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Comparing Leadership Landscapes: Local Government versus the Private Sector

Comparing Leadership Landscapes: Local Government versus the Private Sector

08 March 2024 Eleanor Ogston

Town Hall

​At Leading Roles, we are often asked by our local government clients to bring private sector leadership skills into executive roles in councils. We have now recruited over 60 Chief Executives and General Managers into councils in Australia and have some experience and observations to offer our clients about the pathways to successful transition between other sectors and local government.

While we are open minded about private sector or public sector experience, there are unique and specific requirements in local governments, and a request from a client for candidates that have private sector experience is often a cue for us to seek a deeper discussion of our clients’ needs and aspirations for their council organisation and its leadership.

Leadership in local government and the private sectors thrives on distinct purposes and goals. These distinct purposes and goals in-turn shape the operating frameworks of each sector, and each sector requires unique and quite different mindsets and skillsets from their leaders.

Let’s explore the disparities in leadership approaches, the differing mindsets and skillsets demanded in each sector and offer some insights for executives considering such a move or councils contemplating hiring their next leaders from outside of the local government sector.

Visionary Thinking

Local government leaders steer organisations towards sustainable development and social equity, fostering forward-thinking cultures based upon delivery of long-term community strategic planning.

In contrast, private sector leaders are compelled to balance short-term results with long-term strategic planning to drive innovation and competitiveness and ultimately, improve shareholder value.

Board Engagement

Councils are governed by publicly elected community representatives, who are tasked with overseeing the organisation's operations, ensuring compliance with laws and regulations, and representing the interests of community’s stakeholders.

Private sector boards that govern corporations and for-profit entities consist primarily of directors elected by shareholders or appointed by existing board members, who are responsible for setting strategic direction, monitoring financial performance, and safeguarding shareholder interests.

While both types of boards share responsibilities for governance and oversight, they operate within different legal and regulatory frameworks and are subject to distinct expectations and accountability structures tailored to their organizational objectives and stakeholders' interests.

In practice, a council “board” operates quite differently to a corporate board by nature of differing goals, priorities and the often-variable level of experience of its members, as well as dynamics of the local government election cycle, and this places very different demands on the organisation’s executives.

Governance Arrangements

Public sector governance involves the management and oversight of government institutions, which are responsible for providing essential services and implementing policies to serve the public interest. This governance is typically guided by principles of transparency, accountability, and responsiveness to community needs and preferences, and may be influenced by democratic processes.

In contrast, private sector governance focuses on managing businesses and organisations that operate for profit, with a primary goal of maximising shareholder value. Private sector governance is characterised by a competitive market environment, where decisions are driven by profitability, market dynamics, and shareholder interests, often guided by corporate governance structures and regulations.

Networks and Connections

In local government, extensive networks within the specific stakeholder groups of local governments are crucial for efficient council operations. Collaboration with various stakeholders, including other levels of government, ensures effective service delivery and community advocacy. Local governments do not explicitly operate in a competitive environment, so collaboration, sharing and partnerships are more intrinsic to leadership and operations in the sector.

Conversely, in the private sector, networks revolve around customers, shareholders, and regulatory bodies, driven by profit-centric goals.

Service Provision

Differences in funding mechanisms, service objectives, scopes, and competition dynamics distinguish service provision between sectors.

While local government prioritises public interest, community service outcomes and collaboration, the private sector focuses on profitability and market share.

Our observation is that local government service complexity is substantially higher than in an equivalently sized private sector organisation, which itself is a key differentiator in terms of leadership and management demands.

Fiscal Management

Local government leaders manage public funds with transparency and accountability, facing budgetary constraints and fluctuating revenues. In the private sector, financial decisions revolve around maximising profitability and shareholder value, driven by market dynamics and investor expectations.

Workforce Management

Public sector leaders navigate government mandates, budget limitations, and political scrutiny in managing their workforce.

Private sector leaders, on the other hand, can leverage greater flexibility in hiring and compensation to attract and retain talent, aligned with business strategy and shareholder interests.

Risk Appetite

Public sector leaders tend to be more risk-averse, prioritising stability and cautious decision-making to maintain public trust and service reliability. In contrast, private sector leaders embrace higher risk appetite to drive innovation and growth, recognising the need for calculated risks in dynamic market environments.

Transitioning into local government from a private sector leadership role demands nuanced understanding and adaptation to the specific challenges of local government.

Capable people will be successful wherever they choose to work, but successful transition between sectors requirements development of a clear understanding the disparities between the sectors.

Adaptable leadership approaches tailored to the distinct contexts of local government and the private sector, an organisation with the resources and maturity to manage the executive’s transition, and a grace period of time are each essential for success.