What public sector boards can learn from private sector discipline

Public sector governance is often judged through a private sector lens. Calls for greater efficiency, sharper performance and more commercial discipline are familiar refrains, particularly in periods of fiscal pressure and heightened public scrutiny. Yet public sector governance is not simply private sector governance with a different funding model. It operates in a fundamentally different context, shaped by statutory purpose, democratic accountability, political cycles and the obligation to steward public value on behalf of current and future generations.

Those differences matter. But they do not absolve boards from the growing expectation that they will govern more deliberately, focus more clearly on outcomes and demonstrate that public resources are being used well. In fact, the opposite is true. As complexity increases and trust in institutions remains fragile – with the 2026 Edelman Trust Barometer indicating continued pressure on trust in government, business and other core institutions – boards cannot assume that legitimacy will be granted automatically.

Recent international analysis by McKinsey, based on its work with public company boards and private equity-backed organisations across multiple jurisdictions, highlights how board time, focus and behaviour shape organisational performance. Its findings suggest that boards operating under strong performance discipline spend materially more time on forward-looking strategy and value creation, and are far more likely to see themselves as having a meaningful impact on organisational outcomes. This is not an argument for importing private equity models into the public sector. It is, however, a reminder that governance is not neutral. How boards choose to use their time, attention and authority has real consequences.

For public sector boards, the parallel challenge is well documented. Oversight and reporting obligations are extensive, yet it often remains difficult to tell what value New Zealanders are receiving from significant levels of public spending. The Office of the Auditor-General has repeatedly observed that performance information is often inward-looking, overly focused on activity and process, and weak in demonstrating impact, outcomes and stewardship. This is not primarily a reporting problem; it is a governance one. When boards lack a clear line of sight from strategy to outcomes, accountability becomes blurred and trust is harder to sustain.

This tension sits at the heart of contemporary public sector governance. Boards are expected to comply with detailed statutory and reporting requirements while also providing strategic direction, exercising stewardship and navigating political interfaces with confidence and integrity. Too often, compliance crowds out the space for deeper discussion about priorities, trade-offs and long-term value. Over time, boards can drift into an administrative mode that feels safe but delivers diminishing returns.

Private sector discipline offers a useful counterpoint, not because its objectives align with public purpose, but because it exposes the cost of a lack of focus. McKinsey’s research into board effectiveness shows that boards operating under strong performance expectations are more deliberate about what sits on the agenda, more rigorous about the information they rely on, and more willing to confront uncomfortable issues early. For public sector boards, the lesson is not to pursue financial value, but to be clearer about what public value looks like, how it will be achieved, and how progress will be tested through governance and performance oversight.

This clarity is inseparable from board capability. Public sector boards operate in environments characterised by policy complexity, long-term risk, heightened scrutiny and increasingly contested expectations. Comparative research across several international jurisdictions shows that many have responded to this complexity by introducing clearer expectations around director capability, including structured induction, ongoing development and regular evaluation, particularly for public and quasi-public boards.

By contrast, governance pathways in New Zealand’s public sector have tended to rely more heavily on experience, reputation and informal networks, including ministerial appointments, with training and evaluation largely voluntary and variable across entities. Research suggests this approach reflects a strong tradition of service and trust in individual judgement, but also has the potential to result in uneven capability and inconsistent support as governance demands intensify. Experience remains valuable, but international evidence indicates it is most effective when complemented by deliberate, ongoing development and clearer expectations of what good public sector governance requires over time.

International audit and governance research, including analysis of public sector audit committee effectiveness in South Africa, reinforces this point. Effective stewardship requires boards to look beyond annual performance and short-term delivery, and to take responsibility for long-term capability, assets and resilience. This includes workforce sustainability, infrastructure, institutional knowledge and the ability to respond to emerging risks. Unlike private ownership models, public sector stewardship is enduring. Boards cannot rely on exit horizons or market discipline to correct course. They must hold that responsibility themselves.

The political dimension of public sector governance further differentiates it from private sector practice. Boards do not have the option of insulating themselves from politics; they must instead learn to navigate it. This requires clarity of mandate, confidence in role and a disciplined approach to engagement that respects democratic accountability without surrendering independent judgement. Boards that retreat into compliance risk becoming administrative rather than strategic. Boards that overreach risk undermining trust. Striking the balance is difficult, but it is central to effective public governance.

What emerges from this is not a call for public sector boards to become more commercial, but to become more intentional. Intention shows up in how agendas are structured, how performance information is used, how capability is developed and how long-term consequences are weighed alongside immediate pressures. It shows up in a willingness to ask whether reporting truly illuminates performance, whether strategy is actively shaping decisions and whether the board is equipped for the environment it governs.

Private sector insights are most useful when treated as prompts rather than prescriptions. They challenge assumptions and reinforce the idea that governance itself is a value-creating activity. For public sector boards, the task is to apply that discipline in service of public purpose, not to replace it.

Ultimately, strong public sector governance is not defined by how closely it resembles private sector practice, but by how effectively it fulfils its own mandate. That mandate is demanding: to steward public resources wisely, to deliver outcomes that matter, and to sustain trust in institutions over time. Meeting it requires boards that are focused, capable and confident in the distinct role they play. The opportunity is not to borrow a model, but to sharpen the practice of public governance itself.