With the creation of Public Enterprises, it is expected that these functions are carried out both efficiently and effectively. ‘Public Enterprises have also been created to support the development process which encompasses the building of harbours, airports, highways, technical schools, universities and public utilities. For example, the Barbados Marketing Corporation (1961) was established to stimulate output of non-traditional agriculture. Also, the Barbados Development Bank was set up to finance new investment in tourism and industry, while the establishment of the Barbados Port Authority reflected the need to nationalize and improve port operations.’3
As fore mentioned, many Public Enterprises within the Caribbean lack the three key requirements of quality people, good management, and creativity. This has caused the Caribbean experience with Public Enterprises to be rather unsuccessful. The failure rate of Public Enterprises in the Caribbean helps to highlight how important the three characteristics can lead to effective and efficient management of Public Enterprises.
It is important to note that Public Enterprises cannot be effectively executed through Civil Service type procedures in the context of bureaucratic practice. Such practice of bureaucracy makes the level of communication very slow and practically ineffective. In these days where the level of competition is high and the response rate to customers must be almost immediate, it is essential that Public Enterprises have a fast means of communication. Furthermore, the business environment is so unpredictable and uncertain, that bureaucratic means of communication would render a Public Enterprise ineffective. The absence of quality people and good management would reinforce the use of such bureaucratic techniques. This inherently would restrict the creation of effective means of communication which involves the use of the latest technology. Thus, technical and managerial skills are vital just for the Public Enterprise to operate effectively and efficiently so that its functions can be carried out.
‘The much inefficiency exhibited in the Public Enterprise is less a function of ownership and more a function of bureaucratic meddling and mismanagement.”4
The absence of the three key requirements leads to three main types of problems for Public Enterprises. These are allocative inefficiency, productive inefficiency and non-market inefficiency. With the area of allocative inefficiency, government has multiple goals and objectives, but Public Enterprises cannot effectively carry out these objectives because resources are too limited. For example, the question must be asked if the Transport Board can provide service to all routes equitably and still run efficiently.
Non-market efficiency occurs when there is a slow process to implement policies dude to the lack of administrative skill. In most developing countries such as Antigua and Barbados, management capacity is very limited and often absorbed by the private sector. A further problem arises as the government seeks to expand operations and there is a gap in the appropriate level of management capacity which inherently leads to many problems and inefficiencies. The Public Enterprise is a legitimate institutional tool in a strategy of economic development. Thus, if Public Enterprises experience high levels of non-market inefficiencies, it can be conceived that the economic status of a country could take a down-turn, especially of the public sector contributes heavily to the economy. For example, by 1980 the Guyanese government gained control of about 80% of the formal economy. The end result is a severe devaluation of the local currency.
The most pervasive problem within the Public Enterprise is that of productive inefficiency due to internal inefficiencies. Public Enterprises suffer from a weak human resource base. The problem is further compounded with inadequate risk/reward performance incentives; civil service type organizational culture handed down from colonial times creates x-inefficiencies. For the sake of argument, x-inefficiencies can be described as inefficiency in the operations of a firm. This inefficiency is reflected in the higher cost of a firm. Workers view management teams as handpicked by politicians to be stooges trying to find an excuse to fire them and hire someone from the minister’s constituency or party. Consequently, this air of distrust leads to poor performance, high labour turnover and the ultimate x-inefficiency. The problem becomes worse when management personnel lack the relevant expertise for running a Public Enterprise.
The book entitled “Public Sector Employment-In Time of Transition” states: “the 1990's have been seen increased aggression in public sector collective bargaining. Fiscal pressures and a more conservative political environment have combined to create the apparent need for major cost reductions and downsizing of the public sector workforce and have resulted in increased conflict over these issues. These have taken other forms such as grievance filing, arbitrations, and unfair labour practice charges against employers.”5 These conflict issues act negatively on the operations of Public Enterprises.
As mentioned before, Public Enterprises play a critical role in the developmental process in most developing countries within the Caribbean. Therefore, strategic planning by capable management is necessary for the designated goals for these Public Enterprises. However, government officials intervene on various issues within the Public Enterprise. The attempt of Ministers to control the daily activities of a Public Enterprises creates much confusion and therefore dissolves the responsibility of management. This inherently adds to the problem of productive inefficiency where political control is of a large quantity with limited quality. Such demands of ministers have nothing to do with the strategic purpose of a Public Enterprise. Furthermore, managers end up feeling like messengers or puppets rather than feeling in control of an organization. The most likely result is the under-utilization of managerial skill or an eventual transfer to the private sector.
On the other hand, the selection of a directorate is difficult since the pool of knowledgeable and experienced individuals is limited. Even with an apparent selection, the individual may not have the desired qualifications or ‘know-how’ in order to run the Public Enterprise. The governmental appointment of managers can lead to operation biases. The appointment personnel may be from the Civil Service who are generally political supporters. This gives rise to scandalous activities, misappropriation of public funds and misuse of the Public Enterprise. For example, the inquiry into the MBS in Antigua, where there was a mismanagement of public funds for personal gain. Fraudulent activities permeated the fabric of the enterprise and a few ministerial officials were implicated in wrongdoing. “Indeed the use of public resources to achieve partisan political objectives has a corruptive effect upon the Public Enterprise and diminishes its capacity to achieve its legal objective.”6 Furthermore, management usually changes with the change of political administration. There is no time for consistency and proper structures are not developed. Constant changes leave the Public Enterprise unable to reach the required or expected efficiency and effectiveness.
One of the most prevalent issues in the business arena, whether it is public or private, is that of change. With change comes the removal of ‘old’ variables and the subsequent implementation of new techniques. Public Enterprises exist on bureaucratic techniques of administration and operating in a centralized manner. These days, rigidity and centralization are things of the past. Public Enterprises lack the administrative skills to implement areas of flexibility and decentralization. Public Enterprises desire to maintain the old paradigm which stifles creativity, improvement of managerial techniques and the effectiveness and efficiency of the Public Enterprise.
Within the public domain, phrases like ‘reinventing’ government,‘re-engineering’ the public sector, and ‘performance-based’ government illustrate the changes that are occurring. Issues of downsizing, job security, contingent employment, productivity bargaining, subcontracting, privatization and succession rights are now prominent in the public sector. Joint ventures and alliances, mergers, separate business units, and internal pricing schemes – concepts that once were largely restricted to the private sector – are now common in the public sector. With such an evolution of business where private sector techniques have now trickled down to the public sector, the need for quality people, good management and creativity are essential for these rapid changes. The current practice of Public Enterprises have Board of Directors and management personnel being either old in their methods or lacking the three basic requirements, needs to amended very quickly. The Public Enterprise runs the risk of being left behind due to the lack of business knowledge.
The effects are two-fold:
- The need for Public Enterprises would decrease as the private sector would prove more efficient.
- The attitudes toward Public Enterprises would further deteriorate since there is a loss of faith in the efficacy of these enterprises to deal with social problems.
In conclusion, the three requirements of quality people, good management and creativity are essential for the effective and efficient management of Public Enterprises. With many changes occurring in the business arena, it is essential that the Public Enterprise have these key components so that their existence remains. However, there are problems for this to occur with the high level of governmental influence in decision making and the selection of management personnel. The use of bureaucratic techniques further compound existing problems and runs in conflict with employees who have received training from universities. Therefore, it is of paramount importance that the Public Enterprise adopts new management techniques or face extinction.
