Thursday, September 08, 2005

Katrina and corporate governance

Amid all the calls for inquiries, the fingerpointing and the apologists it's worth remembering that public services matter. The quality of public services has an impact on the quality of people's lives. No matter if you support big government or one the size you can drown in a bath tub the administration of the kind of the things that impact us all, like provision of roads, education, air and water quality, defence or emergency planning makes a difference to people's lives. How good and how accessible public services are matters even more for those who are at desperate moments in their lives, old and infirm, or young or suffering in the aftermath of some calamity.

Just like the private sector, the public sector can have disastrous failures. When the private sector fails people lose money and pensions or access to important services, and sometimes people die. (The Vol-in-Law lost two cousins in the Herald of Free Enterprise ferry disaster, an extreme example of private sector failure). When public services fail people's lives can be utterly ruined, too. In either sector these failures indicate a breakdown of either the decision making or implementation systems of an organization - that is, in other words, a failure of corporate governance.

Everyone knows that Enron was a classic case of a corporate governance breakdown. Two recent examples of potential of public sector corporate governance failure are the Jean Charles de Menezes shooting in London and the scandalous failures in New Orleans. We don't know all the details yet for either, but clearly something went wrong. In the case of the de Menezes shooting, it's possible that most of what happened was a single person's failure of judgment, but there could have been larger systemic issues. A previous report into police shootings in the UK suggests it's likely there were factors beyond one person's bad decision. The problems around preparedness and relief for Hurricane Katrina are so big and so widespread that there were clearly systemic failures. Exactly what these were and who was responsible for them aren't completely clear and can't be clear yet and probably won't be ever be clear unless there's a huge effort to seek out answers. And unless we seek out those answers we won't be able to avoid future failures when dealing with major disasters. So we must seek out those answers.

The Audit Commission, the public sector watchdog in England, published a report two years ago called Corporate Governance: Improvement and Trust in Local Public Services (link to a large pdf file) that looked at public sector failures in England (like the riots in Oldham and Bradford, the death of Victoria Climbie or a particular health care failure which led a number of babies dying). It identified several factors leading to major service failures in the public sector (and I would argue in the private sector, too). These were:

  • Leaders creating a culture of self-delusion and deliberate misreprentation of information
  • Poor decisons based on inadequate information and a failure to challenge, often because a climate was a created where people were afraid to challenge authority.
  • Lack of clarity of roles, responsibilities and accountabilities within and between organisations
  • Organisations failed to address known problems in working relationships; and
  • Insular organisational culture with poor customer focus or community engagement.
Whatever kind of inquiry takes place into the Katrina failures, people need to make darn certain that these kinds of issues are looked into and properly, or something like the failures that occurred in the Gulf Coast states could happen again, and maybe next time, to you.

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