"Waste, fraud, and abuse": A hollow and hypocritical critique

August 5, 2012

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Seth Rosenblatt

There are many critiques of the public sector by those in the private sector; some have validity, while others ring hollow. I have written about examples of both, but a great illustration of the latter is the oft used criticism that governments – including our public schools – are guilty of “waste, fraud, and abuse.” It harks back to a quote allegedly by Otto von Bismarck that “laws, like sausages, cease to inspire respect in proportion as we know how they are made.” It does indeed seem that the work of our public schools is like sausage-making: slow, sloppy, and ugly at times.

Why is that? One of the biggest reason lies in a fundamental tenet of government: openness. We see the sausage-making because we’re allowed to! As someone who has worked for many companies and led many teams over the last 25 years, I encountered countless painful decision-making processes; however none of them were visible to the public (let alone involved the public)!

Business interactions are by and large secret. Compensation levels of most employees are secret; strategic plans are secret; computer code is secret; and the discussions at board of directors meetings are mostly secret. Most companies make all employees sign non-disclosure agreements, and there are countless examples of “settlements” (with non-disclosure clauses) with former employees who either performed some act of misconduct or accused others of doing do. The ability to choose what information is made public and what is not is a cornerstone of capitalism. It allows companies to compete with each other, to shape their overall message to the market, and to manage their employees in the most flexible way. So, in every company there is plenty of sausage-making; it’s just not visible to most of us.

Contrast this corporate secrecy to our public school districts, which by most measures are an open book. Board meetings are held in public. All contracts, salaries, and project bids are made public. There are only a few exceptions, including areas such as student discipline, employee discipline, and discussions of lawsuits. From a businessperson’s perspective, these disclosure requirements would be anathematic – it would be impossible to run a business that way. But government’s apparent lack of efficiency and flexibility is part of the price for openness. And, after all, as these are public institutions funded with tax dollars, would we expect something less than transparency?

But in addition to not recognizing this real distinction in the process of governing versus managing a business, the criticism of “waste, fraud, and abuse” rings hollow because it is hypocritical. Just because we don’t hear about such mistakes or misconduct in the private sector as much, that hardly means it doesn’t exist, or even exist on a much bigger scale. Think Enron, Lehman, BP, Halliburton, Long-Term Capital Management, et al. – and these are just the ones that got caught!

Anyone who has had any significant business experience has personally witnessed all forms of bad behavior, everything from padding expense reports to lying to customers to actual fraud. In any organization of humans – public or private – there will be those who abuse the system. It just so happens that the private sector has more tools to hide it. I have personally witnessed all of this bad behavior in my business career. But, ironically, because I am also under non-disclosure agreements, I can’t give specifics – some matters get settled outside of the public eye. So, I found it incredibly peculiar that one of our former candidates for governor so often invoked the “government is full of waste, fraud, and abuse” mantra when she must have been witness to much greater foibles in her business experience.

Lastly, I would argue that the notion of “waste” is in the eye of the beholder. If you are personally not in favor of government spending money on high-speed rail, then from your point of view it’s a “waste” of money, whereas proponents would consider it an “investment.” That perspective is completely independent from whether the money is spent “efficiently” to achieve its outcome. If you don’t support the outcome in the first place, then it’s “waste” to you. Public institutions have the burden of a much broader group of “shareholders” – the entire taxpaying public – who of course will rarely agree on the outcome of any particular initiative.

Through my straddling of both the private-sector and public-sector worlds, I have noticed that most people don’t think through the implications of some of these fundamental differences on how an organization can be managed. Although these contrasts should not be used as an excuse to defend poorly performing public institutions or instances where there are indeed waste, fraud, or abuse, simply making blanket and hollow accusations actually detracts from the discussion of the real issues facing our public schools.

Seth Rosenblatt is the president of the Governing Board of the San Carlos School District. He also serves as the president of the San Mateo County School Boards Association and sits on the executive committee of the Joint Venture Silicon Valley Sustainable Schools Task Force. He has two children in San Carlos public schools. He writes frequently on issues in public education, in regional and national publications as well as on his own blog. In his business career, Seth has more than 20 years of experience in media and technology, including executive positions in both startup companies and large enterprises. Seth currently operates his own consulting firm for technology companies. Seth holds a B.A. in Economics from Dartmouth College and an M.B.A. from Harvard Business School.

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