Where’s Sailor Jack? makes some play on the differences between public and private sector attitudes to business. As a former CFO of the mighty Central Electricity Generating Board, followed by the privatised National Grid Group and a later career as Chairman of smaller quoted and unquoted companies in the US and UK, I think I’m entitled to a view.
So I’ve just created three oppositions, public/private, big/small, UK/US. The last one is the least important. The management bullshit is perhaps even more intensive in the States, the availability of risk capital is greater and the marketplace is less sceptical about the chances of success so that, overall, the chance for a start-up succeeding is higher. The problems in running the business on a day-to-day basis are more or less the same.
The business issues are actually not that different between big and small companies either, provided the small company is adequately capitalised. Unfortunately most aren’t and too much management time is spent on cash management as well as abortive attempts at fund raising all advised by bankers and intermediaries more interested in what’s in it for them. Small companies are prone to becoming too dependent on a limited number of customers, none of whom will display any loyalty whatsoever if someone else is charging a penny less for the widget.
The economies of scale of the large company are frequently outweighed by inefficiencies in administration. Sell the shares of any company investing in an atrium at its new headquarters, or in a new management information system. Management for big and small in any competitive market is about having less than perfect information and knowing how to make best use of what you do know.
The really interesting differences to me are between large public sector and private sector companies. The private company is more single-minded. It will have a social responsibility statement designed to say nothing specific, but profit maximisation is the only game in town. No Board of Directors can pass up on any legitimate tax-saving scheme, even if they don’t like its contrivance. The private sector company either has to borrow money or raise more from shareholders for business development, so decisions are made on a hard-nosed and frequently short-term basis. ‘In the long run, we are all dead.’
The public sector body raises money from the Treasury apart from with those crazy PFI initiatives which kept the bulk of the risks public with the bulk of the rewards private. Proposals come forward from empire-building engineering-trained managers to be judged by civil servants you wouldn’t trust to buy you a new tie. Middle managers run operations as much for their own convenience as for efficiency, and the staff soon get the message.
The pay is better in the private sector for the top guys as remuneration committees institutionalise overpayment to directors. The will of the large shareholders is exercised through fund managers whose personal interest is for large salaries to appear justified. Backs are scratched. When the public sector bodies were privatised, the scramble to claim the assets was led by the directors in a way not seen since the dissolution of the monasteries.
Particularly in the private sector, the top man tends to be a driven individual, lacking in social graces. If business is set up as a rat race, it should never be a total surprise when the rat wins. And even in the trading public sector, the egotistical often triumphs over the able and the talented. Political skills can also be useful, giving a higher ‘creep’ quotient at the top of public bodies.
But I can’t think of any better ways!
John Uttley, 69, was born in Lancashire although he now lives just outside London. Where’s Sailor Jack is his first novel. Not fancying a memoir, or his family’s story, John instead recorded his Lancastrian sense of humour as well as documenting a tumultuous, exciting period of British history. History John just happened to live through.
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