GOVERNMENT BUSINESS; CANDIDATES FOR ELECTED OFFICE SHOULD REMEMBER FAILURES OF THOSE WHO TRIED TO USE PRIVATE-SECTOR METHODS TO ADDRESS PUBLIC-SECTOR PROBLEMS.

Byline: Taegan D. Goddard and Christopher Riback

THE stump speech is familiar: A successful businessman promises to right the wrongs of government by running it like a business. Today Californians hear it from former Northwest Airlines Chairman Al Checchi's campaign for governor to entrepreneur Darrell Issa's bid for the U.S. Senate. Yesterday they heard it from oilman Michael Huffington, billionaire Ross Perot and publishing magnate Steve Forbes.

These CEO-candidates try to convince voters that because they succeeded in the competitive private sector - where fortunes are won and lost every day - they can use the same techniques to turn around the public sector. Their business wizardry will transform them into outstanding public leaders.

But candidates Checchi and Issa - and California voters - should take note: While politicians score points with calls to ``run government like a business,'' after Election Day they find it's not possible. In fact, America's political landscape is littered with the failures of entrepreneur-candidates who failed to recognize the differences between business and government.

After studying the experiences of hundreds of new public officials nationwide, we found several differences - some painfully obvious - between business and government that tripped up newcomers: Government officials have many ``bosses'' to consult before making decisions, from ad hoc committees to legislators to citizens themselves; they find it's extremely difficult to manage career workers whom they did not hire and cannot fire; from their first days in office, they find themselves in crisis management mode; and the incentives that create efficient businesses - cash bonuses, raises, promotions - do not always exist in government.

The failures are spectacular. On the federal level, Ira Magaziner left a successful private-sector career, where he advised companies like General Electric and Volvo for as much as $600 an hour, to reform the national health-care system in the first Clinton administration. His plan bombed even before it was officially unveiled because he managed the reform effort like a business, shrouded in secrecy.

On the local level, Visalia, Calif., struggled through budget deficits after city managers there tried to run government like a business. (Besides losing $20million in a land deal, at one point the town actually bought a minor-league baseball team.) When government fails, it cannot simply hang an ``Out of Business'' sign in the front window.

As Bridgeport, Conn., teetered on bankruptcy's edge in the early 1990s, city officials had no choice but to deal with its massive problems. The troubled government could not simply stop providing services - from repairing roads to preventing crime - that were still needed. As one city politician put it, the city couldn't just shut its doors and move south.

Of course, these differences and disasters don't mean government leaders can't share business's entrepreneurial spirit. Any institution - public, private or nonprofit - should be innovative. Any agency can provide incentives for improved employee output (such as new duties or greater influence over decisions). And all successful organizations must strive for efficiency.

The good news for Checchi, Issa and California voters is that they don't need to search far to find examples of businesspeople who successfully made the jump to government. They can look to the experiences of Mayor Richard Riordan, and in particular, his senior adviser and Los Angeles Recreation and Parks Commissioner Steve Soboroff. They both rejected business techniques that ran contrary to how government works.

For former venture capitalist Riordan, this meant bringing a new openness to the way the city conducts its affairs. For real estate developer Soboroff, it meant managing 12,000 full- and part-time parks employeese (whom he didn't hire and couldn't fire) differently - by selectively, and conditionally, giving them new authority to creatively complete their jobs. A job well done was rewarded with continued responsibility.

In a system that does not allow many financial incentives, Soboroff motivates with enthusiasm. He wants his employees to go home at the end of the day proud of their work. The result: More Los Angeles parks projects are either under way or completed in Soboroff's term than in the previous 15 years combined.

Summing up the difference between government and business, Soboroff told us: ``In government there's more consensus-building. Dictatorship is much less exhausting.''

Fortunately, Soboroff is a tireless public servant committed to making democracy work the way it was designed by our founders more than 200 years ago. His example gives hope to the idea that ordinary citizens can leave private life for a stint in public service. Businessmen-turned-candidates can learn from Riordan and Soboroff. Specifically, they should realize that, unlike in business, new public officials must:

Treat citizens as owners, not customers. Customers look first at what they can reap from government. If citizens think of themselves as consumers, they will shop for candidates who give them the most services now for what they spend. In contrast, owners tend to take a longer-term view. They look to make government work better, hiring public officials who can achieve the common goals expressed during elections.

In addition, businesses earn money from customers buying products and services of their own free will in competitive markets. Inferior products or poor service typically means lost customers. Governments, meanwhile, raise revenues by levying taxes to ensure that everyone pays part of the bill.

If a citizen stops paying, he violates the law and faces jail time. Governments also require people to pay for many services they rarely use. Only a minority of citizens have contact with the police edepartment during a typical year, but everyone shares the bill for public safety.

Keep the boardroom door open. With competitors always looking to steal market share or great opportunities, secrecy in business transactions is essential. Government, however, must be open. Hearings are held, public comments solicited. If laws must be changed, the public's representatives debate the change in the legislature. Information in public offices is subject to Freedom of Information Act requests.

Understand the bottom line. Business leaders and government officials are driven by different bottom lines. Private-sector managers focus on profits, targeting their most promising customers and ignoring those unlikely to buy their product. Government leaders, however, must satisfy the broad range of voters who elected them.

Depriving, say, rural citizens of postal delivery would cripple a politician's ability to govern. Even if the U.S. Postal Service were fully privatized, the government would require that private carriers deliver mail to all citizens. In government, the bottom line is not profits but voter satisfaction.

Hedge their risks. Business executives who take bad risks normally balance them out with more calculated ones. Regardless, if investors think the company takes unwise risks, they can always pull out their funds.

Government works differently. For years, Orange County Treasurer Robert Citron received national attention for earning some of the highest returns of any municipal investor. Of course, when his bets on interest rates soured during 1994, Citron lost millions and forced the county into bankruptcy. He lost his job and even landed in jail. And unlike in business, taxpayers couldn't pull out their funds.

Certainly public officials can make strategic bets and still survive if they fail. But while business leaders seek the large upside for bets that pay off, most public officials try to avoid the huge downside of those that fail.

CAPTION(S):

3 Photos

Photo: (1--Color) ROSS PEROT

(2--Color) AL CHECCHI

(3--Color) MICHAEL HUFFINGTON