Friday Rant: A Prescription for Spend Management in State Government (Part 2)

In the initial installment of this rant, I suggested how state governments like Illinois should first turn to better Spend Management to drive balanced budgets before going back to the taxpayer trough and eating into private sector growth and prosperity. As we continue this investigation, it is critical to tackle the giant issue of labor management and services procurement in the public sector's full-time and contract workforce. The Economist recently ran a great series highlighting the growth and influence of public sector unions. In it, the authors note "while union membership has collapsed in the private sector over the past 30 years (from 44% of the workforce to 15% in Britain and from 33% to 15% in America), it has remained buoyant in the public sector. In Britain over half the workers are unionized. In America the figure is now 36% (compared with just 11% in 1960)."

These are significant growth percentages indeed. But in Spend Matters view, the problem is not the unions themselves, but what they have come to represent -- self-interest over state/tax payer interests. Given that many unionized state workers now end up making far more than their private sector counterparts over their lifetimes -- The Economist has some great references in this regard and Illinois is the poster-child for six figure state retiree pensions -- it's become clear that this workforce will fight to the last card holding member standing to preserve the benefits they've negotiated for themselves. For this reason, taking on the unions head-on is futile, given the mutually assured destruction that labor-friendly states are likely to realize as a result.

Rather, what's needed is a different tactic that I'll argue comes back to better procurement, or Spend Management, if you will. To this end, I agree with The Economist that to solve the budget mess in many states and municipalities that we must reframe the debate "about delivering better services" rather than "about cutting resources." The key is "focusing on productivity" to redefine the debate. But we must not limit ourselves to simply hiring a next generation of productivity-focused civil servants -- unionized or otherwise -- to drive savings and accountability.

No, what's needed is something else entirely. We must empower state politicians and procurement organizations to understand what is truly core and non-core when it comes to the delivery of services-driven outcomes, ranging from everything to high school graduation rates to plowing the streets. I don't pretend to know what the line should be, but given the capabilities of the current generation of services procurement tools from a range of stable and growing providers (e.g., IQNavigator, Fieldglass, Beeline, Provade, PeopleClick Authoria, Emptoris, etc.) it's now possible to manage both the buying, the lifecycle and the performance of contract employees and statement-of-work type requirements and engagements. Moreover, the MSP (managed services provider) ecosystem that provides a management and administrative layer that sits in between internal stakeholders, the "spend owners," and the suppliers themselves is also equally as mature and could easily be ported from the private to the public sectors.

True make/buy decisions won't be easy when it comes to human capital and services. But the benefits of moving to a more flexible, specialized and accountable workforce by managing to outcomes will put an emphasis on productivity like nothing else. Perhaps just as Rahm Emanuel is now employing his famous quip about never wasting a crisis in designing a new educational architecture for Chicago as part of his mayoral campaign by indirectly taking on the unions by focusing on outcomes and accountability, other elected officials and public sector workers must redefine the role of public sector services in terms of outcomes rather than employment.

- Jason Busch

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