Governing By Network Has Challenges, Rewards

By Benita M. Dodd

For want of a nail, the kingdom was lost, goes the rhyme. To Stephen Goldsmith, Harvard professor and former two-term mayor of Indianapolis, sometimes it’s for want of a water cooler that government opportunity is lost.

In their new book, “Governing by Network: The New Shape of the Public Sector,” Goldsmith and co-author William D. Eggers make it clear that government agencies are well past the debate about “whether” to contract out instead of handling work themselves. Today, the question is “how” to manage the transformed “government by network” that is replacing the traditional, hierarchical bureaucracy.

The book is a reality check in a process that can easily fail, but is doable – if government learns how to manage networks instead of people and programs. At the same time, they warn of unreasonable expectations from governments that engage in the process: “Government must remember where it started and measure success against the original baseline.”

“Governing by Network” elaborates on why government can’t contract out a service to a nonprofit or for-profit organization, wash its hands of oversight and involvement, then self-righteously blame the contractor when the project goes belly up. Nor is it necessarily the fault of one department or another when a collaborative project among independently successful government agencies falls flat on its face.

The book is not mind-numbing theory, but numerous real-life examples of the various pitfalls, successes and failures in the government by network approach to contractors, interagency cooperation and public-private partnerships. Goldsmith also will visit Atlanta on Tuesday to keynote a Foundation Policy Briefing Luncheon on “Governing by Network,” sharing his personal experiences spearheading privatization efforts in America’s 12th-largest city.

Take the unexpected example of the proverbial water cooler. “When a service is provided in-house, informal communication channels within the organization augment formal communications and information flow,” the authors point out. Government by network necessarily diffuses and decentralizes responsibilities, but a vital channel of communication is lost when that centralized “water cooler” of informal updates goes away and isn’t augmented, and that sets up the process for failure – or success at a slower rate than the private contractor promised.

The inability to provide sufficient, timely or necessary information is a major impediment to the success of government by network. Outdated technology and incompatible information systems are added impediments. “Governing by Network” recalls the 2001 anthrax crisis in Washington, when the Kaiser Permanente health group sent e-mails and phone messages to physicians with updates and guidelines; ran an electronic search of patient records for at-risk postal workers, then contacted them to suggest treatments.

“When Kaiser communicated with the federal government, however, it had to resort to far less sophisticated information-sharing strategies – fax, telephone and postal mail – because government IT systems were not set up to interact with external partners and many government records were not digitized.”

It’s imperative that government manage not only its relationships with each organization, but the relationships among the organizations within the network: “[P]oor performance by one organization or the breakdown of the relationships between any two organizations – can imperil the performance of the whole.”

Decisions on outsourcing and networking require cost-benefit analysis, of course. Traditionally, however, government has had no competition and little incentive for accountability measures such as accurately gauging costs or performance of services. In the mid-90s, when Kansas contracted out all foster care, adoption and family preservation programs, it “grossly understated the state’s true costs.” Successful bidders experienced huge cost overruns and two providers were forced to declare bankruptcy.

The recurring message in “Governing by Network” is summed up in one sentence: “Good oversight concentrates on outcomes, not process.” To provide government services by network is to give taxpayers a flexible, innovative, cost-effective, responsive, efficient and consumer-friendly system. Government executives must be aware that this can’t be accomplished through micromanagement, excessively burdensome compliance requirements and bureaucratic red tape.

For state and local policy-makers in Georgia who want a head start in meeting Governor Sonny Perdue’s goal of making this the best-run state in the nation, Goldsmith’s dynamic and fascinating analysis is a must-read on how to do it – and not to.

For want of a nail the shoe was lost.

For want of a shoe the horse was lost.

For want of a horse the rider was lost.

For want of a rider the battle was lost.

For want of a battle the kingdom was lost.

And all for the want of a horseshoe nail.

Benita M. Dodd is vice president of the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (May 13, 2005). Permission to reprint in whole or in part is hereby granted, provided the author and her affiliations are cited.

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