What Does It Mean to Run the State Like a Business?

There’s a common expression, run it like a business, connoting a set of organizational reforms that intend to evoke private-sector efficiency. Unfortunately, the actual implementation as far as I’ve seen in public transportation agencies has always fallen short. This is not because the private sector is inherently different from the public sector – it is, but not in ways that are relevant here (for example, in marketing). Rather, it’s because the examples I’ve seen always involve bringing in an outside manager with experience in private-sector management but not in the industry, which tends to be a bad practice in the private sector too. Many of the practices bundled with this approach, like the hiring freeze, are harmful to the organization and well-run private firms do not engage in them.

So, instead, what would it mean to run public transportation like a business?

Internal workings

A public transit agency that wants to access the high productivity of frontier private-sector industries in the United States had better imitate common features to large corporations. These include all of the following:

1. Smoother HR. Jobs need to fill quickly, with a hiring process that takes weeks rather than months or years. HR should follow private-sector norms and not civil service exams, which represent the best reform ideas of the 1910s and are absent from the strongest bureaucratic public sector norms out there. Moreover, the pay needs to be competitive and largely in cash, not benefits. Some European countries (like Sweden) get away with having a fully laden cost of employment that’s about twice the gross salary because their tax structures have such high employer-side payroll taxes that this is more or less also the case for the private sector; but in the US, the private-sector norm is a multiplier of about 1.3 and not 2 and the public sector needs to do the same. Benefit cuts should go one-to-one to higher base pay, which should be competitive with high-productivity industries – public transit agencies should want to hire the best engineers, not the engineers who couldn’t get work in the private sector.

2. Promotion by merit and not seniority. Seniority systems in private businesses are a feature of relatively low-productivity countries like Japan, whereas the more productive American and Northern European private sectors promote by merit and have paths for someone to have decisionmaking power in their early 30s if they’re good. In contrast, American public transportation providers are bound by rigid notions of seniority at all levels – including even how bus and train drivers are scheduled (in the German-speaking world, schedulers set everyone’s work schedules on the principle of spreading out the painful shifts equally) – turning one’s 20s into a grueling apprenticeship, and even at my age people are always subordinate to a deadwood manager who last had an idea 20 years ago.

3. Hiring successful leadership, from within the industry if not through internal promotion. In some cases I can see hiring from adjacent industries, but so far this has meant national railroads like Amtrak and SNCF hiring airline executives, who do not understand some critical ways trains differ from planes and therefore produce poor outcomes. The practice of hiring people whose sole expertise is in turnarounds must cease; in Massachusetts, Charlie Baker’s foisting of Luis Ramirez on the MBTA was not a success. In the United States, the best example of a successful outside hire for leadership is Andy Byford, who Andrew Cuomo then proceeded to treat with about the same level of respect that he has for the consent of women in the room with him and for the lives of residents of New York nursing homes. This is really an extension of point #2: people with a track record of success in public transit should run public transit, and not hacks, washouts, and personal friends and allies of the governor.

4. Professional development. A planner earning $60,000 a year, who should probably be earning $90,000 a year, gets to regularly fly to a conference abroad for $2,500 including hotel fees to learn how other countries do things. The core of a high-value-added firm is its employees; the biggest risk when one invests in them is that they then take their skills and go elsewhere, but public transit is a local monopoly and if a New York planner takes their skills and moves to Philadelphia, on net New York has lost nothing, since SEPTA is complementary to its services rather than a competitor.

Note that this list avoids any of the usual tropes of hiring freezes, rank-and-yank systems, or the imposition of a separate class of managerial overlords who get to tell the experienced insiders what to do. These are not features of successful, high-productivity businesses. Some are features of failing companies, like the hiring freeze. Others are a feature of long dead industrial traditions, superseded by more modern ones: the class system in which the recently-hired MBA is always superior to the experienced worker, faithfully reproduced in most militaries with their officer-enlisted distinction, is inferior to the classless system in which people are hired and among them the most successful and most interested in a leadership role are more rapidly promoted.

Outside funding

The above points are about how a public transit agency should restructure itself. But the private sector has some insights about how external funding, such as federal funding in the US, should work.

Central to this is the venture capital insight that the quality of the team of founders matters at least as much as the proposal they bring in front of the VC team. If public transit agencies are to be run as frontier businesses (such as biotech or software-tech), then it stands to reason that federal funding should look at how the VC system funds them. In addition to following the above agency norms for their own hires, grantors like the FTA and FRA should then look at who exactly they’re funding. This means at least three things:

1. YIMBYer regions get more money than NIMBYer ones. New York can still get some money if it has exceptionally strong proposals, but overall, regions with stronger transit-oriented development, which in the US mainly means Seattle, should be getting more funding than regions without. This is on top of the purely public-sector negotiation process, common in the Nordic countries, in which an area that wants rail access to city center jobs is required to plan for more housing, even over local NIMBY objections. The Nordic process is a negotiation, whereas what I’m proposing here is a process in which the FTA and FRA get discretion to invest more money in regions that have pro-growth, pro-TOD politics without rezoning-by-rezoning negotiation.

2. Regions with recurrent corruption problems get defunded. If there’s a history of poor project management (for example, at California High-Speed Rail), or of actual corruption (as in Florida with Rick Scott), or of leakage of federal funds to unrelated goals such as creation of local jobs or overpriced betterments, then outside funding should not be forthcoming. There are other places that need the money and don’t abuse federal funds.

3. Regions with healthy ecosystems of transit advocacy get more money than regions without. NGOs are part of the local governance structure, and this means the FTA and FRA should be interested in the quality of advocacy. The presence of curious, technically literate, forward-looking groups like TransitMatters in Boston and 5th Square in Philadelphia should be a positive mark; that of populist ones like the Los Angeles Bus Riders’ Union with its preposterous claims that trains are racist should be a negative mark. This also extends to the local nonprofit grantors – if they are interested in good governance then it’s a sign the region’s overall governance is healthy and it will not only spend federal money prudently but also find new innovative ways to run better service that can then lead to a nationwide learning process. But if they are ignorant and incurious, as Boston’s Barr Foundation is (see incriminating article here by Barr board member Lisa Jacobson, falsely claiming Britain has no interest in equitable investment and the Netherlands has no interest in pedestrians), this suggests the opposite, and regions with such people in positions of power are likely to waste money that they are given.

Giving the state discretion

A lot of people are uncomfortable with the idea that the public sector should ever have the discretion to make its own decisions. In practice discretion is unavoidable; the American solution to the conundrum has been to bury everyone in self-contradictory paperwork and then any decision can be justified and litigated using some subset of the paperwork. So the same discretion exists but with far too high overheads and with a culture that treats clear language as somewhere between evil and unthinkable.

Because the idea of running the government like a business is disproportionately common among people who don’t like the public sector, programs that aim to do just that are bundled with programs that leash the state. The leash then means politicization, in which personal acquaintances of the mayor, governor, or other such heavyweight run agencies they are not qualified to work at, let alone manage; the professionals are then browbeaten into justifying whatever decision the political appointees come to, which is a common feature of dysfunctional businesses and a rare one at successful ones.

But successful businesses are not leashed. To run the government like a business means to imitate successful business ecosystems, and those are not leashed or politicized, nor are their core office workers subjected to a class system in which their own promotions are based on seniority and not merit whereas their overlords are a separate group of generalists who move from agency to agency. What it does mean is to hire the best people and promote the best among them, pay them accordingly, and give them the explicit discretion to make long-term planning and funding decisions.

56 comments

  1. Alex Cat3

    I’d think one reason that attempts to apply American business culture to government don’t go well is that when managers try to turn around a failing business, they generally focus on the things that the business succeeds at– it’s core competencies– and sell off or shut down the weaker parts of the company. Applying this thinking to government, if your country has a strong military and a weak public transit system, you can’t just decide to only focus on the military and let someone else build public transit. This essentially seems to be the argument of many anti-transit libertarians– the US government is bad at transit, so it should focus on something it is good at and let the private sector handle it. The problem, of course, is that many things that governments do, like public transit, are things that cannot be done effectively without government involvement, due to the necessity of, say, eminent domain to acquire rights of way, or the need for integrated fares and connections between lines, or the high cost of infrastructure relative to operations making it a natural monopoly.

    • adirondacker12800

      the US government is bad at transit
      Because we elect people who think Real Americans(tm) drive everywhere. They then do everything they can to assure transit is bad.

      • Lee Ratner

        The vast majority of Americans drive cars or are too young to drive cars. The number of American adults without cars is statistically miniscule. Now many Americans would be financially better off without cars or who might even live in areas where having a car is kind of on the nuts side but they still drive cars and would never get in transit. Even internationally in places with much better transit than the United States and where government makes car driving at actual cost or at least as close to as possible or because it is a developing country with a lot of people in poverty, you still have hundreds of thousands or millions of people that just want to drive everywhere. Even if the transit system is really good like in Paris or Tokyo or Berlin.

        We transit advocates need to pay attention to why the car is actually popular with most people. Not only in the United States but globally. Until the advantages of the car and the disadvantages of transit are faced than the car is always going to win against transit hands down. Without even dealing with travel time, where the car usually wins easily in the United States, you have the fact that you really don’t need to deal with people making your ride unpleasant in a car. There are no men taking advantage of the crowded subway to engage in sexual harassment, nobody blaring music out of a loud speaker, no schedule, and nobody having a drag out fight or high as a kite. I’ve had to dealt with nearly all of the above on BART or MUNI more often than I like.

        • Onux

          “We transit advocates need to pay attention to why the car is actually popular with most people.”

          The transit explanation for car use is simple:
          Cars provide express service (no intermediate stops), with zero headway (no waiting at the car) and infinite span (the car works 24 hrs a day).

          Normally express service, lower headway and longer span is expensive, because they all involve more vehicles in the road and paying drivers. The personal car provides objectively high quality transportation because it shifts the labor burden to the driver, who isn’t paid to drive themselves. Transit advocates who do not understand and address this will not affect major change.

          • Tiercelet

            I think Lee’s got a point beyond pure transportation-specific factors.

            I’d put it this way: cars, like the suburbs they’re symbiotic upon, are appealing because they create the illusion of greater personal space. Cars and suburbs reduce the number of strangers you have to be face-to-face with, and make you physically somewhat more separate from them. And it turns out it’s quite difficult for humans to tolerate the presence of other strange humans–it takes a good bit of socialization to suppress those “non-tribe-member present, conflict incoming” instincts.

            However, I think this is more illusion than reality. I’m all too aware of the annoyances of apartment living; but without exception my friends and family who live in suburbs have stories about their horrible neighbors and all the obnoxious and dangerous conflict they bring–I’ve probably got fewer annoying neighbors than they do. I’ve seen some nonsense on BART and the MTA, but I’ve also sat in stopped traffic on Highway 4 at 5:30 AM; and I don’t think anybody who’s driven in America is unfamiliar with the impositions of inattentive drivers, the violence of willfully aggressive drivers, and the literal murders committed by armed road-ragers. For every person I’ve seen high on the subway, I’ve seen one on the road, too, and *they’re operating a two-ton death machine*–there’s a reason you don’t have Mothers Against Drunk Subway Riding.

            The thing is that there’s one form of toxic interaction that we’ve all been convinced is totally normal and unremarkable–that between drivers or people who share a yard–and another that we’ve stigmatized or just aren’t as equally used to–that between subway passengers or people who share a wall. Some of that is cultural inertia, and the financial interest of having consumers buy cars and mortgages, but a lot of it also comes down to it’s hard to teach primates to be tolerant of strangers. But that latter part is exactly what we have to do if we’re going to live at the densities required by our population size and the energy intensity of our lifestyles. (Not to mention that putting up with strangers is the price of having things like museums and performances and diverse shopping.)

            My two points of hope in this are that younger people tend to be more and more living in cities–thus gaining the kind of socialization to be tolerant of strangers and differences–and (probably not unrelatedly!) their increased interest in the labor movement, as direct experiences of solidarity help reinforce the lesson that strangers can be defenders and allies in addition to threats.

          • Henry Miller

            @Tiercelet

            Those are things that transit cannot do much about. (you could provide private first class compartments for everyone, but it isn’t reasonable) I’m not sure if that is correct – while it is clear that private cars avoid interaction, as you point out it isn’t even clear if this is something desired.

            What Lee was taking about is things that would push someone who is very extroverted and wants to talk to strangers to drive a private car anyway. Those are things transit can and should focus on first.

          • Matthew Hutton

            The stations in even small rich places in the Thames valley get respectable train ridership (say 250-500k passengers a year for 2021/22). But a decent part of that is because the Chiltern Mainline and the Great Western mainline run at up to 160-200km/h so they are competitive on speed with driving.

            If the train companies in other places ran their trains like that they would also get respectable ridership.

        • Oreg

          Few people want to drive everywhere in dense cities with decent transit. In cities like New York or Zurich, more than half of households don’t even have a car.

    • Alon Levy

      Yeah, so, the core competency of public transit agencies is running public transit, and the inefficiencies that they have involve providing this core service at high cost rather than having separate side businesses that can be sold off. So the typical corporate raider techniques don’t apply – the corporate raider has no tools or time to manage the core business better, just to sell parts for cash, and even a manager hired for turnaround without a hostile takeover doesn’t know the industry enough to be able to do it (Ramirez certainly didn’t).

  2. adirondacker12800

    not civil service exams
    Would be illegal. Change the law and when the party in control changes they put their useful idiots in.

    • Alon Levy

      Somehow, every functioning, depoliticized civil service manages to stay this way without vintage dieselpunk exams. In the US, too – teachers aren’t hired based on a civil service exam.

      • Onux

        What?!?! Public teaching in the US is one of the most exam focused job sectors around.
        Every state except three has testing requirements, and most require multiple tests (in New York the EAS and CST, in California the CBEST and CSET – except a certain combination of CSETs can replace the CBEST, etc.)
        Just because they use a different test than the civil service exam for other government jobs doesn’t mean they are not hiring based off of an exam.

        • Alon Levy

          There’s a lot of certification, yeah, but it’s distinct from having all cops who want to make rank sit an exam and then pick the highest scorers (who often just come out of cheating rings).

          • Onux

            Using exams for promotion is a different from the civil service exam, as it is understood in the US, which is used for hiring. Adirondacker’s original post was specifically referring to this (in the days before the CSE, a change of election meant everyone got fired and all the new hires the next day were friends of the new mayor). You specifically said “teachers aren’t hired based on a civil service exam” which is simply incorrect (I gave multiple examples) and inconsistent with your subsequent statement of “There’s a lot of certification”.

            Regarding promotion, however, why would making people sit for an exam be bad in all situations? If you are going to promote some beat cops to detective, wouldn’t you want to pick the ones who are more knowledgable of criminal procedure and investigative techniques? You can say that for management (or perhaps more precisely, leadership) positions that what you are looking for are intangibles that can’t be tested, but exams do have the advantage of being immune to nepotism and most bias. I am not an expert on this, but one procedure I am aware of (via a famous Supreme Court case) was a fire department that promoted Lieutenants via a combination of exam (to evaluate technical aspects such as how to handle an oil fire versus a house fire) and a promotion board interview (to evaluate leadership).

            You have mentioned several times that Europe doesn’t use exams, seniority, etc., but not given any examples except for bus scheduling assignments. How does “every functioning depoliticized civil service” recruit and promote? For instance, isn’t admission to the French Civil Service through exams (in addition to gatekeeping via the Grande Ecoles)?

          • Alon Levy

            A couple points:

            1. In American policing, exams are not at all immune to bias or nepotism – there are cheating rings.

            2. In the days before the American civil service reforms, Germany had an emperor and each state had a separate army; solving the problems of the 1880s-1910s does nothing to deal with the reality of the 1950s, let alone the 2020s.

            3. The Grandes Ecoles are for higher-level positions, and are also a way of figuring out early who the national elite is. The US has the same mechanism of elite universities, they just admit by legacy preference and not by test; if anything, the US and UK have a worse problem than France (let alone the rest of Europe) in that where you studied matters more than what you studied.

            4. DB hires like any other normal employer. There just isn’t any of the bullshit that US government jobs have.

            5. The American Supreme Court has about the same legitimacy as Kaczyński’s handpicked judges.

          • Tiercelet

            @Onux

            All the examples you listed (EAS, CST, CBEST, CSET) are certification exams, i.e. a qualification. Lots of fields have certifications–EMTs, for example, who are required to be certified even if they work for private entities. Getting a certification is a requirement for employment but does not guarantee it, and there’s no real distinction between a perfect score and barely passing. The certification just says you are allowed to work as a thing-you-are-certified-for.

            That’s different from a Civil Service Exam. In a CSE, there are specific exams for specific job categories. The exam feeds into a list. Your score on the test (with potential bonuses for other factors, intended to reduce historic inequities) determines your rank on the list, and the order in which you are hired. If you are at the top of the list, you will be hired when a position opens. (And if you don’t like that position, but it falls into the class of position you sat the exam for–like if you sat the administrator’s exam and have 12 years of experience in employment services but the position that opens up is in child welfare–well, too bad, hope you like working in child welfare.) Conversely, if you are not at the top of the list, you won’t be hired until everyone above you is hired.

            New York State requires a Civil Service Exam for people who teach *in prisons* (through the Department of Corrections). But for public schools in NYS and NYC (as documented on teachnyc.net) you get your certification, then apply to individual openings, much like the process for private employment.

            As a side note, the Civil Service Exam setup in New York is so sluggish and ineffective that the bureaucracy has to do end-runs around it, like hiring people for “temporary” roles that last for a decade.

          • Onux

            1. Its true any system can have bias, including testing, but if someone is going to help out a favored candidate by passing them the answers, they are certainly going to do so if they have flexibility to make their own hiring distinction, as you seem to argue. A properly designed (only questions relating to job knowledge) and administered (centralized and/or outside run) test should be neutral in terms of favoritism. Also, policing is only one part of state hiring, what about procedures to hire sanitation workers, bus drivers, etc?

            2. Back in the days of Germany having an emperor it also had the Abitur – and it still does. That something is old is not justification that it is wrong, you have to explain what is wrong with the system or why an alternative is better. “Its 2020 not 1880” isn’t an argument, it’s a statement.

            3. I admit the French system of admitting to a Grande Ecole by test is better than the more frequent legacy admissions at US Ivies, but this does nothing to support your assertion that every society except the US manages their civil service without test taking. You are correct the Grande Ecoles feed higher management, not all civil service jobs, but this feeds into….

            4. DB is one organization out of hundreds in Europe. Technically it isn’t even civil service or government since it is a joint stock company, but with the German government as the only stock owner. Also what does “hire like any other employer mean”? Do they use headhunters, hold career fairs, give employment exams? Does every branch line manager personally hire all of the drivers/conductors on their route, or does their union have some say in hiring and assignment? Since your post was about running the “state” like a business: how are firefighters hired in Denmark, metro planners promoted in Milan? You’ve given the example of German speaking areas not scheduling drivers by seniority, but does pay or promotion tie to seniority? Is there an exam to become a bus driver in Germany? What about every aspect of the state in Europe that isn’t bus driver scheduling in German speaking nations? You are making very broad assertions without specifics and your one example of a follow-up (DB) is a corporation not a civil service entity.

            5. This is irrelevant to the discussion. I mentioned the Supreme Court just to highlight I was familiar with a particular case for reasons other than familiarity with the civil service. I wasn’t suggesting this or any other process had legitimacy because the Supreme Court said so or because there happened to be a case about it.

            @Tiercelet
            Thank you for your explanation how the CSE process works. The “waiting list” system you mention does indeed seem very inefficient, versus a certification/”pass to qualify” followed by interview process, or even a “we have ten openings so we will give the exam and the top ten test scores get the specific job they applied for right away” approach.

          • Matthew Hutton

            1. I think US policing today is probably sufficiently corrupt that some low level people will pass out the test answers – probably for cash. I don’t think US policing today is so corrupt that multiple high level police officers would give a high score on an interview to a candidate just because they gave them money.

            Perhaps high level police would get their slightly under par cousin a job on a nudge-nudge wink-wink – but that is pretty small scale as these things go.

  3. Matthew Hutton

    As far as I can tell there are three primary reasons HS2 is over budget:

    1. Design speed of 400km/h not 320 or 300km/h.

    2. General gold plating and over speccing

    3. Not dealing sensibly with the people who live near the construction.

    Problem 3 is a sales and marketing issue – or at least a here’s what we need to change to sell to the public issue.

    With problems 1 and 2 it’s less clear cut, but if the engineers were asked to justify why the items in 1 and 2 were important in terms of selling them to the public then there might have been less of them. Also realising earlier that the project was unpopular might have helped focus minds.

    • Matthew Hutton

      And for sure Aylesbury to Milton Keynes is top of the list of mitigations that I would do – but part of why I think that is because I’ve spent a bunch of time listening to smart sales and marketing people and listening to smart private sector managers.

    • Alon Levy

      #2 is a technical problem that’s really a combination of incuriosity (the efficiency levels required for using existing train stations rather than building new ones exist in Japan, just not in Europe), laziness (HS2 has such high benefits they didn’t bother trying to economize), and perhaps the use of consultants who are very worldly and yet never get work in the non-English-speaking countries with good intercity trains.

      #3 is to an extent the same kind of laziness plus consultants who are paid to not cause trouble rather than to propose low-cot solutions. These are not the sort of people who will build at-grade through the Chilterns and tell the Home Counties snobs to kindly move to Alicante if they have a problem with it (and before someone chips in with a take about politics, look at the actions of the current government and ask yourself if they appear at all optimized for winning elections).

      • Matthew Hutton

        The complaining about HS2 in the Chilterns came up a fair amount on the doorstep when canvassing during the planning phase. It wasn’t a community meeting only issue.

        I mean realistically if they hadn’t done anything to counter the objections to HS2 there was a good chance the Conservatives would have lost the seats affected by HS2 – except perhaps Buckingham which was the speakers seat. And that would have stopped them governing after both the 2010 and 2017 elections.

        And the UK government doesn’t like to do out of scope mitigations (such as other rail or road projects) as that’s against civil service culture – and that’s been a thing for a long time.

    • CA

      You’re missing some important reasons:

      1. Usually high levels of risk transfers to contractors – including holding the contractor liable for soil settlement, etc. in 20 years. This has been realized to be a major problem and corrected for Phase 2A onwards. It’s usually more expensive to shift risk to the private sector

      2. Construction in a highly inflationary, unstable economic environment. Labor issues with EU citizens after Brexit and huge increases in the cost of energy and construction materials play a major role.

      It’s also the largest construction project attempted in the UK for a significant period, so there is a lot of learning going on. We’ll see if Phase 2/2B are able to deliver more cheaply.

      • Matthew Hutton

        The original Paris Lyon line was only €5m per track kilometre and it was the first high speed line in Europe, so I don’t think the fact that its a big project justifies the cost overruns.

        I mean even if you think the €600m for the Canary Wharf station is justified there’s no reason for example that an underground station in Manchester or Leeds for both HS2 and the East West stuff should cost more than that. While the platforms are longer and people will have more luggage the passenger throughput is substantially lower and less peaky.

        And neither Manchester or Leeds have the traffic on the roads not to do cut and cover to get into the city for the approach tracks.

        • CA

          LGV Sud-Est was built at a time of lower labor and material costs, with in-house engineers, through low-density agricultural areas, without a new urban approach to Paris, without indulging NIMBYs, and benefited from state ownership/coordination of any utilities or public works that could interfere with construction (EDF, PTT, etc.). Today in Britain, everything is more adversarial, land is more valuable, the public sector has no capacity to deliver a project without consultants, and existing approaches to London do not have 12-18 TPH worth of free capacity facing north.

          I’m not saying any of this is good, or immutable – but it’s a key driver of much higher costs. HS2 is building two extensively tunneled urban approaches with new-build stations in Phase 1. Were these the right decisions? I don’t think so, but they were made, and drive extremely high costs. I don’t think they are justified, but I see how they happen.

  4. Brett

    Unions tend to push for seniority rules in pay and promotion, because it’s seen as more “fair” and less subject to managerial manipulation and arbitrariness. But you probably could design merit-based promotion in bargaining, although I don’t know how.

    • Alon Levy

      We have unions here too. The system here is fair through having a consistent cycle of shifts for each worker, not through screwing everyone who has been on the job for fewer than about 10 years.

      • Tiercelet

        A seniority system for shift allocation is asinine, for sure.

        But Brett has a good point about the motivations behind seniority systems for promotion and pay–it’s far too easy for managers to leverage their discretion over work assignments & performance evaluation into godlike power over their subordinates’ careers (both as reported, and even what they actually “achieve through merit,” if you can confine them to low-prestige or under-resourced or otherwise doomed projects). This sort of thing is rampant in US private industry–even among would-be good managers, when forced to participate in stack ranking systems.

        Seniority-based promotion is not a good solution for it, but the better ones would seem to require a society-wide movement to stop rewarding sociopathic behavior on principle (even when it temporarily Gets Results), or institutionalizing some sort of matrix-management system where multiple decision-makers can provide employees with opportunities and independent evaluations of performance (which rather smacks of bureaucracy). Adding formalized definitions of merit might help, but it runs the risk of crashing on the rocks of Goodhart’s Law (a good metric stops being a good metric once it starts being optimized for) and the McNamara Fallacy (anything not measured is unimportant), at which point the org winds up falling back on vibes-based evaluation.

        Obviously these issues aren’t as prominent in high-performing US private organizations, nor (it sounds like) in high-performing German public ones. But at that point the distinction between high-performing and low-performing organizations seems less about specific structural features than about an overall attitude.

        The missing piece in all of this is goodwill–both its actual presence, and the safety of assuming it in others. People of good will, who believe in the organizational mission and are focused on accomplishing it, are much more inclined (within the limits of human structural bias) to do the right thing and promote for competence. People who lack this will be concerned only with their own power.

        People who can trust that others will behave out of good will feel safe and empowered to do the right thing for the larger group, even if it means giving up immediate reward for themselves, because they can be confident they won’t be screwed by managerial sociopathy, but rather that their humble contributions will be recognized. People who can’t count on the goodwill of others will build fiefdoms and backstab their would-be colleagues, since that’s the only way to survive in the war of all against all; the winning move is to make sure no project can ever succeed if you personally don’t get credit for it.

        People who are confident in their own skills and the visibility of their accomplishments do not fear promoting their competition–they know that they too will benefit when the organization succeeds. But woe betide the talented, motivated, eager youngling hired under the backstabbing manager who treats them as a threat.

        Lord, if only we could fire everybody with a managerial title in any American public transit system.

        • Alon Levy

          Whatever the original motivation is, it’s not hard to compare the system to both the American private sector and to the Northern European public sector. The German system of equality-matching the timetables lets workers swap if they want and notably manages to fill jobs without the chronic shortages seen in the US, where workers evidently Do. Not. Want. to be in this system despite high-for-non-college-job pay.

          And the bad managerial behavior you describe is not ameliorated in the seniority-centric American public sector at all. Backstabbers still exist, and they still figure out ways to find reasons to fire workers who are too good at their jobs in the voluminous rulebooks that nobody can possibly ever read in their entirety.

        • Onux

          Perhaps the solution is a hybrid system as used by most militaries: promotion is by merit, but there are seniority gates where a certain amount of time must pass between promotions (sometimes with promotion “windows” or limited ”before-the-window” promotion opportunities). Many militaries also separate evaluation (regularly, by direct managers) from promotion selection (only when eligible, by an independent board) – again with some exceptions for on-the-spot promotions by commanders.

          The result is that better performers are generally promoted earlier/more often, but promotion generally moves with experience (you don’t see 25 year old generals or 55 year old privates). There is less opportunity for nepotism/favoritism by managers, or for a single manager to derail a career (the reviewing manager is separated by time and rank from the promotion board which may come years later, and a notoriously unfair manager may be known to someone on the board who can advise against taking their reviews seriously).

          • Alon Levy

            The American system isn’t quite this. Rather, it has the following features:

            1. Nearly all officers are direct-entry – in the services other than the Marines, OCS is only around 20% of officers (60% in the Marines), but even then OCS includes some direct-entry college graduates, like John Kerry, and one answer on Quora says only 40% of Marine OCS cadets in their class were former enlisted. Compare this with Continental European militaries, which have a much larger proportion of mustang officers, e.g. 50% in France, but also some direct-entry NCO, who historically would’ve enlisted for a longer period than the one to two years of mandatory service typical of the Cold War.

            2. Officers are promoted by seniority, at regular intervals: captain after four years, major after 10, lieutenant colonel after 16, colonel after 22, with identical bands for these ranks’ naval equivalents. Some high performers can be promoted a year early (“below zone”), but it’s uncommon – and if you read WW3Real, it was a deliberate decision to make Pauline Colby a 31-year-old, below-zone-promoted major; some low performers are promoted a year late (“above zone”) but that’s uncommon as well.

            3. Officers can fail out but not shine. The promotion system is such that a growing minority in each rank will not be promoted and be required to leave the service. The only point at which one can really shine and get ahead is the boundary between colonel and brigadier general. Compare this with academia, where a large majority of postdocs don’t get a tenure-track job.

            4. Enlisted are subject to a strict class system, in which a specialist in a field can be promoted to master sergeant or sergeant major but is still outranked by any officer, and may have status at the unit due to their knowledge but it requires a superior officer to enforce this status personally. Enlisted promotions are not as rigidly time-based as officer promotions, but it takes many years to get to be a platoon sergeant.

            The classless system isn’t really common in militaries. The US maintains a more rigid class system than most of NATO, and the military success of the US is influencing both allies and non-allies – for example, the Soviet class system was and the Russian system still is based on education, using junior officers to do what senior NCOs do at NATO, but since 2014, Ukraine has at least in principle tried to transition to the NATO system. The IDF has an in theory classless system in which most people do the same basic training, and then the best performers in training are invited to an NCO position such as tank commander, and the best among those (still in training) are invited to extend their service for two to three years beyond the mandatory minimum and attend OCS to become platoon leaders. I say “in theory” because in practice there are prior tests to determine eligibility for command positions and the examiners are biased.

          • PS

            I work for a US state transportation agency – here’s how the system works if you care about details. Your State may vary.

            Pay is determined by a combination of “Pay Grade” and “Step”. Pay grade is tied to the position, Step to seniority.

            Under normal circumstances, you start your employment with the state at Step 1, and gain one Step per year up to a maximum of Step 10. Each Step is worth about a 4% pay raise. Steps are essentially automatic, absent an across-the-board pay freeze or disciplinary action (which is a lot of work on the part of the supervisor and requires approval by HR). For a given position, Step 10 is quite competitive with equivalent pay in the outside world (considering benefits), Step 1 is pretty miserable.

            It is possible to hire someone from outside at something other than Step 1, but requires an investigation of that person’s work history and an evaluation of what the equivalent Step would be. That takes about 6 months, and has to be done before the candidate accepts the position, which is pretty awkward.

            Promotions can only be to a vacant position, and new positions can only be created with the approval of the Legislature. Selection of a candidate to fill a vacant position is by the direct Supervisor of that position with approval of the Division head. With the way the org chart works, the new position Supervisor won’t be the same as the old position Supervisor, but could be in the same chain. Pay increase is per the Pay Grade of that position (which is as approved by the Legislature). If the increase is less than or equal to 10% of the old position, you keep your Steps. Otherwise you lose Steps to keep your pay increase to 10%.

            Overall, not a bad system. I think it works as well as it does because of a generous retirement system which encourages people to retire young and make room to move up. It does tend to go in waves, so you get periods when a whole bunch a people retire at the same time and get replaced with newbs with no institutional knowledge. And then you get periods when no-one retires, hence no promotions, hence entrenchment and low motivation. Other systems would suck in other ways, I’m sure.

            The executives (8 out of about 2000 employees) work under a somewhat different system and the details are a little opaque. Executives don’t have pay grade and step, but their pay is public knowledge and is broadly in line with the regular employee system (i.e. the rungs on the ladder are spaced about the same). They are at-will, so can be fired without cause unlike the regular employees. Generally internal candidates try to time applying for Executive positions so that they’ll hit retirement age before the next gubernatorial election, although only the top position usually changes with change in Governor.

          • Matthew Hutton

            Waiting 6 months before they can accept a position isn’t awkward. It’s insane.

            Why can’t it be done in a week?

          • Onux

            You have some misunderstandings how the US military works. You are also generally conflating three separate ideas A) how the military evaluates/promotes officers and enlisted (the topic at hand in response to Brett’s comment on unions and seniority B) how officers are selected (the “gentleman officer” paradigm of commissioning college grads vs the “aspirant” paradigm of promoting from enlisted ranks) in #1 below, and C) the military officer/enlisted class divide in #4 below.

            1. Prior-enlisted officers are much lower than what you state. In the Marines, which has the highest prior enlisted ratio, it is less than 10 percent of new officers each year.
            2. I fully noted that the US military uses promotion windows, (and it can be a feature not a bug; it eliminates opportunities for nepotism through fast-track promotions, and ensures “promoting top performers” doesn’t become “promoting wildly inexperienced people”) but it is not strict seniority with fixed years as you state. Promotions must go through a promotion board, they are not automatic. Very junior enlisted promotions may be strictly based on time and for the most junior officer ranks the promotion board is almost a formality (only the very worst performers are passed over) but at higher ranks for both promotion is not a given as you suggest. Technically all officer promotions come from Congress, which is usually a true formality where all promotions are voted on as one big list, but from time to time an officer with a cloudy history that makes it through a promotion board will not find their name on the requisite bill due to an astute Congressperson.
            2b. Are you seriously using a fictitious person from a made up war-fan-fiction twitter thread as an example of how the US military promotes people (“Pauline Colby” from “WW3Real”)? I’ll just state that we should evaluate based on real world examples and sources.
            3. There are absolutely ways for officers to shine. As I noted, promotion is not simply by seniority, board selection is required. While below zone/above zone promotions are rare, they do introduce variation between high and low performers. Furthermore there is also the category of not-promoted at all, which means being selected at all is the way to shine. Another means of shining is that selection boards are also used for high status assignments (joint duty, recruiting/training) and who gets unit command. A high performing communications officer will be given command of a communications battalion, while lower performing communications officers *of the same rank* will be assistant comm’s officer for a larger unit. What’s more, officers make up less than 1/5th of the military, but the same quasi-seniority/promotion window + promotion board system is used for enlisted promotions and some enlisted special duty (including enlisted selection for officer commissioning). Enlisted promotions windows are much looser and there are also opportunities for meritorious or spot promotions (either selected directly by commanders, or again, by a centralized board based after commander nomination) outside of the normal promotion track. As a result it is relatively easy in the system for top performing enlisted to “shine” and be promoted quickly; reaching the level of senior sergeants/petty officers with leadership authority years before peers. These last two facts are particularly relevant because the original question was how to get union rank and file to accept a non-seniority system for promotion and assignment without feeling they will be subject to manipulation by management.
            4. You are correct about the class system but it is not as rigid as you suggest. Everyone recognizes disparity in experience between new officers and senior enlisted. “Grizzled Sergeant teaches new Lieutenant the ropes” is a common trope for a reason – it does happens and junior officers are specifically told to seek enlisted advice. Second, as a practical matter senior enlisted de facto “outrank” very junior officers. A Lieutenant may “outrank” a Master Sergeant, but if he attempts to boss the Master Sergeant around he will find out from the Master Sergeant’s Colonel who really outranks who. Senior enlisted like platoon sergeants do NOT require an officer’s presence to enforce their status or authority personally (you are unequivocally wrong here, in some service traditions – Navy Chiefs and to some extent the Army – it is exactly the opposite, a brand new officer without the trust or backing of their enlisted advisor is the one with no status). What’s more this disparity is only true for very junior officers. A company commander will not be hugely different in experience from their first sergeant, and above that the disparity is basically gone. Another factor is that enlisted have much more a practical supervisory role than rank suggests. The US military is overstaffed with officers in staff positions, but operational units are more lean. An aircraft squadron may have one or two maintenance officers, but each shop (avionics, hydraulics, etc.) will be run by a senior sergeant with decades of experience. They closely represent what you identify as an ideal middle management paradigm (relevant hands on experience, promoted from within, etc.) This is furthered by the Warrant Officer and Limited Duty Officers, whose use varies by service, consisting entirely of enlisted promotions and who provide management in fields where technical experience is a major factor, such as ammunition handling or deep sea diving. Finally it is worth noting that almost all industries have a class structure when it comes to management roles, even if not as stratified as military rank. Andy Byford did not begin his career as a bus driver or train operator, he went straight into management (and isn’t his degree in French not railway engineering?) The main advantage to promoting officers from the ranks isn’t that enlisted experience makes an inherently better leader (does knowing how to drive a tank make one a better tank tactician? see above re: Andy Byford) but that it allows screening for competence. If you cannot handle a ten person squad it makes sense you won’t do better with a thirty person platoon. The failing of the US model is that it lets incompetent Lieutenants flail about and ruin a platoon for a few years before the system catches up and keeps them from further command.

          • adirondacker12800

            Why can’t it be done in a week?
            Because the position is unfilled for months which means expenses come in under budget, without much effort?

          • Matthew Hutton

            If the job being done doesn’t add any value – why hire at all?

          • adirondacker12800

            Other people do the work while it’s unfilled. Eventually someone quits or dies and you are two people short.

          • PS

            “Waiting 6 months before they can accept a position isn’t awkward. It’s insane.

            Why can’t it be done in a week?”

            It takes about 6 months to get permission to offer something other than Step 1 (i.e. minimum pay for the position) to someone from outside. It takes that long because there has to be a review the candidates work history, what Step they would be at if they started their career with the State, how the offer compares to what has previously be made to other candidates, etc.

            The state is very, very concerned with equity (or at least its definition of equity) above all else. Several times someone has been brought in at say, Step 7, then a co-worker complains, and then there’s a review of both their histories that starts a chain reaction of dozens of other people getting a bump to equalize things. Probably no one at HR wants to be involved in that, so they go as slow as possible in the hopes that it gets assigned to someone else.

    • Henry Miller

      If you are a rank and file union member it often isn’t possible to be better than anyone else. Everyone is limited by the slowest person on the assembly line, so long as you get your part installed before the line moves on it doesn’t matter. Maybe you can install it in record time and thus spend most of your shift doing nothing, maybe you just barely get it installed on time – it doesn’t matter, you are equally good. If you don’t get your part installed on time you are incompetent, but other than that there isn’t really anything you can do to make yourself better.

      If you drive a bus there likewise isn’t much you can do. You have to arrive at the transfer points on time (but if you don’t it is probably outside of your control). You have to drive safely. You can get a better customer service rating on rider surveys – but most people are not taking to the driver (I’m not sure if I want drivers to: they need to focus on safety and on time not good survey results). Similar for train operators, if you do your job right you are just as good as everyone else.

      There is some value to a company to having people stick around for a while. It does cost to train new drivers. However once you have been on the job for 6 months your value is the same as someone who has been around for 30 years on the same route. (someone who can drive a long bus is maybe worth more than someone who drives a standard bus – but I still want the drivers of standard buses to have the license to drive a long one even if they never do just because of the flexibility it gives)

      This is very different from management where you can be better at doing your job, and some of those are measurable ways.

  5. Eric2

    Note that the state, and most state agencies, are monopolies. Monopolies in business are generally bad – what makes business effective is a competitive market where the most effective businesses win and others are destroyed by natural selection. Many of the unique features of state agencies are attempts to limit the bad tendencies that any monopoly will accumulate. Get rid of these features, and you’re more likely to end up with the equivalent of a horrible private monopoly than a competitive private market.

    • Alon Levy

      Paying competitive wages is not a predatory monopoly feature. Neither is the suite of investment guidelines for federal funding, which occur in a context of competition between agencies for funding. Even the broader problem of New Right politicians and activists who don’t like the government very much isn’t about monopoly but about status anxiety.

  6. Patrick Jensen

    “if a New York planner takes their skills and moves to Philadelphia, on net New York has lost nothing, since SEPTA is complementary to its services rather than a competitor.”

    You clearly think like an earnest transit nerd and not like the bean counters holding the purse of SEPTA or MTA. If MTA trains someone who leaves to work for SEPTA (or goes into consulting), the bean counters will see a wasted investment and will let the manager know.

    The free-rider problem of non-excludable but rivalrous goods i.e. common pool resources is a major reason why public education exists. Everyone wants well-educated workers, but nobody wants to pay for training them.

  7. Henry Miller

    Business literature has noticed that promote form within is a key. While some outside leaders have made major turn around, most long term successful companies have CEOs that “started in the mail room” – or at least had been at the company for a decade prior to being in charge.

    • Richard Mlynarik

      That’s assuming a successful organization with a culture of producing and rewarding what people outside the organization might regard as successes.

      This is the exact opposite of US public transportation agencies.
      They do indeed promote from within (hey, Caltrain, after an extensive galaxy-wide search, found that their new executive director just so happened to already be serving as interim executive director, after having been deputy executive director, and has the experience of having very close to zero exterience in any industry outside that one agency), but the “success” they reward with internal promotions is the stuff of your or my nightmares.

      Fun and impossibly depressing fact: the Caltrain service offering and timetable has not improved at all (nb: June 2004!) in all the years that the current executive director has been employed by the agency, and there are no plans to ever change that.

      Don’t mess with “success”.

  8. Borners

    Its always weird* that people who advocate “privatisation”** none of them dare mention Japan. This also applies to education (majority of educational institutions outside Primary-Middle schools are private). Partly that’s Westerncentrism/Racism but Boomer Conservatism would detest relinquishing state control on education and housing to the degree those well known liberals in Japan have.

    *Actually its not when you understand Neoliberalism didn’t exist till the Reddit group and the dominant trend inaugurated by the New Right in the late 1980’s is actually Boomer Conservatism which seeks to maintain/return the social order of the 1950-60’s and failing that use nihilistic economic policy to punish the rest of society for daring to change while they are still alive.

    ** I realised British railway privatisation wasn’t actually privatisation when my cousin who works in construction described how all their dealings with railways where handled by Network Rail operating according to Department of Transport directives.

    • adirondacker12800

      A few Baby Boomers were too young to vote when Saint Ronnie of Reagan was elected with a slim margin. He didn’t win the vote of the ones old enough to vote either.

      • Borners

        Boomers (and Silent Generation behind them which is actually folded into them politically) are already the dominant electoral constituency in the first world by the end of the 1970’s. And its also about the disjuncture that the society they grew up in has so completely disappeared as the Gender/Sexual Revolution/Mass Immigration/Rise of the Service Economy/The Great Aging/The Tertiary Education Divide etc. Conservatism’s greater adaptability has allowed them to steal many marches on left-wing parties that are still often stuck in nostalgia for a bygone social order/revolution/future that never happened.

        • adirondacker12800

          Conservatism’s greater adaptability, I giggled so loud I scared the cat.

          • Luke

            I think that probably translates to “lesser concern for or possession of principles”. As long as there’s at least one–but preferably more–group of people otherized and consequently oppressed, conservatives can be mollified. Hence the importance of stigmatizing that train of thought.

          • adirondacker12800

            They don’t have any principles other than doing whatever it is the old rich straight white guys want. They are okay with armed insurrection against the freely elected government. It wasn’t particularly large but it was armed insurrection. And they are okay with discussing the next one. Often. A few other ugly themes are rearing their ugly heads but the most urgent one is that they are for armed insurrection. In the future.

    • Lee Ratner

      When Americans talk about other developed democracies, they usually mean the other white developed democracies. This is regardless of their politics. Very few talk about the Asian developed democracies. A couple of months ago, in a discussion about universities, a commentator on another blog was kind of surprised to learn that the Asian developed democracies have a lot of private universities and colleges in the same way America does. That person thought that having lots of private universities and colleges of varying quality from very elite to miserably low was an American thing only and all other developed democracies had entirely public universities and colleges.

      • Borners

        Well East Asian educational systems (even the PRCs) are heavily influenced by 20th century America. For the record I don’t actually East Asian models have much to recommend them. Its more about the tell that’s so much is just bullshit on all sides, US transportation, land planning and educational sectors are much less “business-like” and centrally planned than their East Asian counterparts. Including the PRC with land-sale-lease based regional development policies plus Hukou public service apartheid. Its like Texas without the oil.

      • Alon Levy

        Yeah, but note that in Japan and Singapore at least (not sure about the other three), the most elite universities are public, although arguably the most elite universities for Singaporeans are Oxford and Cambridge, followed by Berkeley. Singapore also has an entirely public primary and secondary education system – the elite secondary schools are run independently but they’re state schools and do not charge tuition.

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