This IS Small Government--And That Is Why It Isn't Working

For years, Republicans have argued that small government is better than large government and business is better still. Republicans want to bring corporate efficiency to government. California gubernatorial candidate Meg Whitman explicitly states that her experience building a business will make her a better governor (as a former ebay seller, I would disagree, but I digress).

So let's talk about bringing principles of business management to government.

Businesses don't generally come to business consultants to learn how to do what they do better. They already know how to make glass or sell vacuums or whatever it is they do. They come to learn how to do the business end better. They come to learn why their growing business that was working so well is now dysfunctional. It's harder to schedule meetings. Executives are wasting time on administrative work. Stuff isn't getting done.

A business consultant takes a goal-oriented approach. Let's look at what you want to accomplish, lay out the best steps to get there, measure the man-hours to do what you need, and staff accordingly. A consultant expects that routines and structures that used to work will have to be jettisoned in favor of new ones. (Single payer, anyone?)

When I was a business consultant, I found that the many of the businesses that came to us had similar and predictable problems having to do with expanding infrastructure.

For example, three people starting a business can communicate by calling out. "Hey, did you order us some business cards?" "Yeah, be here Friday." Done. At a dozen people, you can't shout, but you can still get up and walk into someone's office for most communication. At 30 people, you need to rely more on email, and so on.

At each stage of growth, there has to be more structure to support the organization. Things you can do casually in a small group have to be structured for a larger group. Roles become more specialized. Quality control and layers of accountability enter the picture. It all gets more complicated, and there's no getting around that if you want to function properly.

That undisputed principle was behind the 1982 business bestseller In Search of Excellence by Tom Peters. Peters believed that by keeping businesses under 200 employees or so, you could prevent it from getting bogged down in administration. Thus it would be both more responsive to market changes and more profitable. When a business grew too much, you were supposed to spin off a unit into a new business.

Coincidentally, this was around the same time that Ronald Reagan was telling us that smaller government would be less wasteful and more responsive to change.

But just as Reagan's small government utopia didn't quite turn out as advertised, the promise of small business didn't solve every problem.

Even a cluster of businesses has to be managed, and that creates some administrative overhead. Moreover, managing multiple autonomous businesses can be like herding cats--much more challenging than managing subordinate departments.

And, some businesses have so many moving parts that they can't achieve efficiency of scale at only 200 employees.

So again, it is undisputed that larger organizations need more infrastructure.

In 1900, the U.S. population was 76 million, about 1 million of which (1.3%) were government employees.

In 2010, the U.S. population is about 307 million, about four times what it was in 1900. By 1900 standards of 1.3% government employees, we should have about 4 million government employees. In fact, we only have 2.15 million, and this is the highest federal payroll ever.

Small government advocates should be delighted by how we've kept expansion down. Instead, they claim it is a "return to the era of big government." They claim that government is inadequate to its many tasks because it is a "bloated bureaucracy."

The truth is, it's just inadequate.