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Thursday , September 19 , 2019

Government Agency vs. Private Sector Management

Most of the literature on the Balanced Scorecard and other management theories is oriented around the values and needs of private-sector companies. In such organizations, profit is a pervasive performance metric that is relatively easy to measure, precise, and closely related to the strategic success of the company.

Government agencies and other non-profit organizations exist not to make a profit but to accomplish a mission. They still have a long-term interest in financial performance, because chronic losses may lead to low morale and the eventual demise of the organization. However, financial performance is only one indicator of success. Customer satisfaction in terms of mission outcomes is the primary motive and strategic value. This is especially true of governmental agencies, in which the ultimate "customer" is also the source of funding -- the taxpayer. Therefore, unlike private companies, where internal efficiency is of little concern to the customer, efficiency and productivity are of great concern to government customers, since they are paying for the entire agency's operations. This fact makes internal efficiency or cost effectiveness one of the key strategic goals of a government agency.

In many cases, private companies have developed best practices and efficient ways of operating, based on their need to compete in the marketplace. Hence it is appropriate for government agencies to consider outsourcing some activities to private contractors in order to improve operational effectiveness and efficiency. However, outsourcing can be taken too far. There are some functions that are inherently governmental, and that (either by statute or by agency charter) must be done by government workers. The following table suggests a way in which to distinguish these functions.

Inherently Governmental Functions

Recent legislation, including the Government Performance and Results Act (GPRA) and the Clinger-Cohen Act, has clarified what functions are inherently governmental, and on the other hand what functions could be carried out by contractors depending on their cost and benefits to the agency. The following table summarizes the distinctions between these two categories of functions. Note: this list is not official or authoritative; it is only a suggested list for study and research purposes.


Inherently Governmental

Not Inherently Governmental

Strategic planning: defining strategic goals, vision, desired outcomes, initiatives (GPRA)


Facilitating strategic planning retreats, documenting and publishing strategic plans

Defining performance assessment metrics, goals, targets, schedules, collection & reporting processes (GPRA)


Collecting data for performance evaluations, doing surveys

Budgeting for strategic initiatives


Accounting and financial data processing

Establishing or approving standards, policies, procedures, and guidelines


Writing instruction documents and manuals

Evaluating vendors for specific mission tasks, benchmarking


Testing vendor equipment, evaluating and comparing product performance; negotiating Service Level Agreements

Honest broker of vendor products and services, government and consumer advice


Providing multi-vendor contracts, bundling standard interoperable packages

Defining security and data access policies


Grounds guards, security testing

Mediating disputes between private parties


Supporting government investigations of third parties

Defining Common Operating Environments for interoperability

Certifying interoperability of systems