Every top manager of the Department of Veterans Affairs received a positive performance evaluation for the past four years, and 78 percent got a bonus in 2013, despite a string of patient deaths and falsification of records related to patient wait times, according to congressional testimony Friday.
Agency executives write their own performance evaluations, which seem to receive only cursory reviews from their supervisors, several committee members said in questioning the VA’s top personnel officer.
While everyone was deemed at least “fully successful” in meeting their performance goals, 57 percent of top managers were rated to have exceeded expectations and another 21 percent were found to be “outstanding,” according to testimony from Gina Farrisee, assistant secretary for human resources and administration at VA.A very common retort to conservative criticisms of public sector inefficiency is the production of valid private sector counterexamples. And this is a perfectly reasonable retort to any argument simply that government is inherently inefficient. Large organizations, to an extent, all generate a degree of drag. Firing bad employees is difficult for private sector companies, too, what with the lengths that companies go to prevent lawsuits from former employees claiming wrongful termination. So liberals, on this point, are entirely correct: private organizations and public organizations all can be highly inefficient.
But the difference between the public sector and the private sector is not that one is intrinsically inefficient. It's the ever-present threat of organizational death.
Government agencies rarely die. If they do, it was because they were established for an extremely narrow purpose and failed to expand their mission. More often, organizations that were formed for one thing grow and expand their authorities and missions. (The World Bank and International Monetary Fund are archetypal examples on the international stage.)
Meanwhile, in the private sector, just like in government, Facebook, General Motors, Sears and most other private companies can deceive themselves with bad metrics, or saddle themselves with destructive and incompetent employees, or simply fail to fulfill the needs of their customers. But the difference is simple: barring government protection, those companies will die if they fail. Organizational death serves two purposes:
1. It puts the fear of God into managers, who are more likely to endeavor to fix their issues.
2. It cleans the economy of less efficient business models.
In a well-functioning private economy, bad business models die, and good business models live. There is a great deal of churn as this process unfolds: people lose jobs, start-ups form and create new jobs. When it's working right, more jobs are created than destroyed. Companies that are struggling have two options: either they fix their problems, or they die.
But the public economy is different. Bad models do not die. In fact, they often attract more money, at the behest of well-intentioned bureaucrats and politicians, who argue that more money can fix the issues. They may be right sometimes. But the incentives don't change, and the fear of organizational death never arrives.
One of our public policy goals should be to try to transition as much public service delivery as we can to arenas where the fear of organizational death can reign. That implies more decentralization and much less of a role for a big government. Instead, it seems to me that the recent policy regime has been to move more of the private economy into a world where organizational death is not an option. (See: General Motors.) That's a real shame.
Postscript: Using this framework, one can argue that the US military, which is highly effective at certain things while still being incredibly bureaucratic, succeeds because the fear of organizational death is supplanted by the fear of actual death, which is a far stronger motivation.
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