Public Project, Private Leaders

The federal government announced this week a bold plan to spend $200 billion to finally improve highways, bridges and the rest of the nation’s crumbling infrastructure. That’s the good news. Now for the wrinkle: the funding is capped in ways that force the private sector to take on a big role—and find the right leaders and strategy for that.

Under the plan, federal funding for any individual state or city project will be capped at 20%. The onus is on state and local governments to fund the remaining 80% of the cost, which means that, for many projects, they will most certainly look to the private sector for capital.

Indeed, the administration’s plan implicitly encourages public-private partnerships, so-called P3s. It’s a logical framework, experts say, considering that President Trump is a land developer by trade and real estate development is one of the largest components of public-private collaboration. But these kinds of partnerships, which are growing in popularity around the world, require more than just money to succeed. They require leaders who can balance generating a return for investors with the complexities and nuances of public stakeholders.

“Leaders in these roles need to be very agile learners because they need to get a lot of different people to work together cohesively without the time or history with them to do that,” says Zack Deming, senior client partner and co-leader of public private partnerships at Korn Ferry.

One of the biggest challenges in public-private partnerships is that an entire C-suite of executives has to be assembled all at once. Private companies almost never replace their entire leadership team or board of directors in one fell swoop. Moreover, new civic projects usually don’t have an embedded legacy talent, and even if they do they might not be equipped with the skill set needed to handle the profit expectations that come with private ownership.

The benefits of a successful public-private partnership are obvious, experts say. Improved roadways, more reliable mass transit, and cleaner, more efficient energy delivery can all help spur economic development, for instance. But infrastructure projects have historically been left to the public sector. Private sector involvement can be a bridge to support rebuilding deteriorating infrastructure with more efficiency, oversight, and execution than typical of a public sector-only project. In other parts of the world, public-private partnerships have driven innovation, enhanced the customer experience, and leveraged technology into the infrastructure they’ve built.

But whether it is an airport, subway, or something else, success or failure depends on the partnership’s ability to convert a public accommodation into a consumer space. And that ability depends on the leadership team and the talent it puts in place for each stage of the project, from design and construction to commercialization and operation. In this respect, private capital also helps expand the talent pool by allowing for higher levels of compensation than the public sector norm. So rather than recruiting someone with an aviation background to run an airport, the pool can be expanded to include other leaders with differentiated skills sets. LaGuardia Airport in New York did just that when it named a former Disney executive as its chief commercial officer in 2016.

“Leadership teams in these partnerships often have to be jigsawed together,” Deming says. “A wide net needs to be cast to find the right leaders and teams to operate in this emerging space.”

Authors

  • Zack Deming

    Senior Client Partner, Co-Leader Public Private Partnerships

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