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We have all heard people clamor that the federal government should be run like a business. Those people are wrong. The federal government is not a business and should NOT run like a business. Businesses are incented to maximize shareholder return which is often equated to some measure of profitability. Government intends to maximize social value while maintaining ethical and legal legitimacy. That cannot be measured by profitability.

We should not strive to make the government a profit maximizing enterprise. Our goal should be to help the government improve continuously, spur greater innovation, and be more responsive. We need to find better ways to incent these behaviors – but with incentives that are not necessarily tied with greater compensation. We already know that linking pay to performance can lead to perverse incentives and OMB has already affirmed that government pay is comparable with the private sector.

The incentives we should investigate would involve span of control. We should incent the project managers, chief executive officers, and agency heads with greater autonomy of their teams and greater control over their budgets. Imagine the potential impact of the project manager that is empowered to hand pick her next team or project based on her prior success. Imagine the CIO that earns more autonomy over his budget based on effectively implementing a portfolio management strategy. Imagine the agency head that is given more authority to manage the acquisition processes and hiring processes based on efficiencies she has garnered in prior fiscal years.

Incentives can have unintended consequences, which is why further study is needed. But the power of incentives has been proven time and time again. Now, more than ever, we need new incentives to quiet the “run the government like a business” critics and promote the positive change we all seek.