Monday, January 4, 2016

IN THE NEW YEAR MEASURE OUT PUT NOT INPUT

What is the difference between governments and business?

Businesses provide a good or service for the public just as government. Businesses employ people as does government. Businesses buy products from the market just as government.

The main difference – as they maybe many, is that business measures it success by output – profit, return on investment, market share while governments measures success by input – classrooms, health centers, kilometres of road built.

Some may argue that a road built is an output but imagine a businessman counting output as hotels built when he is barley doing 30 percent occupancy? The hotel as the road, is a means to an end.

If one were to argue that the businessman want to enrich himself and his partners, the same could be said about the government official, unfortunately his actions suggest his partners are not the people who employ him.

"This difference is at the heart of the reason why governments the world over are notoriously bad at business. Because their measure of success is not one that is suited to building business...

A businessman needs to pay attention to his return on investment, how much money he has got out for what he has put in, because it determines the very survival of his enterprise and also because you do not get rich by funnelling your money into a bottomless pit.

And because of that the businessman has to work out how to collect the most revenue with the least cost or at optimal cost. This means every coin has to count. US billionaire investor Warren Buffett says he worries when he hears a manager saying they will focus on control costs, to him it is like breathing you don’t go out there determined to breath you just do it in the normal course of getting about.

However the businessman can’t go around taking an axe to costs as he may hack off the muscle with the lard, they have to be systematic and not all costs should be cut some will rise while others fall, depending on how they will affect final output.

In addition a good businessman knows that his inputs have to be quality inputs otherwise he may cheat the market for a bit but it will soon catch up to his underhand markets and vote with its feet – away from him.

The naysayers will say but the businessman his selfish he does this all for his own enrichment. 

Maybe that’s why the quality of our businessmen is so wanting.

The good businessman will enrich himself only to the extent that more and more people partake of his goods or benefit from his service. By extension a businessman has to be selfless before he is selfish.

Which brings us squarely to what we wish government could start doing in the New Year.

Let us say the betterment of the people of Uganda is the bottom line and everything done will be done in the employ of this worthy goal.

So while building thousands of classrooms is admirable even desirable we want to measure the output from our schools. Inputs are good to measure for political purposes could it’s much easier to put up a school block than to churn out first grades.

If we dot the countryside with health centers do we have the staff and medicine to ensure they deliver quality health services? Do we see a corresponding drop in diseases with the setup of a health unit?

"Unfortunately political considerations colour judgement. Politicians often have to pander to certain constituencies for their survival, constituencies which are good for nothing other than to sponge off the state, it’s even doubtful that they deliver votes...

We are I a good place right now in Uganda to make that shift in government operations. Over the last 30 years we have built a usable institutional capacity, credible revenue collections and some success in addressing some of our pressing issues that can be replicated around the country.

The mind shift to measuring outputs versus slobbering over inputs is what I wish for Ugandan in the New Year.

Happy New Year to you all!


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