It is the cost of organization (and specialization). In a world where you and I are the only 2 people, and we only eat fish, we may at some point figure out that you are better at making nets, and I am better at fishing. So we decide you make nets and I fish - more fish for everyone. However, the time we sit around talking about how many nets you make, and how many fish I give you for them, I’m not fishing, and you’re not net- making. This is the cost of organizing our efforts. Ideally, the benefit of our specialization outweighs the cost of organizing. The more parties, the higher the cost of organizing - but often also the higher the benefits. At a certain size, you will have people doing nothing but establishing or maintaining organization. And of course, the larger the system, the bigger the chance that there are inefficiencies in the organizing (enter Douglas Adams’ phone sanitizers). But generally, it is preferable to the alternative of everyone being a subsistence farmer.
Comment from Sol Trujillo when he was running Telstra, he was asked why he got paid 20 times more than a bloke running cables. “Simple, when you make a mistake you lose your job, when I do 10,000 people lose their jobs”.
Everybody has a part to play just that some are more easily provided from the masses. God I sound so elitist but tough go and cry into your blue collar.
To further illustrate my point, imagine we had 100 people who could fish but only 3 capable of making nets, guess who is more valuable and gets fat.
Sorry guys, I didn’t abandon the thread, I just missed the notification.
I’ll be first to admit that the last economics class I took was Macro Economics, was 100 level, and was 20-(sigh)-3 years ago.
I’m also in a pretty pessimistic position in local government, seeing a LOT of mismanagement and outsourcing, and the people we choose to outsource to are no better than anything we could generate internally.
The no-value-add issue stems from a debate I’ve been having with my Boss lately. My contention is that we need to train employees rather than contract out, having the knowledge on our payroll would ALWAYS be cheaper as that first external contractor that knows his stuff pulls behind him the contracting firm’s PR/HR/Executive Leadership, etc. We have no internal money available, are horribly understaffed, yet multi-million dollar contracts are being made all over the place and the product it give us is far from the golden solution the sales teams promised.
So the dissatisfaction raises my question, which really isn’t well formed, and is tainted by the experiences I have as a Public Sector employee.
You’re describing most law firms.
Another thing to think about here is the concept of “core competency.” What are you good at, what is your organization good at? Concentrate on doing that and hire someone to do everything else.
On the other hand, what you are saying here is that you have a “color of money” problem. You have a budget that allocates dollars in certain ways, and (you think, anyway) those ways are inefficient and could be better allocated in other ways. It would be cheaper to hire than to contract but the budget process irrationally forces you to contract.
I feel your pain there. I see this kind of thing a lot, and it is frustrating. My advice is not to allow yourself to be frustrated and angry, because that just burns you up. Either say “fuck it, not my problem” and do what you are told, or look for ways to change things–in that case, figure out who made this decision, and try to prove to him/her that there are better ways.
However, be aware that that person made the decision for some reason, maybe seeing things you do not see, and may point that out to you with some varying degree of patience and kindness. In particular, in this case, you might be overlooking a lot of costs that are incurred by hiring someone, many of which are long-term or indirect. It might in fact BE cheaper to contract that to hire–it often is.
I spent a decade in local government and got out before the complete collapse, so I feel for you.
But what you want will never happen, except at the smallest scales.
Take payroll. Rochester’s richest man is Thomas Golisano. He got that way by creating Paychex, a firm that does payroll for other companies. He’s got experts at payroll processes with years of training and the fanciest programs money can buy. How much would your government have to invest to match that? How long would it take? How do you guarantee you could keep that expertise and not have to retrain continually? And if you could, how do you match the economy of scale that a billion-dollar operation like Paychex can offer? How do you match the salaries that Paychex can offer? You can’t, and neither can thousands of others, and that’s why he’s a billionaire.
You say you have no internal money and are understaffed. That’s because nobody wants to give government a penny. You can’t combat that by spending - even if the spending makes sense to you. You may be right for certain functions, but even there it’s a hard case to make.
But if you’re at the level of multi-million dollar contracts, then you’ve lost. The start-up costs of a function that big are enormous, the lag time before the kinks are worked out guarantees enormous public mistakes, and the cost savings will arrive over many years and may never appear at all.
Ah the good old days, back when executives cared about people keeping jobs.
I don’t think it’s any more or less true today, except that the robber-baron class has re-emerged into the light.
Perhaps “silly” was harsh. I was commenting that Efficiency as a measure is something which never existed outside of textbooks and grand economic calculations, and mistakenly misread your post as implying that you thought it should.
My apologies.
This…in spades. We’ve played the game that Government needs to be leaner, and run like a business, but the reality is: As long as you’re penalized for not spending every penny, and there’s no mechanism for retaining or returning saved monies, things will never change. It’s just been a parade of people being paid well to say things that are nice to hear.
I can’t quickly find a cite for md2000’s anecdote (although I have heard it before) but Ford was known for statements like this:
Management analyst Peter Drucker commented that from about 1927 on, Ford Motor Company lost money every year for two decades. (Page 236)
And David Lanier Lewis(Page 398) said of the company at the time Henry Ford II took over:
Yes, I know that Henry Ford was a foe of accountants. So what? The supposed quotes are still phony and shouldn’t be cited as if they’re real.