Chapter 6: Customer-Driven Government: Meeting the Needs of Customer, Not the Bureaucracy

In this chapter, the authors argue that government services often fail to meet the needs of their customers, because funding for services comes not from customers but from elected representatives like legislatures and city councils. As our society become more complex and diverse, the needs and preferences of customers are no longer homogeneous, yet governments still provide standardized services.

The authors argue that government must make a greater effort to perceive the needs of customers and give them a choice of producers. In order to learn the needs and preferences of its customers, government should give them a voice through methods such as surveys, customer contact, customer interviews, customer councils, and ombudsmen.

To respond to the needs of customers, however, it is not sufficient to know about their needs. It is also necessary to let them have a choice of providers by putting resources in the customer's hands' through vouchers and cash grants, for example. This "customer-driven system" approach has many advantages:

1. It makes service providers be accountable to their customers: if customers can choose their providers, providers should meet customers needs.
2. It can prevent political influence from choosing the service providers. If the public agency select providers, politicians may interfere with the decision. In this case, the providers with the largest constituencies will be selected, regardless of the quality of the service they can provide.
3. It stimulates more innovation. Competition will make providers pursue the most efficient way of providing service, so that they will invest in innovation.
4. It makes it possible for customers to choose the service that they want.
5. This approach wastes less, because the quality and quantity of service are determined when supply meets what consumers want, rather than when supply meets what legislatures or city councils want.
6. It makes consumers commit themselves to the service. For instance, students are more committed to education in schools they have chosen.
7. It provides the opportunity for greater equity. For example, if government funds institutions rather than individuals, on the one hand, institutions that are targeted at the poor will deteriorate and the poor will be stigmatized. On the other hand, the institutions not limited to the poor will promote inequality, because the most intensive users of the service are the affluent. In contrast, through this approach, governments can equalize the funding for each individual and get rid of the stigma of the poor.

There are some limitations to this approach. It cannot be applied to the regulatory sector, because in this case the primary customers are not individuals but the community as a whole. This approach is best applied to service delivery. The other drawback is that it cannot be applied when market is dominated by a monopoly situation, and when competition for a service would result in inefficiency, as is the case with garbage collection routes.

The authors point out that in addition to putting resources in their customers' hands, governments need to restructure the existing bureaucracy. Because the traditional public systems are designed for administrators and service providers, it is difficult to expect public managers to serve customers. According to them, the bureaucracy should be transformed from the old systems to new systems that are both "user-friendly" and "transparent." Customers should not be faced with a confusing maze of fragmented programs, conflicting eligibility requirements, and multiple forms to fill out; and they should be able to sort through their options without having to sort through the complex bureaucracy behind them.