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PART THREE

STRATEGIES FOR MANAGING AND IMPROVING PUBLIC ORGANIZATIONS

Rainey, Hal G.. Understanding and Managing Public Organizations, John Wiley & Sons, Incorporated, 2014. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ncent-ebooks/detail.action?docID=1595184. Created from ncent-ebooks on 2021-10-26 14:39:28.

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If, as Chapter Six asserts, organizational effectiveness is the funda-mental issue in organizational analysis, then the challenge of chang- ing organizations is a strong candidate for second place. A sprawling literature addresses organizational change and innovation, with much of it focused on how to change organizations for the better. As earlier chapters point out, controversy simmers over whether public organiza- tions and their employees resist change. The truth is that researchers and experts often note a paradoxical aspect of change in public orga- nizations. Far from being isolated bastions of resistance to change, they change constantly. This pattern may sometimes impede substantial long- term change, however. In many public organizations, the politically appointed top executives and their own appointees come and go fairly rapidly. In federal agencies, the agency heads stay less than two years on average. Shifts in the political climate cause rapid shifts in program and policy priorities. This can make it hard to sustain implementation of major changes. Conversely, we now have an abundance of examples of successful change in public organizations, and this chapter describes some of them.

CHAPTER THIRTEEN

MANAGING ORGANIZATIONAL CHANGE AND DEVELOPMENT

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410 Understanding and Managing Public Organizations

Relatively Natural Change: Organizational Life Cycles

Members of organizations plan and carry out some changes purposefully. Other changes occur more spontaneously or naturally as organizations pass through phases of development or respond to major shifts in their environment. The two types of change intermingle, of course, as manag- ers and other members respond to shifting circumstances. In the past two decades, in their writing and research on organizational life cycles, birth, and decline, scholars have turned more attention to externally imposed and naturally evolving change processes (Aldrich, 1999; Baum and McKelvey, 1999; Cameron, Sutton, and Whetten, 1988; Kimberly, Miles, and Associates, 1980). Much of this work concentrates on business fi rms but applies to pub- lic organizations as well (for example, Quinn and Cameron, 1983; Van de Ven, 1980). Years ago, Simon, Smithburg, and Thompson (1950) noted that public organizations become distinct by the nature of their birth. An infl u- ential set of interests must support the establishment of a public organiza- tion as a means of meeting a need that those interests perceive, and they must express that need politically. Public agencies are born of and live by the satisfaction of interests that are suffi ciently infl uential to maintain the agencies’ political legitimacy and the resources that come with it.

Later, Downs (1967) suggested a number of more elaborate ways in which public bureaus form. For one of these ways, Max Weber coined the phrase “routinization of charisma,” in which people devoted to a char- ismatic leader press for an organization that pursues the leader ’s goals. Alternatively, as Simon, Smithburg, and Thompson (1950) pointed out, interested groups press for the formation of a bureau to carry out a func- tion for which they see a need. A new bureau can split off from an exist- ing one, as did the Department of Education from what used to be the Department of Health, Education, and Welfare (Radin and Hawley, 1988). Also, entrepreneurs may gain enough support to form a new bureau. Admiral Hyman Rickover became a virtual legend by building an almost autonomous program for the development of nuclear propulsion in the nuclear power branch of the navy ’s Bureau of Ships and the nuclear reac- tor branch of the Atomic Energy Commission (Lewis, 1987).

The Stages of Organizational Life

Downs also said that bureaus have a three-stage life cycle. The earliest stage involves a struggle for autonomy. “Zealots” and “advocates” dominate

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Managing Organizational Change and Development 411

young bureaus and struggle to build political support for their bureau ’s legitimacy and resource requests. Once a bureau has established itself and ensured its survival, it enters a stage of rapid expansion, in which its mem- bers emphasize innovation. Ultimately, it enters a deceleration phase, in which the administrators concentrate on elaborating rules and ensuring coordination and accountability. Downs associated this process with what he called the rigidity cycle for bureaus. He said that as bureaus grow older and larger and enter the deceleration stage, the zealots and advocates either depart for more active, promising programs or settle into the role of “conservers.” Conservers come to dominate the bureau, and it ossifi es. Others have pointed out that over time many bureaus form strong alliances with interest groups and legislators—especially legislators on the commit- tees that oversee them. These allies guard the bureaus’ access and infl u- ence and stave off many change attempts (Seidman and Gilmour, 1986; Warwick, 1975).

Yet Downs oversimplifi es the foot-dragging bureaucracy. Large, old organizations change markedly, as has been recognized in recent life-cycle models. Quinn and Cameron (1983) developed a framework based on similarities among models that others have proposed. Their framework conceives of four stages of organizational life cycle—the entrepreneurial, collectivity, formalization and control, and elaboration stages.

In the entrepreneurial stage, members of the new organization con- centrate on marshaling resources and establishing the organization as a viable entity. An entrepreneurial head or group usually plays a strong lead- ing role, pressing for innovation and new opportunities and placing less emphasis on planning and coordination. Quinn and Cameron illustrated this stage by describing a newly created developmental center for the men- tally disabled in a state department of mental health (DMH). The ener- getic center director led a push for new treatment methods that involved deinstitutionalizing clients and developing their self-reliance. The center began to receive expanded support from federal grants, the DMH, and the legislature. In this stage, the center emphasized the open-systems model of organization.

Out of the fi rst stage develops the second, the collectivity stage. In this stage the members of the center developed high cohesion and commit- ment. They operated in a fl exible, team-based mode, exhibiting high levels of effort and zeal for the center ’s mission. This type of shift represents an expanded emphasis on teamwork, marked by adherence to the human relations model as well as to the open-systems component of the competing values framework described in Chapter Six.

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412 Understanding and Managing Public Organizations

The research on life cycles points out that crises sometimes push orga- nizations into new stages. About six years after the formation of the center, a major newspaper ran articles attacking the DMH for ineffi ciency, poor treatment of clients, and loose administrative practices. The articles cited critical reports from oversight agencies citing inadequacies in such control mechanisms as organizational charts, records, job descriptions, policy man- uals, and master plans. The DMH conducted a special investigation and instructed the center director to move toward a more traditional organiza- tional structure and more traditional controls. The director left, and the new director emphasized clear lines of authority, rules, and accountability. Staff commitment fell, and many staff members left. The center had clearly moved into the formalization and control stage. In competing values terms, the rational control model predominated, and the importance of open systems and human relations criteria declined.

The case ended at this point, but the life-cycle framework includes a fourth stage, involving structural elaboration and adaptation. Confronting the problems of extensive control and bureaucracy that develop during the third stage, the organization moves toward a more elaborate struc- ture to allow more decentralization but also corresponding coordination processes. The organization seeks new ways to adapt, to renew itself, and to expand its domain. A large corporation may become more of a con- glomerate, multiplying its profi t centers, or it may adopt a matrix design (Mintzberg, 1979). It appears to be diffi cult for public agencies to decen- tralize in these ways, however (Mintzberg, 1989). They have no sales and profi t indicators to use in establishing profi t centers, and they face stron- ger external accountability pressures. Note that in the DMH case the press and the oversight agencies both pressed for traditional bureaucratic structures—charts, manuals, job descriptions. Some public agencies also reconfi gure in later stages, however, as described shortly.

Organizational Decline and Death

Many older, supposedly entrenched organizations face intense pressure to renew themselves. During the 1970s and 1980s, such pressures rose to particular intensity in the United States. Businesses faced surging inter- national competition and swings in the price of oil and other resources. Government agencies faced tax revolts and skepticism about government. This climate bolstered the Reagan administration ’s efforts to cut the fed- eral budget, including funding for many agencies and for federal support to state and local governments, many of which also faced state and local

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Managing Organizational Change and Development 413

initiatives to force tax cuts (Levine, 1980a). In the 1990s, these pressures eased in certain ways because of a strong economy, and research on decline in public agencies slackened. Nevertheless, many factors continued to pres- sure public organizations in many nations to do more with less. In the United States, a drive to reduce taxes and the federal defi cit continued. The Clinton administration ’s National Performance Review eliminated 324,580 jobs from the federal workforce, bringing federal employment to its lowest level since 1950. As the new century got under way the Bush administration issued the President ’s Management Agenda, which criticized the Clinton administration for making these employment reductions in an across-the- board, poorly planned way that did not take into account strategic human resource needs. At the same time, however, the management agenda announced that competitive sourcing would be one of the primary empha- ses of the administration. This involves conducting competitive assessments to determine whether government jobs and tasks should be outsourced, or contracted out to private organizations (U.S. Offi ce of Management and Budget, 2002). The administration further announced the objective of con- sidering more than eight hundred thousand federal jobs for outsourcing, and the Department of the Army announced a plan to contract out more than two hundred thousand jobs. In many other nations, reforms as part of the New Public Management movement often emphasized using more busi- nesslike arrangements in government, including contracting out and priva- tizing governmental activities. So the challenge of reductions, declines, and cutbacks looms very large for people in government.

Even before these recent pressures, organizational researchers realized that while such pressures may have intensifi ed during the period, they actu- ally refl ected ongoing processes of decline and demise that had received little attention in organizational research (Cameron, Sutton, and Whetten, 1988; Kimberly, Miles, and Associates, 1980). Bankruptcy rates among busi- ness fi rms have always been high, and all organizations, including pub- lic ones, tend to have low survival rates (Starbuck and Nystrom, 1981). Organizations may decline at various rates and in various patterns, for a number of reasons (Levine, 1980b). They may atrophy, their performance declining due to internal deterioration. They may become rigid, ineffi - cient, and plagued with overstaffi ng and ineffective structures and com- munications. As described later, the Social Security Administration (SSA) once became so backlogged in processing client requests that everyone involved agreed that something had to be done. In the late 1990s, the IRS undertook a major transformation in response to performance problems and public criticisms (Thompson and Rainey, 2003).

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414 Understanding and Managing Public Organizations

Vulnerability and Loss of Legitimacy. Organizations, especially new ones, can be quite vulnerable to the loss of resources or support from their environment. Shifts in consumer preferences can undercut businesses. Government organizations face an analogous problem when voters resist taxes. This issue is related to another reason for decline, the loss of legiti- macy. Private fi rms, such as tobacco companies, can suffer when the public or public offi cials question the legitimacy of their products or activities. Legitimacy fi gures even more crucially for public organizations. Public and oversight authorities often impose stricter criteria on public organi- zations for honest, legitimate behaviors, as in the example of the HUD scandal described in Chapter Seven.

Environmental Entropy. An organization ’s environment can simply dete- riorate in its capacity to support the organization. Resources may dry up. Political support may wane. Public organizations often lose support because of the waning of the social need they address (Aldrich, 1999; Levine, 1980a).

Responses to Decline. Organizations respond to decline with greater or lesser aggressiveness and with more or less acceptance of the need for change (Daft, 2013; Whetten, 1988). Some organizations take a negative, resistant disposition toward the pressures for change. They may aggres- sively strike a preventive posture or passively react in a defensive mode. They may try to prevent pressures for change by manipulating the envi- ronment. Public agencies may try to develop or maintain legislation that rules out competition from other agencies or private providers of similar services. Public employee unions sometimes attack privatization proposals because public employees may fi nd them threatening. Conversely, orga- nizations may adopt a less proactive defense against cuts, citing statistics showing the need for their programs and working to persuade legislators that their programs meet important social needs.

Other organizations take a more receptive approach to the need for change, either by reacting or by generating change and adaptation. Many public agencies react with across-the-board cuts in subunit budgets, layoffs, or other reductions in their workforce. Conversely, organizations can also adapt through fl exible, self-designing structures and processes. They may allow lower-level managers and employees to redesign their units when they feel the need (Whetten, 1988).

The pressures for reduced government just described have led to a rich discussion of tactics for responding to funding cutbacks. Table 13.1

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Managing Organizational Change and Development 415

Tactics to Resist Decline Tactics to Smooth Decline

External political (problem depletion)

1. Diversify programs, clients, and constituents

2. Improve legislative liaison 3. Educate the public about

the agency ’s mission 4. Mobilize dependent clients 5. Become “captured” by a

powerful interest group or legislator

6. Threaten to cut vital or popular programs

7. Cut a visible and widespread service a little to demonstrate client dependence

1. Make peace with competing agencies

2. Cut low-prestige programs 3. Cut programs to politically weak

clients 4. Sell and lend expertise to other

agencies 5. Share problems with other

agencies

External economic/ technical (environmental entropy)

1. Find a wider and richer revenue base (for example, metropolitan reorganization)

2. Develop incentives to prevent disinvestment

3. Seek foundation support 4. Lure new public and private

sector investment 5. Adopt user charges for

services when possible

1. Improve targeting on problems 2. Plan with preservative objectives 3. Cut losses by distinguishing

between capital investments and sunk costs

4. Yield concessions to taxpayers and employers to retain them

Internal political (political vulnerability)

1. Issue symbolic responses, such as forming study commissions and task forces

2. “Circle the wagons”— develop a siege mentality to retain esprit de corps

3. Strengthen expertise

1. Change leadership at each stage in the decline process

2. Reorganize at each stage 3. Cut programs run by weak

subunits 4. Shift programs to another

agency 5. Get temporary exemptions

from personnel and budgetary regulations that limit discretion

(continued )

TABLE 13.1. ORGANIZATIONAL DECLINE AND CUTBACK MANAGEMENT: TACTICS FOR

RESPONDING TO DECLINE AND FUNDING CUTS

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summarizes Charles Levine ’s description of some of those tactics (1980b). Rubin (1985) analyzed the Reagan administration ’s cutbacks in fi ve federal agencies. She found that the agencies’ responses in some ways matched what one would expect from the public administration literature and in some ways differed markedly. The president was fairly successful in achiev- ing cutbacks in the agencies. His strong popular support blunted inter- est-group opposition to the cuts in the early phases. Still, agencies with interest-group support more effectively resisted the cutbacks. Yet Rubin found no evidence of strong “iron triangles” (tight alliances of agencies, interest groups, and congressional committees, as discussed in Chapter Five) protecting the agencies.

The agencies were not nearly so self-directed and uncontrollable as is sometimes claimed. Agency heads tended to comply with the president ’s cutback initiatives and usually did not work aggressively to mobilize interest- group support. Career personnel carried out many of the cuts as part of their responsibility to serve the president. Some of the agencies, particularly central administrative and regulatory agencies, had no strong interest-group

TABLE 13.1 (Continued) Tactics to Resist Decline Tactics to Smooth Decline

Internal economic/ technical (organizational atrophy)

1. Increase hierarchical control 2. Improve productivity 3. Experiment with less costly

service-delivery systems 4. Automate 5. Stockpile and ration

resources

1. Renegotiate long-term contracts to regain fl exibility

2. Install rational choice techniques 3. Mortgage the future by

deferring maintenance and downscaling personnel quality

4. Ask employees to make voluntary sacrifi ces such as taking early retirements and deferring raises

5. Improve forecasting capacity to anticipate future cuts

6. Reassign surplus facilities to other users

7. Sell surplus property, lease back when needed

8. Exploit the exploitable

Source: Adapted from Levine, 1980b.

416 Understanding and Managing Public Organizations

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Managing Organizational Change and Development 417

support and were more vulnerable to cuts. Golden (2000) analyzed the career civil servants’ reactions to policy changes that Reagan appointees sought in four federal agencies and found that the careerists put up little strong resistance. Their tendency to resist and their manner of doing so depended on many factors, such as professional background. Attorneys in one agency argued more with the Reagan appointees, but felt that it was part of their professional responsibility to carry out their duties conscien- tiously even when they disagreed with the priorities of the Reaganites.

These analyses establish some extremely important points. Agency responses to decline are more complex and perhaps less politically resis- tant than depicted in the general literature—agencies do change, and they do not necessarily resist change as forcefully as stereotypes and some theo- ries suggest. Still, politics fi gures very importantly in change and cutback attempts and can severely impede them. Understanding when and how one can effect change becomes the major challenge, to which we return later.

The Ultimate Decline: Organizational Death. A conclusion similar to Rubin ’s comes from a debate over whether public agencies can “die.” Kaufman (1976) investigated the question of whether government organizations are immortal, in view of the many assertions about their staunch political sup- port and their intransigence against pressures for change, reduction, or elimination. He noted many threats to an agency ’s survival. They face com- petition from other agencies, loss of political support, and the constant reorganization movements that keep offi cials continuously hunting for ways to reshape government, especially ways that appear more effi cient. Kaufman reviewed statistics on the death rates of federal agencies and concluded that such rates are not negligible. Generally, however, federal agencies have a strong tendency to endure. Of the agencies that existed in 1923, he said, 94 percent had lineal descendants in 1974.

Later, Starbuck and Nystrom (1981) mounted a fascinating challenge to this conclusion. They pointed out that Kaufman had classifi ed agencies as lineal descendants even if they had changed organizational locations, names, or personnel or had substantially different functions. When agen- cies merged, he treated the new agency as a descendant of both of the former ones. Starbuck and Nystrom pointed out that studies of death rates of industrial organizations typically treat mergers between corporations as resulting in only one existing organization. When a corporation goes bank- rupt and employees start a similar new one, analysts do not count this as a continuation. Diffi cult issues exist, then, in defi ning organizational death. Starbuck and Nystrom reanalyzed Kaufman ’s data, using criteria more akin

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418 Understanding and Managing Public Organizations

to those used in studies of industry; they found that government agencies and industrial corporations have similar death and survival rates. A large proportion of both government agencies and business fi rms do not survive very long. The analysis turns on whether one uses criteria biased toward organizational change or against it.

Peters and Hogwood (1988) also reported fi nding a great deal of orga- nizational change in the U.S. federal bureaucracy. Their analysis showed, however, what other organization theorists have seen when they have stud- ied public organizations (Meyer, 1979): public organizations may be quite change-resistant and intransigent in some ways, and steering them in new and innovative directions can be a major challenge for society. Yet they do, in fact, change a great deal, including undergoing the ultimate change of passing out of existence. As described in later sections, they can also revital- ize themselves after periods of decline.

Daniels (1997) analyzed the termination of public programs, point- ing out that programs do get terminated. Termination, he concluded, is hard to achieve, involves a great deal of political confl ict, and presents an American political paradox in that “everyone supports it, and everyone opposes it” (p. 70). Similarly, but with more emphasis on the likelihood of agency termination, Lewis (2002) reported a study of government agency mortality between 1946 and 1997 and concluded that 62 percent of agen- cies created since 1946 have been terminated. He also emphasized the major role of political processes, concluding that agencies face the greatest likelihood of mortality when shifts in the political climate bring their critics and opponents into power.

Innovation and Organizations

Another response to pressures on organizations, a response that they need in order to survive, is innovation. Innovations in society and in organi- zations fi gure so importantly in social progress that a body of research focused specifi cally on such processes has developed in the last several decades. Some of it addresses the broad topic of diffusion of innovations in societies and across levels and units of government. Numerous studies have explored such topics as the adoption of birth control methods in overpopulated countries, new agricultural methods in less developed coun- tries, and different ways of providing fi refi ghting, garbage collection, and teaching services in governments across the United States. Some studies have also analyzed general measures of innovativeness in a certain type of organization, such as the number of health-related innovations adopted

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Managing Organizational Change and Development 419

by county health departments. According to Rogers and Kim (1985), the vast majority of these innovation studies have focused on public organiza- tions or public programs, and their application to business organizations remains open to question. They also pointed out that many of these stud- ies followed what they called the classical diffusion model, which includes the following components: characteristics of the innovation itself (see Exhibit 13.1 ), communication channels in the social system being studied, time (for example, rate of adoption of innovations), and members of the social system (the characteristics of its individuals and groups and how

EXHIBIT 13.1 Attributes of Innovations That Affect

Their Implementation

1. Cost—initial and continuing; fi nancial and social 2. Returns on investment 3. Effi ciency—improvements in effi ciency offered by innovation 4. Risk and uncertainty 5. Communicability—clarity of the innovation and its results 6. Compatibility—similarity to existing product or process 7. Complexity 8. Scientifi c status 9. Perceived relative advantage—whether potential advantages can be demonstrated

10. Point of origin—from inside or outside the organization; from which person, unit, or institution

11. Terminality—whether the innovation has a specifi c end point 12. Reversibility and divisibility—whether the innovation can be reversed or divided

into steps or components so that the organization can return to the status quo if necessary

13. Commitment—the degree of behavioral and attitudinal commitment required for success

14. Interpersonal relations—how the innovation infl uences personal relations 15. Public versus private-good attributes—whether the innovation provides public

benefi ts or restricts benefi ts to a smaller set of individuals 16. Gatekeepers—how the innovation is related to various infl uential persons or groups

that can block or initiate the innovation 17. Adaptability—whether users can modify and refi ne the innovation 18. Successive innovations—prospects for leading to additional innovations

Source: Adapted from Zaltman, Duncan, and Holbek, 1973.

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420 Understanding and Managing Public Organizations

those characteristics infl uence their response to innovation). Students of innovation have also developed process models emphasizing initiation and implementation processes in which people perceive a performance gap and match an innovation to a perceived problem, and then implement the innovation through restructuring and institutionalization. Exhibit 13.1 offers a simplifi ed look at this important topic and all the work on it, but it has potential use for practicing managers as well as researchers thinking about the characteristics of an innovation that can infl uence its success.

Organizational researchers have also studied innovation within orga- nizations, of course. Mone, McKinley, and Barker (1998), for example, argued for a contingency perspective on the relationship between inno- vation and organizational decline. They proposed that organizations will respond to decline with more innovation when power is more widely diffused in the organization, and when the organization ’s mission is not strongly “institutionalized.” Other studies tend to concentrate on private sector organizations, involving variables related to market share and com- petition, in ways that make their application to many government agencies diffi cult to interpret (see, for example, Greve and Taylor, 2000).

Innovation in Public and Nonprofi t Organizations

In something of a revolt against the literature and stereotypes that cast government organizations as rigid and change-resistant, a stream of research and discussion about innovative government organizations has burgeoned in the past couple of decades (see, for example, Behn, 1994; Borins, 1998, 2008; Cohen and Eimicke, 1998; Holzer and Callahan, 1998; Ingraham, Thompson, and Sanders, 1998; Levin and Sanger, 1994; Light, 1998; Linden, 1990, 1994). The studies vary widely from one another and offer complex conclusions, making it diffi cult to summarize them with- out producing a blurring array of lists of their conclusions. The following examples, nevertheless, offer a picture of some of these contributions.

Linden (1990), on the basis of a set of case observations, drew conclu- sions about how an innovative manager can make an organization more effective. Innovative managers, he found, share seven characteristics: stra- tegic action, holding on and letting go, creating a felt need for change, starting with concrete change, using structural changes, dealing with risk, and using political skills. Innovation involves both rational and intuitive thinking, and successful innovation is a function of many small starts and pilots. Successful innovation also tends to involve the use of multifunc- tion teams, and occurs when leaders and sponsors provide time, freedom,

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Managing Organizational Change and Development 421

fl exibility, and access to resources, and when they offer autonomy and sup- port for committed champions, while preventing an emphasis on “turf” protection. Linden (1994) later described a set of cases of successful pro- cess reengineering initiatives in government organizations, which involved moving away from organizing around functional groupings and toward being “seamless.”

Borins (1998) conducted an elaborate analysis of 217 state and local government programs that had won awards in the Ford Foundation and Kennedy School of Government ’s Innovations in American Government Awards program. Borins found an array of factors that tended to character- ize the programs that had made award-winning innovations. The successful innovations, he concluded, occurred when there was systematic thinking and planning for change, when the programs delivered multiple services, and when they were partnered with other organizations. Effective innova- tion also tended to occur when the programs applied new technology; undertook process improvements and organizational redesign; and empha- sized empowerment, incentives instead of regulation, prevention instead of remediation, and use of the private sector, voluntarism, and internal com- petition. As for when and why successful innovation takes place, Borins ’s analysis indicated three main paths: politicians responding to crises, newly appointed agency heads restructuring organizations, and midlevel and front-line workers responding to internal problems and taking advantage of opportunities. Interestingly, Borins found that about half of the persons initiating the award-winning innovations were career civil servants below the agency-head level.

Light (1998) conducted a questionnaire and case analysis of twenty- six public and nonprofi t organizations in Minnesota that he identifi ed as innovative, to determine how and why they were innovative. He chose the organizations because of their diversity in mission, size, age, and other fac- tors. He discussed how people need to release creativity in the organiza- tion by lowering or removing internal and external barriers and debunking myths. He concluded from his observations that innovative organizations must work with and manipulate four factors that make up the organiza- tional “ecosystem” on which long-term, sustained innovation depends: the external environment, the internal structure, leadership, and internal man- agement systems. For each of these components he suggested a lengthy list of “preferred states” most conducive to innovation. For example, concern- ing the external environment, the organization should “center on mission,” “embrace volatility,” lower barriers to external collaboration by working with stakeholders and clients, and “harvest external support.” Concerning

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422 Understanding and Managing Public Organizations

internal structure, the organization should “stay thin” by avoiding too many layers, push authority downward and democratize to maximize participation, encourage collaboration, and provide resources to support innovation and innovative thinking. Leadership should, among other emphases, issue a call for ideas, give permission to fail, communicate to excess, and keep faith and inspiration alive. Preferred states for management systems include downplay- ing pay, measuring performance, celebrating success, and constantly listen- ing and learning. Light found that relatively small nonprofi t organizations tend to be the organizations most likely to sustain innovations and innova- tiveness. He saw no single path to innovation, and observed that organiza- tions show different mixtures of states. He concluded that core values, such as honesty, trust, rigor, and faith, play a strong role in this process.

Other studies, described in later sections and chapters, also refl ect on successful innovation and other forms of change in public organizations.

Large-Scale Planned Change

Besides facilitating individual innovations and patterns of innovativeness, organizations also undergo major, large-scale transformations and planned processes of development, such as the transformation of the Internal Revenue Service mentioned at several points earlier. A vast literature pres- ents many different perspectives, models, and research issues about major organizational change (for example, Armenakis and Bedeian, 1999; Burke, 2010; Pettigrew, Woodman, and Cameron, 2001; Van de Ven and Poole, 1995). Rather than attempting to cover this range of material, the discus- sion here concentrates on certain key issues, such as resistance to change and types of change. This is followed by perspectives on the leadership and management of change and development, including organization develop- ment, some analyses of successful leadership of change, and examples of successful and unsuccessful change leadership in public organizations. The perspective on successful large-scale organizational change developed here is highly consistent with conclusions about the topic in recent overviews (Armenakis and Bedeian, 1999).

Resistance to Change

From the beginning, management and organization theorists have recog- nized the problem of resistance to change in organizations. Many authors have argued that traditional bureaucratic forms of organization inhibit

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Managing Organizational Change and Development 423

change. They assign people to positions and departments on the basis of rules and job descriptions, require people to adhere to them, and reward them for doing so. This aggravates the normal human tendency to resist change for all the reasons implied by analysis of the characteristics of innovations (Exhibit 13.1 ): change can be costly, troublesome, unfamiliar, threatening, and diffi cult to understand and accomplish.

Human resistance to change can be one of the most destructive, danger- ous tendencies in life, but managers and researchers often appear to forget that people have good reasons to resist change. Fairly typically, a new manager enters an organization with a desire to have an impact and not simply to serve as a caretaker. Employees sometimes throw objections and obstacles in the way of the new manager ’s proposals. Quite often, the new manager expresses frustration with longtime employees’ commitment to the status quo.

Certainly, the new manager may have good reason to complain, but he or she may also cripple effective change by too readily assuming that resistance means laziness, selfi shness, or stupidity. People may have well- justifi ed reasons to resist. Some ideas are simply bad ideas, and the people with the most experience realize it. The New Yorker magazine once ran a cartoon in which two employees of a fast-food restaurant watched a family stopped in their car at the drive-through window of the restaurant. The fam- ily members were leaning out of the car with tongs in hand, struggling to serve themselves out of a large salad bowl perched on the windowsill of the drive-through window. Cherry tomatoes bounced like Ping-Pong balls on the pavement. Lettuce fl oated in the wind. One employee was saying to the other, “Well, it looks as if the drive-through salad bar is an idea whose time has not yet come.” Some ideas are bad ideas. They deserve to be resisted.

Unsuccessful ideas abound in government and industry. As one promi- nent example, Lyndon Johnson directed that the planning and program budgeting system (PPBS) be adopted in all federal agencies. Within a few years the directive was withdrawn. Many elected offi cials and politically appointed executives at all levels of government initiate new programs, reforms, or legislation but show a disinclination to become too deeply involved in implementing them. They often feel that their duty involves set- ting policy and directing the bureaucracy rather than closely following its management. Many of them do not stay very long in their positions. Their mandate is often far from clear, no matter how much they claim that it is. This can deprive the change process of essential support and leadership.

The point is not to defend the prerogative of the public bureaucracy to resist change but rather to emphasize a dilemma about organizational change in government. As described later, successful organizational change

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usually requires sustained support from leaders, participative planning, and fl exible implementation. Government managers achieve these conditions more often than many people suppose, but much of the literature never- theless suggests their scarcity in the public sector. What we learn from the management literature on change makes the point that, in the example just provided, the reason for the failure of PPBS was not necessarily that it was a bad idea. It was a well-intentioned innovation advocated by many experts on public administration. Good ideas are not simply born, however; they are made—developed and nurtured—through appropriate change processes. Too negative a view of resistance to new initiatives and ideas can cloud the message that people may have reasonable objections that can make a dubious idea into a better one. The challenge for public managers is to fi nd ways to overcome obstacles to such participation and fl exibility amid the political complexities and accountability pressures in government.

Types of Change

Many types, levels, and degrees of change complicate the discussion of the change process. Researchers have not thoroughly incorporated these variations into their models; instead they have moved to highly general frameworks that broadly cover many types of change. Still, the variations bear noting and have implications that are taken up in later sections.

Daft (2013) points out that organizations undergo at least four types of change:

• Technology changes occur in production processes and equipment, as in the installation of computerized client information systems or word processing systems.

• Administrative changes include new performance-appraisal systems, such as the Performance Management and Recognition System for all middle managers in the federal civil service; pay-for-performance sys- tems, such as those that state and local agencies have tried to implement; and affi rmative action programs.

• Changes in products and services abound in all types of organizations. As described later, the SSA has struggled for the past several decades with steady increases in the number and nature of Social Security ser- vices mandated by Congress.

• Human resource changes occur as a result of training, development, and recruitment efforts aimed at improving leadership and human rela- tions practices or upgrading employee skills.

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While each of these different domains may undergo limited change relatively independently, they frequently intertwine. In fact, for major changes, the challenge is to coordinate them. Tichy (1983) argued that most approaches to organizational change have concentrated on one of three primary dimensions: the political, technical, or cultural aspects of change. Strategic change, as Tichy called it, involves moving beyond these more fragmented approaches and coordinating these three dimen- sions to effect large-scale transformations in an organization ’s relationship to its environment.

Golembiewski (1986) introduced the conception of three types of change that can occur in individual responses in organizations. Alpha change involves the change from one level to another along a measure of some dimension, such as job satisfaction. Beta change involves a similar change in degree, except that the signifi cance that people attach to inter- vals on the measure may change as well. Gamma change, however, involves a general change in state rather than just a change in degree. A person may shift to a redefi nition or new conception of reality such that the meaning of the dimension fundamentally changes for that person. In their research, Golembiewski and his colleagues found that virtually all the people in the most advanced stages of “burnout” fall at a point on a measure of work sat- isfaction that is almost the exact opposite of the point at which virtually all of those in the earliest phases fall. This suggests that once a person moves into the more serious phases of burnout, he or she also moves to a funda- mentally different state, in which the meaning and nature of job satisfac- tion change radically. Differences in responses to job satisfaction measures do not fully capture this shift, which raises major issues for both research and practice pertaining to organizational change, because it complicates the measurement and assessment of change in challenging ways.

There are a variety of strategies and tactics for leading and managing these different types and degrees of change (Daft, 2013). Before covering examples of frameworks and suggestions about leading major change pro- cesses, it is useful to explore the topic of organization development, a well- established subfi eld of organization theory that concentrates on changing the human relations aspects of organizations for the better.

Organization Development

Writers and practitioners in organization development (OD) work to improve the functioning of organizations, especially along human relations

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and social dimensions, by applying social scientifi c theory and techniques. OD consultants or “change agents” work with people in organizations to improve communication, problem solving, renewal and change, confl ict airing and resolution, decision making, and trust and openness. They often go into organizations to help them diagnose and overcome problems they have in these areas. Ideally, they seek to leave the organization better able to manage such processes effectively. A mountain of books, articles, and professional journals, as well as a number of professional associations, deliberate about OD, and large corporations and government agencies sometimes have OD offi ces or bureaus that minister to the other parts of the organization.

As this description suggests, OD has firm roots in the human rela- tions orientation in organization studies and in the group dynamics movement. It also draws on various elements of social science and orga- nizational behavior, such as theories of motivation, leadership, systems, and techniques such as survey research. OD theory and practice vary widely but tend to have common basic values and assumptions about orga- nizations and the people in them. French and Bell (1999) pointed out that OD involves common assumptions about people, groups, and organizations:

• People have a drive to grow and develop, especially if they are pro- vided with an encouraging environment. They want to make a greater contribution to their organization than most organizational settings permit.

• For most people, the work group is a very important factor. People value acceptance and cooperation in work groups. Leaders cannot provide for all leadership needs, so members of groups must assist one another.

• Suppressed feelings are detrimental to satisfaction, trust, and coopera- tion. Most groups and organizations induce suppressed feelings more than they should. Solutions to most problems in groups must be trans- actional, involving changes in people ’s relationships.

• The leadership style and culture at higher levels tend to pervade the organization, shaping levels of trust and teamwork throughout.

• Win-lose conflict management strategies usually do harm in the long run.

• Collaborative effort has value. The welfare of all members of the system is important and should be valued by those who are most powerful in the system.

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OD practitioners tend to value personal growth and a richer, more meaningful, more enjoyable, more effective life for people in organiza- tions, especially through allowing people’s feelings and sentiments to have a legitimate value. They also value commitment to both action and research, and democratization and power equalization in organizations. One can begin to guess some of the controversies that these assumptions and values engender among management experts. Before looking at them, however, it is useful to consider how OD interventions in organizations tend to proceed.

OD Interventions and Change Processes

OD consultants take a variety of approaches, but the action-research model shown in Exhibit 13.2 illustrates a typical pattern. Key executives perceive a problem or performance gap. They bring in a consultant, who conducts a diagnosis of the organization and the problem, often using interviews, surveys, and group meetings. The consultant feeds the results back to the clients and works with them in interpreting the results and developing plans for the OD program, including objectives, problems to be addressed, and techniques to be used. The consultant continues gathering informa- tion for use in the activities, using such tools as group problem-solving and team-building sessions. Further planning takes place as new ideas arise from the activities, and the consultant continues to gather information to assess the newly planned activities and their effects. The consultant continues this developmental process for a time, until eventually he or she leaves the people in the organization to continue it on their own. Similar models include an ultimate phase, consisting of institutionalizing the changes that the OD project has developed and terminating the rela- tionship with the consultant (Burke, 1994; French and Bell, 1999; French, Bell, and Zawacki, 2000).

OD Intervention Techniques

OD consultants can draw from an array of responses to the problems they help an organization identify. The literature in the fi eld provides a variety of models, typologies, and tables suggesting the type and level of intervention that the people in the organization and the consultant might select (Burke, 1994; French and Bell, 1999). For example, if the organiza- tion wants to focus on problems at the level of individual organizational members, it might work on new approaches to recruitment and selection,

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training and development, counseling, and job design. At the broader organizational level, OD may involve organization-wide survey-feedback processes, grid OD projects, quality-of-work-life programs, management-by- objectives projects, or intergroup confl ict-management procedures.

For the development of group processes, an OD project might employ team-building techniques that work groups can use to develop more effec- tive relationships. Team-building exercises typically focus on setting goals for the group, analyzing members’ roles and responsibilities and the work processes of the team, and examining the relationships among the mem- bers. The OD consultant might draw on various techniques to support these efforts, such as a role negotiation process in which members list the things they feel each other member should do more or less of in the group. Then the members negotiate agreements about the changes and confi rm these agreements with a written contract.

EXHIBIT 13.2 Phases of an Action Research Model for

Organizational Development

1. Performance gap: Key executives perceive problems. 2. Executives confer with an organizational consultant. 3. Diagnosis: The consultant begins a process of diagnosis and data gathering. 4. Feedback: The consultant communicates the results to key clients and client groups. 5. Joint action planning: The consultant works with client groups in planning the

objectives and procedures (such as team building) for the OD program. 6. Further data gathering: The consultant continues to monitor perceptions and

attitudes. 7. Further feedback: In team-building sessions or other settings, the organizational

members address the problems identifi ed in the diagnostic work. 8. The client groups discuss and work on the data from the diagnosis and earlier

sessions. New attitudes emerge. 9. Action planning: The groups set objectives for further development and develop

plans for getting there. 10. Action: The plans are carried out, and new behaviors develop. 11. Further data gathering. 12. Further feedback. 13. Further action planning. 14. Continuation and consultant departure: The cycle of diagnosis, feedback, planning,

and action continues until the appropriate point for the departure of the consultant.

Source: Burke, 1994; French and Bell, 1999.

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Managing Organizational Change and Development 429

OD consultants also employ a technique they call process consulta- tion. The consultant observes the work groups and other activities; gathers observations and information about key processes such as communication, teamwork, and interpersonal confl ict handling; and consults with the mem- bers on interpreting and improving these processes.

OD projects in the past often employed T-groups, encounter groups, or sensitivity sessions. All are group sessions intended to develop communica- tion and understanding among the members of the group and enhance each member ’s sensitivity to the feelings and viewpoints of the other members. These approaches grew out of the work of Kurt Lewin and his colleagues described in Chapter Two. Such groups engage in intensive dis- cussions aimed at helping participants learn more about how other people see them and respond to them and how they perceive others. The sessions follow a diverse array of approaches, often involving such exercises as hav- ing members take turns expressing perceptions of other members. In some versions, these techniques become highly confrontational and emotional, and participants often fi nd the experience exhilarating. These techniques were widely used during the 1960s, but their use has dwindled, apparently because of controversy about whether they had much long-term impact, and evidence that when they did have an impact it often appeared to be damaging to some participants (Back, 1972).

OD Effects and Controversies

Just how a consultant selects, combines, and uses all these procedures depends on his or her experience and skill. No organizing theory links the aspects of OD or systematically guides its practice. OD consultants play a role much like that of clinicians in psychology or psychiatry in that they have no clear, uncontested theory or guide for practice. They oper- ate on the basis of their experience and intuition, choosing from an array of loosely defi ned procedures. The complexity of organizations and their problems makes it hard for OD consultants to establish and prove clear successes. Critics sometimes attack OD for this lack of substantive theory and theory-based research. They say that OD ’s concentration on human relations issues can lead to misdiagnosing an organization ’s problems when they involve other dimensions, such as the accounting system or produc- tion processes. Some critics, for example, argue that OD concentrates on human resource issues in organizations when large-scale strategic change requires coordinating those issues with strategies for improving the orga- nization ’s technical and political dimensions. OD adherents respond that

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they know their efforts are often valuable, even if they cannot always pro- duce simple, clear evidence of marked improvements in profi ts or other performance criteria. They also argue that other areas of organization the- ory hardly provide managers with beautifully crafted guides to changing and improving their organization, and that they are justifi ed in trying to go out and do what they can to apply behavioral science knowledge to the problems that organizations face.

OD in the Public Sector

Despite these controversies, OD remains a widely used approach for improving and changing public and nonprofi t organizations (Carnevale, 2003). OD experts who work with public sector organizations regularly discuss whether public and private organizations differ in ways that affect the application of OD. That discussion has an interesting history.

In a leading contribution to this debate, Golembiewski (1969; see also 1985) cited greater challenges in the public sector as a result of factors much like those discussed in earlier chapters. He said that fi ve primary structural constraints complicate the application of OD in government:

1. Multiple actors have access to multiple authorities, thus presenting a complex array of possible supporters or resisters for an OD project. For example, the State Department began Project ACORD (Action for Organizational Development) after a career offi cial with strong ties to key members of Congress pushed for it. Yet the project stalled when other prominent actors—the department head and offi cials in the budget and personnel bureaus—attacked it. The newspapers even got into the act, with editorials calling for the State Department to leave its long-term civil servants alone and not pester them with a dubious program.

2. Confl icting interests and reward structures complicate the problem. Different congressional committees, legislators, and administrators may respond to different incentives. For example, some actors may press for improved organizational operations, while others may seek to defend political alliances.

3. The administrative hierarchy is fragmented and weakened by these competing affi liations, thus making it harder to sustain the implemen- tation of OD projects. Administrative offi cials may have stronger ties to congressional allies and stronger commitment to their programs than to the top executives in their department or to the president.

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Managing Organizational Change and Development 431

4. Weak relationships between career civil servants and politically appointed executives produce a similar problem of diffuse authority.

5. Golembiewski agreed with Kaufman (1969) that the political system continually shifts its emphasis among several goals for the executive branch—representativeness, executive leadership, and politically neu- tral competence. During a period of emphasis on the fi rst two, such as President Reagan ’s drive to master and reduce the federal bureau- cracy, the climate for OD deteriorates.

Golembiewski argued that these factors interact with managerial “hab- its” in government in ways that hinder OD. Higher-level executives tend to avoid delegating authority and to establish multiple layers of review and approval because of their tenuous authority over lower levels. Legislative and legal strictures constrain many dimensions that OD often seeks to reform, such as reward systems and job classifi cations. Government agen- cies, more often than business fi rms, have secrecy and security require- ments. People in government show more “procedural regularity and caution.” The role of the professional manager is poorly developed in gov- ernment compared to business, according to Golembiewski. He suggested that this results in part from the diffi culty of enhancing public manag- ers’ sense of ownership of organizational objectives and values, due to the public nature of the organizations they lead. This in turn poses greater challenges in enhancing managers’ commitment to their agency.

Golembiewski concluded that these conditions create differences in the culture that predominates in public agencies. Unlike in other settings such as private business fi rms, managers in public organizations face more constraints and have fewer supports and rewards for inventiveness, risk tak- ing, and effort. Not surprisingly, some public managers are cautious about supporting initiatives in their organization.

Most other authors who have examined this issue agree with Golembiewski in general but make variations in his analysis. Davis (1983), for example, offered a similar analysis of the effects of the external politi- cal environment on the use of OD in the public sector. Yet he more heavily emphasized the problem of public agencies’ pursuit of multiple goals with vague programs and performance criteria (perhaps because he drew on an OD project in a human services agency, the area of government in which these problems are probably severest).These writers and others (Carnevale, 2003) have nevertheless emerged from these discussions with the conclu- sion that OD certainly can succeed in the public sector. While their depic- tions of the public sector environment have made some common notions

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of bureaucratic rigidity sound positively optimistic, these OD experts treat the public sector context as perhaps more challenging than the private sector but ultimately manageable, and as presenting a set of conditions for which one can be prepared.

Golembiewski (1985) reported evidence that OD projects in the pub- lic sector enjoy a relatively impressive success rate, apparently in line with that of projects in the private sector. First, he and his colleagues reviewed numerous published reports of OD initiatives in public organizations and classifi ed the diffi culties they apparently encountered. They found that in 270 reports of OD applications, the writers frequently mentioned the sort of constraints that Golembiewski had described. They noted external con- straints such as procedural rigidity (in 124 cases), diversity of interests and values (111 cases), public scrutiny (87 cases), and the “volatile political/ administrative interface”—the rocky relationship between legislative and administrative units and between career officials and political officials (62 cases). They also mentioned internal constraints such as lack of profes- sionalism (78 cases), weak chains of command (70 cases), complex objec- tives (61 cases), and short time frames (52 cases). In addition, the reports for city governments were generally similar to those for other levels of gov- ernment. Although the reports cited these complications, Golembiewski noted that the large number of initiatives reported—especially considering that agencies carry out many efforts that are not reported in the profes- sional literature—suggested that “the constraints may be tougher in the public sector, but they are not that tough” (p. 67).

Golembiewski also analyzed studies that have sought to assess the effec- tiveness of OD applications in both sectors. One of his students assessed the success of the 270 OD initiatives just mentioned, using procedures similar to those used in previous studies of OD success rates, and found that most of the reports indicated either positive effects (43 percent) or highly positive effects (41 percent), with only 7 percent indicating no effect and 9 percent reporting negative effects (Golembiewski, 1985, p. 82). The results also sug- gested that the public sector initiatives included a healthy percentage of the most demanding OD applications; furthermore, they did not indicate that the success rate in public agencies resulted from a tendency to try more lim- ited forms of OD interventions in government. In addition, Golembiewski had independent observers do similar ratings of forty-four OD applications in city governments and found even higher success rates. These success rates are very similar to those reported for the private sector, Golembiewski concluded, and indicate that despite the apparent constraints of the govern- ment context, OD practitioners do fairly well at adapting to them.

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Robertson and Seneviratne (1995) reported on a study that generally supported Golembiewski ’s conclusions. Robertson and Seneviratne per- formed a general analysis (a meta-analysis) of about fi fty studies of planned change interventions in public and private organizations. They found that OD interventions in public and private organizations showed similar rates of success in such areas as work setting and organizational outcomes. They found some differences in more specifi c areas, however. The evidence indicated that change efforts in the private organizations led to positive changes in four components of work settings—organizing arrangements, social factors, technology, and physical setting. In the public organizations, however, the change efforts appeared to have a positive effect only on organizing arrangements and social factors, not on technology and physi- cal setting. In addition, even though change efforts showed positive effects on organizing arrangements in both sectors, these effects were signifi cantly stronger in the private sector. Also, change efforts in both sectors showed positive infl uences on a general measure of organizational outcomes, with no signifi cant difference between the sectors. Change interventions in the public organizations, however, showed a signifi cantly stronger relationship to one dimension of the organizational outcomes measure—improved organizational performance—than change efforts in the private orga- nizations. These results support many of the observations about public and private organizations cited in previous chapters—such as the greater constraints on organizational structures in public organizations. They also generally support Golembiewski and his colleagues’ conclusion that public agencies may face certain challenges. Generally, however, planned change initiatives appear to succeed about as often in public organizations as they do in private organizations. In spite of stereotypes and some academic assertions based more on simplistic theory than on systematic evidence, organizational change initiatives occur with frequency and apparent suc- cess throughout government.

Success and Failure in Large-Scale, Planned Organizational Change

The evidence of successful change initiatives in public organizations illus- trates the importance of how the members of an organization manage and implement change. Organizations have always periodically undertaken large-scale planned change processes that are well beyond the scope of OD initiatives. In recent decades, challenges from international competition

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and other pressures have caused many U.S. corporations to undergo thor- ough overhauls. The management literature began to resound with terms such as transformation, reinvention, and reengineering, all referring to strategies for large-scale planned change in organizations. Under the pres- sures described earlier and in previous chapters, governments have fol- lowed suit (Gore, 1993; U.S. Offi ce of Management and Budget, 2002). As noted earlier, the literature on large-scale organizational change is quite diverse and diffi cult to summarize succinctly. Two articles, however, in which the authors summarized patterns of organizational change and transformation, provide particularly valuable observations about analyzing and managing successful initiatives. Although they were published some thirty years apart, they have some interesting similarities, and according to recent overviews of the topic, they also show similarities to the perspectives of other organizational change theorists and researchers (Armenakis and Bedeian, 1999).

Over four decades ago, Greiner (1967) analyzed eighteen major orga- nizational change attempts and drew conclusions about the patterns of successful change. He noted that some frequently used approaches to change often seem to founder. Examples include unilateral actions, such as top-down decrees or commands for structural changes; limited attempts at power sharing through group decision making; and efforts to encour- age delegation of authority through T-group training. The successful change efforts that Greiner observed involved much more comprehensive approaches, as illustrated in Exhibit 13.3 .

As indicated in step 5 (Phase III) of Exhibit 13.3 , and implied in other phases, Greiner emphasized the key role of power sharing in successful patterns of change. He concluded that success requires power sharing and that it must occur through a developmental process. The failures he observed involved more unilateral pressures for change, with an illogical sequence of steps.

About thirty years later, Kotter (1995), a prominent author on lead- ership, organizational change, and other topics, published an article on organizational change in the same journal in which Greiner ’s article had appeared, the Harvard Business Review . In the article, Kotter presented a number of reasons for the failure of organizational transformations (a currently fashionable term for large-scale, comprehensive change efforts). Exhibit 13.4 turns Kotter ’s reasons for failure around, transposing them into requirements for success. Kotter ’s observations about organiza- tional change differ from Greiner ’s in important ways. Kotter referred to

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EXHIBIT 13.3 Patterns of Successful Organizational Change

Phase I: Pressure and Arousal

1. There is signifi cant external and internal pressure for change. There is a widespread perception of performance gaps and of a need for change, placing pressure on top management.

Phase II: Intervention and Reorientation

2. A new person enters as change leader. The person has a record as a successful change agent and enters as a leader of the organization or as a consultant working with the leader.

3. The new person leads a reexamination of past practices and current problems. The newcomer uses his or her objective, external perspective to encourage examination of old views and rationalizations and attention to “real” problems.

4. Top management becomes heavily involved in the reexamination. The head of the organization and his or her immediate subordinates assume a direct, heavily involved role in the reexamination.

Phase III: Diagnosis and Recognition

5. The change leader engages multiple levels in diagnosis. The change leader involves multiple levels and units in collaborative, fact-fi nding, problem-solving discussions to identify and diagnose current problems. The diagnosis involves signifi cant power sharing.

Phase IV: Invention and Commitment

6. The change leader stimulates a widespread search for creative solutions, involving many levels.

Phase V: Experimentation and Search

7. Solutions are developed, tested, and proven on a small scale. Problems are worked out and solved. Experimentation is encouraged.

Phase VI: Reinforcement and Acceptance

8. Successes are reinforced and disseminated and breed further success. People are rewarded. Successes become accepted and institutionalized.

Source: Adapted from Greiner, 1967.

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vision, a contemporary and much discussed topic in management theory today. He also emphasized the role of a guiding coalition, in contrast to Greiner ’s focus on a change leader who comes in from the outside (a later section in this chapter describes a successful change in the SSA that did not involve a change leader from the outside). Kotter ’s phrasing is consistent with other research on large-scale change in organizations that emphasizes the essential role of shared values (which can equate to vision in important

EXHIBIT 13.4 Steps for Successful

Organizational Transformation

1. Establish a sense of urgency. • Examine market and competitive realities. • Identify crises and opportunities.

2. Form a powerful guiding coalition. • Assemble a group with enough power to lead the change effort. • Encourage the group to work as a team.

3. Create a vision. • Create a vision to help direct the change effort. • Develop strategies for achieving that vision.

4. Communicate the vision. • Use all available means to communicate the new vision and strategy. • Have the guiding coalition teach the necessary new behaviors by example.

5. Empower others to act on the vision. • Remove obstacles to change. • Change systems or structures that present obstacles.

6. Create short-term wins. • Plan for visible performance improvements. • Create those improvements. • Recognize and reward employees involved in those improvements.

7. Consolidate improvements and produce further change. • Use increased credibility to change systems, structures, and policies to pursue

the vision. • Hire and develop employees who can implement the vision.

8. Institutionalize the new approach. • Articulate the connection between the new behaviors and organizational

success. • Ensure leadership development and succession.

Source: Adapted from Kotter, 1995.

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EXHIBIT 13.5 Determinants of Successful Implementation of

Organizational Change in the Public Sector

Proposition Sub-propositions

Ensure the need . Managerial leaders must verify and persuasively communicate the need for change.

• Convince organizational members of the need and desirability for change.

• Craft a compelling vision of change. • Employ written and oral communication

and forms of active participation to communicate and disseminate the need for change.

Provide a plan . Managerial leaders must develop a course of action or strategy for implementing change.

• Devise a strategy for reaching the desired end state, with milestones and a plan for achieving each one of them.

• The strategy should be clear and specifi c; avoid ambiguity and inconsistencies in the plan.

• The strategy should rest on sound causal theory for achieving the desired end state.

(continued )

ways) and leadership teams rather than individual, heroic leaders (see, for example, Huber and Glick, 1993).

The similarities between the two views, offered thirty years apart, and their similarity to other current perspectives (Armenakis and Bedeian, 1999), are striking. Fernandez and Rainey (2006) conducted a search and review to fi nd patterns of consensus among authors and research studies about organizational change, that show the similarities that the Greiner and Kotter frameworks show. Examining several dozen analyses of organi- zational change, they identifi ed the determinants or conditions of success summarized in Exhibit 13.5 .

These elements appear luxurious to public sector managers, because so many public organizations face frequent turnover of top executives, interventions and constraints from external authorities, and other condi- tions that might block some of these steps. Nevertheless, the following sec- tions note examples of the effective adoption of many of these elements of successful change in public agencies.

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438 Understanding and Managing Public Organizations

Proposition Sub-propositions

Build internal support and overcome resistance . Managerial leaders must build internal support and reduce resistance to change through widespread participation in the change process and other means.

• Encourage participation and open discussion to reduce resistance to change. Avoid criticism, threats, and coercion aimed at reducing resistance to change.

• Commit suffi cient time, effort, and resources to manage participation effectively.

Ensure top management support and commitment . An individual or group within the organization should champion the cause for change.

• An “idea champion” or guiding coalition should advocate for and lead the transformation process. Individuals championing the change should have the skill and acumen to marshal resources and support for change, to maintain momentum, and to overcome obstacles to change.

• Political appointees and top-level civil servants should support the change.

Build external support . Managerial leaders must develop and ensure support from political overseers and key external stakeholders.

• Build support for and commitment to change among political overseers. Build support for and commitment to change among interest groups with a stake in the organization.

Provide resources . Successful change usually requires adequate resources to support the change process.

• Provide adequate amounts of fi nancial, human, and technological resources to implement change.

• Avoid overtaxing organizational members. • Capitalize on synergies in resources when

implementing multiple changes simultaneously.

Institutionalize change . Managers and employees must effectively institutionalize changes.

• Employ a variety of measures to displace old patterns of behavior and institutionalize new ones.

• Monitor the implementation of change. • Institutionalize change before shifts in political

leadership cause commitment to and support for change to diminish.

Pursue comprehensive change . Managerial leaders must develop an integrative, comprehensive approach to change that achieves subsystem congruence.

• Adopt and implement a comprehensive, consistent set of changes to the various subsystems of the organization. Analyze and understand the interconnections between organizational subsystems before pursuing subsystem congruence.

EXHIBIT 13.5 (Continued )

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Successful Revitalization in Public Agencies

Many of these conditions and steps, together with an emphasis on trans- forming organizational culture, characterize successful revitalization efforts in public organizations that had declined (Abramson and Lawrence, 2001; Decker and Paulson, 1988; Holzer, 1988; Poister, 1988a, 1988b; Poister and Larson, 1988; Stephens, 1988).

Poister (1988a) pointed out that these transformation efforts refl ect multifaceted processes of strategic change, involving many policy, man- agerial, technological, and political initiatives and a series of strategies that developed over time. While diverse, they all emphasize developing a shared vision and mission, strategic planning, and developing the orga- nization ’s leadership and culture. They involve redistributions of power toward more active involvement of the agency ’s members. Yet they also emphasize enhancements of management systems, such as fi nancial, pro- ductivity-measurement, and information-management systems. Effective revitalization campaigns also required the agency managers to develop and maintain effective political support, to provide resources and a man- date for the changes. Thus successful revitalizations occur in different types of public organizations, often in patterns very similar to those in pri- vate fi rms. Yet success requires more than skillful employment of generic principles of organizational change—it requires skill in dealing with the political context and administrative features of public organizations. These skillful applications and the conditions supporting them can be further clarifi ed by a comparison between a successful and an unsuccessful attempt at large-scale change in public agencies. Besides these examples and those described earlier in this chapter, there are many additional examples of successful leadership of change and development in public organizations (for example, Behn, 1994; Denhardt, 2000; Svara and Associates, 1994; Thompson and Jones, 1994; Thompson and Rainey, 2003).

Two Contrasting Cases

Reviewing two cases of large-scale change in government agencies helps to clarify the applicability of Greiner ’s and Golembiewski ’s observations. Warwick (1975) reported on a failed attempt in the U.S. Department of State to do what everyone would love to do—reduce bureaucracy. The SSA, however, succeeded in a similar effort. When the SSA faced extreme problems with administrative foul-ups and delays in processing claims, the people in the agency responded with a successful redesign of the

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organization and its claims processing system, and improved performance. These cases illustrate the validity of the many observations about the ways in which the political and institutional context of government and the internal cultures of public agencies can impede change. Yet they also support the claim that, under the right circumstances, applying sound principles of change, skillful public managers and employees can carry out major changes effectively.

The “O Area” Reforms in the Department of State. Warwick (1975) described a fascinating case in which a well-intentioned undersecretary in the State Department initiated an unsuccessful effort to decentralize decision mak- ing and eliminate levels of hierarchy. An administrative area known as the O Area had become a complex array of hierarchical layers and diverse offi ces. The undersecretary ’s reforms eliminated six hierarchical levels (including 125 administrative positions) and started a process of manage- ment by objectives and programs. According to the undersecretary ’s plan, the program managers at the levels below the eliminated layers would manage more autonomously—without so many administrators above them and with more direct lines to the deputy undersecretary. They would also follow a management-by-objectives program in which they would specify objectives, target dates, and needed resources.

Although the undersecretary ’s ideas for reform were heavily infl uenced by McGregor ’s concept of Theory Y management (1960), other managers commented that he sought to apply Theory Y using Theory X methods. The undersecretary made the changes fairly unilaterally and then called together a large group of managers and employees to announce them. Rumors had gone around about the reforms, but the nature of them, according to Warwick (1975, p. 37), caught “even the most reorganized veterans off guard.”

Yet Warwick devoted most of his analysis to the factors hindering change in the State Department, which he tended to generalize to all gov- ernment agencies. Externally, congressional relations and related politics played a major role. Some of the administrators whose positions were tar- geted for elimination had strong allies in Congress and among interest groups that opposed the changes. The State Department had several dif- ferent personnel systems (foreign service offi cers and others), which com- plicated the change process. A bill that would have unifi ed the systems, however, did not pass in Congress. A civil service union opposed it, a pow- erful senator felt that it would dilute the foreign service, and the chair of the Senate Foreign Relations Committee gave it little support because he

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Managing Organizational Change and Development 441

wanted better cooperation from the secretary of state on matters pertain- ing to the war in Vietnam. The secretary of state became concerned about the wide span of control that the reduction in the hierarchy created (with many program managers reporting to the undersecretary).

War wick argued that an administrative orthodoxy prevails in Washington and elsewhere in government. Legislators and political exec- utives expect traditional chains of command and hierarchical arrange- ments and worry that their absence means disorganization. The secretary of state was facing a great deal of political pressure from Congress and the public over decisions about the Vietnam War and did not want to waste political capital on any controversy over the administration of the State Department.

Warwick argued that career civil servants are accustomed to turn- over among top political executives every two or three years. Motivated by caution and security, they can easily build defenses against the repeti- tive cycles of reform and change that the political executives attempt dur- ing their short stays in public agencies. The careerists can simply wait out the top executives by doing nothing, or they can mobilize opposition in Congress and among interest groups. Like many public agencies, the State Department also had internal confl icts among units and specialists, includ- ing a tradition of rivalry between foreign service offi cers and other groups of State Department employees and between units organized by function and units organized by geographical regions of the world. These internal confl icts complicated change efforts, especially because the participants often had external political allies.

The undersecretary implemented his changes with some good effect. The changes appeared to have benefi cial results for the autonomy, willing- ness to experiment, and motivation of some of the units and managers. Yet coordination appeared to suffer, and internal and external resistance mounted. Not long after attempting the changes, the undersecretary left the State Department. His successor derided the reforms, and within about nine months he eliminated most of them. Some useful remnants endured, according to Warwick, and some of the lessons learned proved valuable in later change efforts. Yet Warwick concluded that the reforms had clearly failed.

More generally, Warwick suggested that the types of conditions he found in the State Department tend to sustain complex bureaucracy in all government agencies. Congress and interest groups often resist change because they develop alliances with agencies and their subunits. They jeal- ously guard against reorganizations that threaten those arrangements.

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Rapid turnover at the tops of agencies has the effects already noted. The diversity and interrelations of government agencies complicate change efforts. Any one public policy arena tends to involve many different agen- cies (for example, the Departments of Agriculture and Commerce and many other agencies are involved in foreign affairs). Because legislation and policymaking decisions may involve many agencies, consensus and sup- port become elusive. Statutes and system-wide rules govern many aspects of organization and procedure, sometimes dictating the actual agency struc- ture and placing constraints on job descriptions, purchasing, space pro- curement, personnel decisions, and many other processes. Administrative orthodoxy, coupled with diffuse agency goals, reinforces the tendency to impose classic bureaucratic control.

Warwick noted conditions particular to the State Department that had a lot to do with the outcome of the reforms—the problems of the Vietnam War during this period, a history of complex political infl uences on the department, internal rivalries, the particularly great need for secure communications, and the worldwide scope of operations. Still, he moved toward gloomy conclusions about prospects for changing public bureau- cracies. Almost as if he was determined not to end on such a note, how- ever, he offered suggestions about reducing and changing bureaucracy that echo those of Greiner and the OD experts. He pointed out that facile prescriptions for participative management in public agencies face some sharp challenges. Many of the conditions described earlier weigh against prospects for highly participative processes, but to facilitate successful change, government managers must deal with these conditions. Warwick argued that one cannot eliminate bureaucracy by decimation—by fi ring people or merging or cutting units—or by top-down demands for reform. Effective debureaucratization, he concluded, must have strong roots within the agency. The people in the agency must see the changes as important and useful to them. All signifi cant internal constituencies must participate in considering the problem. There must be a careful, collaborative diag- nosis, followed by broad-based discussions about concrete alternatives for change. Then proponents of the change must seek support from external controllers and allies. To avoid the problem of rapid turnover among top executives, a coordinating body should monitor and sustain the change, and this body should include more than one senior political appointee.

Modularization of Claims Processing in the Social Security Administration. While the very words “modularization of claims processing” summon up the impulse to doze off, this example represents an effective attempt to

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do something similar to what the State Department reforms failed to do— to reform bureaucracy in the direction of decentralized control over the work and an enriched work environment. In the 1960s, the SSA became overloaded and backlogged in processing claims for Old-Age and Survivors Insurance (that is, Social Security payments). Clients complained to the SSA and to members of Congress, who passed the heat along to the agency. At one point, the SSA struggled with a backlog of one million claims. Something had to be done.

The problem had developed largely because Congress had added new programs and new forms of coverage to the original Social Security program, such as extending coverage to dependents, farmers, the self- employed, and the disabled. Along with population growth, these additions continually expanded the number of claims to be processed. Also, because of the different programs and the complications of individual cases, some of the claims could raise confounding diffi culties. A claimant might have worked under multiple aliases, for example, and have a degenerative brain disease and no memory of his or her original name and birth date.

The organizational system for handling the claims proved more and more ineffective at responding to the load. The SSA had several major functional bureaus—for the retirement and survivors’ insurance (RSI) program, for disability insurance, for data processing and records, and for supervising the district offi ces. The district offi ces, located around the country, took in claims from clients applying for their benefi ts. For the RSI program, they then forwarded the claims to one of six program service centers (PSCs). These were located in six regions of the country. Each had about two thousand employees. When a claim arrived at a PSC from the district offi ce, a clerical support unit would prepare a folder for the claimant and forward it to a claims unit. There, a claims authorizer would determine the type and degree of eligibility for Social Security payments. The folder would then be forwarded to a payments unit, where a ben- efi t authorizer would compute the amount of the benefi t payment and do some paperwork necessary to begin processing the payment through the computer. The folder would then go to an accounts unit, which assembled and coded information about the case, then to another unit for entry into the computer, then to a records maintenance unit for storage. In some of these units, hundreds of people worked at desks in long rows, receiving deliveries of stacks of folders from shopping carts, with coffee and lunch breaks announced by the ringing of bells. Control clerks and supervisors, emphasizing the technical issues and production rates of their unit, spot- checked the work for accuracy.

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Any incomplete information or disagreements among the technical specialists would delay a claim, because it would have to be sent back to the earlier point in the process for clarifi cation or correction. Communication about the problem usually had to be in writing. There was no provision for getting a problem claim back to the same person who had done the earlier work. The increasing number of claims and the complications of many of the claims increasingly clogged the system. The system created incentives for employees to “cream” the cases by avoiding the very diffi cult ones or even slipping them to the next phase to get them off their desk. Problem cases piled up.

Robert Ball, the long-term, highly respected commissioner of the SSA, appointed an experienced SSA offi cial, Hugh McKenna, as director of the RSI bureau, with a mandate to correct the problems. McKenna initi- ated an open-ended process of change, with some four years of research, development, experimentation, and morale building. Several task forces with internal and external representation studied management processes, case handling, and labor relations. A consulting fi rm analyzed the case- management process. Large team-building and morale-boosting meetings were held between managers and staff from the PSCs, district offi ces, and the RSI central offi ce. The offi ce staff worked with the PSCs to develop training courses on participatory management. Interestingly, someone made a comment about McKenna similar to the one made about the State Department undersecretary—that he “ordered participatory man- agement.” He did, but there was obviously a crucial difference in the way that order was imposed.

Out of these efforts emerged the concept of modular claims-processing units. The planning staff in the central offi ce suggested setting up smaller units—composed of fi fty employees—containing all the technical special- ists needed to process a claim and letting them handle claims from begin- ning to end. Professing to draw on the ideas of McGregor, Herzberg, and Maslow (described in Chapters Two and Nine), the proponents of the module concept argued that it would provide job enrichment and partici- patory management. Individuals would identify with their tasks more and see their clients as individuals, they would have easier access to supervisors and managers, and they would have more control over the process and their part in it.

One of the PSCs tried out one such unit on an experimental basis and then created a total of six modules. Problems arose. At one point, pro- ductivity dropped in the modules, and termination of the experiment was seriously considered. However, the staff decided that the problems could

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Managing Organizational Change and Development 445

be corrected. Managers apparently had some trouble adjusting to the new system. In one instance, two module managers tried to merge their mod- ules to create combined functional units for fi les, accounts, claims, and so on. The central staff had to urge them back to the original concept. The blending of clerical staff and technical specialists in the modules caused some racial and status confl icts. Relations with other agencies, such as the Civil Service Commission (now the Offi ce of Personnel Management), required skillful handling to obtain new space and to receive approval of new personnel structures. Ultimately, other PSCs adopted the mod- ules, with some modifi cations. In one module, the specialists involved in processing a claim sat around a desk together, working through individ- ual cases in direct contact with one another. The modular approach was also adopted by the Disability Insurance Bureau, although with more employees per module.

The modular concept became widely accepted in the agency as a suc- cess. At one point, processing time for new claims in the PSCs had dropped by 50 percent, to an average of twenty days, and it later dropped further, to an average of fi fteen days, with very few long-delayed cases. Some employee surveys showed increased job satisfaction in the modules. The picture was not all rosy, however. Some long-standing employees disliked the change. Problems with computer systems complicated matters. Morale later suf- fered badly when the agency began a process of eliminating seventeen thousand employees in the 1980s, which apparently made it diffi cult to properly staff some of the modules. Nevertheless, many people in the agency regarded the modular concept as successful. Today, the PCSs are all organized into modules, and the employees regard them not as an innova- tion but as a standard feature of the centers. Recent developments, such as computerization of claims processing, are causing some problems for the modular design. Some of the centers are experimenting with new forms of organizing the claims-processing work. As they do so, managers and employees frequently express concern about moving away from the modu- lar design—a sign of just how successful this change has been.

The success may simply refl ect the proper application of some of the generic principles of change. The change was widely recognized as neces- sary, it had support from the top, and there was fl exible implementation, with adaptation, feedback, and experimentation, and a realistic strategy for achieving the agency ’s objectives. The change did, in a sense, have a top-down character, but in this case it appears to illustrate what the experts mean by “support from the top.” There must be sponsors and champions of the change with suffi cient authority and resources to see it through.

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Some particulars about the SSA case distinguish it from the State Department case; these are summarized in Exhibit 13.6 . SSA had as chief executive a long-term career civil servant who had enjoyed trust and sup- port from key congressional fi gures and thus could gain a grant of author- ity to solve the agency ’s problems without interference. SSA has strong support from a large clientele receiving a specifi c service, and the agency ’s tasks tend to be clear and mechanistic. The people in the agency were able to encapsulate their work processes and management methods and seal them off from political intervention.

While such factors may have provided SSA with advantages, the case suggests some key additional considerations about successful change in public organizations (Rainey, 1990). SSA had a durable, skillful power cen- ter that was committed to successful change. Ironically, for all the stereo- types about career bureaucrats resisting change, in this case the long-term

EXHIBIT 13.6 Conditions for a Successful Change in a

Federal Agency

1. A durable power center, committed to successful change • Strong, stable leadership by career civil servants • An internal change agent (career agency executive) with suffi cient authority and

resources • An active, creative bureau staff

2. Appropriate timing for collective support • A political “window of opportunity” • Political overseers (congressional committee heads) who are supportive but not

interventionist • Political sophistication of agency leaders and staff—effective management of

relations with Congress and oversight agencies (OPM, GSA) • Strategies that blend sincere employee involvement with decisive exercise of

authority 3. A comprehensive, clear, realistic alternative process

• A long-term change strategy, using group processes to develop new structures • A major structural reform, focused on measurable outputs, that decentralizes

operational responsibility • Reasonable clarity about the nature and objectives of the new structure and

process

Source: Rainey and Rainey, 1986.

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Managing Organizational Change and Development 447

civil servants were the champions of change. In one instance, they even had to outwit a conservative political appointee who sought to undercut the reforms because he thought they would result in “grade creep”—that is, employees might get higher salary grade classifications because of increased responsibilities in the modules. The leaders of the change effort hurried through an approval of the new personnel structure by the Civil Service Commission to prevent any blockage of the reforms. In this and many other ways, they utilized their knowledge of the political and adminis- trative systems to sustain the change. Also, they were not leaving soon. They had the career commitment to the agency to want the changes to succeed, and they and others knew they would be there for the duration.

In addition, the SSA change took place at the appropriate time for it to garner collective support. (See the section on the agenda-setting process in Chapter Five for a discussion of the concept of windows of opportunity in the political process.) As noted earlier, the reform at the State Department was hindered by the Vietnam War and by other problems with the timing of the change. Of course, the SSA enjoys no inherent immunity from politi- cal interference; many agencies that do mechanistic work with clear out- puts get buffeted by external political forces. The timing was right for this change at the SSA, however, in that no distracting crises or controversies weighed against it. The need for change was widely recognized both inside and outside the SSA. In part this refl ects luck, and in part it refl ects the skill of experienced public managers and staff members who knew when and how to work for better alternatives.

Indeed, they did develop a better alternative, one that was comprehen- sive, clear, and realistic. Rather vague, prepackaged models, such as man- agement by objectives, will fail if they are not adapted to fi t the particular structural and cultural conditions within an organization. The sponsors and champions of the change in the SSA applied relatively fi rm, consistent pressure for a reasonably clear, realistic idea, while allowing a degree of experimentation and variation in its implementation.

Other aspects of the Social Security program and related policies can be debated at length. Nevertheless, in this case, experienced career civil servants in the SSA brought about an effective improvement in a process essential to one of the largest single categories of disbursement from the federal budget of the United States, and that very directly affects the lives of at least sixty million Americans. The public has heard little about this. News reporters have overlooked it. But perhaps it should not receive heroic treatment—it represents only one of many instances of skillful change and management that go on in government continually.

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448 Understanding and Managing Public Organizations

Instructor ’s Guide for Chapter Thirteen

• Key terms • Discussion questions • Topics for writing assignments or reports • Case Discussion: Habitat for Humanity of Medina: Confronting the

Changing Times

Available at www.wiley.com/college/rainey .

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449

Public organizations perform crucial functions, and it is imperative that they perform them effectively. All of the previous chapters have in some way described possibilities for effective management of public orga- nizations. This chapter covers some more summative approaches to the topic, including general issues about the performance of public organiza- tions, and reviews profi les of well-performing organizations in both the private and public sectors. It then reviews some recent trends in manage- ment reform and the pursuit of high performance that have had impor- tant infl uences on public management. Finally, the chapter explores one of the most prominently discussed and frequently employed strategies for enhancing the performance of government—privatization of governmen- tal services, especially through contracting out. Despite its long history of use in government, proponents of privatization still propose it as an innovative solution for public organizations. The main objective of this section, however, is not to analyze privatization. Primarily, it illustrates ways in which the topics and ideas from the framework for organizational analy- sis presented in Figures 1.1 and 1.2 , as elaborated in the previous chap- ters, can be brought to bear in pursuing new (or renewed) alternatives in public management. It attempts to illustrate a systematic approach to organizing and managing in order to confront a task such as establishing

CHAPTER FOURTEEN

ADVANCING EFFECTIVE MANAGEMENT IN THE PUBLIC SECTOR

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a well-organized approach to privatization, or many other imperatives and challenges that people in public organizations must effectively manage.

The Performance of Public Organizations

Criticism of government and its components, such as government offi cials, organizations, and employees, is a thriving industry in the United States and in many other nations that allow freedom of expression. Many people make their living in whole or in part in this industry, and virtually all citi- zens contribute to it in some way. Like other industries, it creates problems, such as information pollution—that is, distortions and excesses in report- ing and analysis of government. At the same time, it is an absolutely crucial industry, because we control government in part by scrutinizing and criti- cizing it. This industry also illustrates the point that the history and culture of the United States have in many ways drawn on the fundamental assump- tion that public organizations are beset with performance problems, such as red tape and ineffi ciency, whereas private business fi rms perform more effi ciently and effectively. This assumption is widespread but not universal: surveys show that a majority of Americans share it, but not all (see, for example, Light, 2002a; Lipset and Schneider, 1987; Partnership for Public Service, 2008). Surveys have also found that some Americans are suspicious of private business but have a strong, deep-seated support for—if not con- fi dence in—their government ’s institutions (Lipset and Schneider, 1987). The fi nal section of this chapter examines the evidence and debate on the performance of public organizations relative to the performance of the private sector, leading to the conclusion that in spite of the assumption to the contrary, many public organizations and managers perform very well.

Chapter Two described how the literature on organizations and man- agement increasingly emphasizes the complexity and turbulence confront- ing organizations, with more and more discussion of paradoxes, confl icting values, and even the chaos facing all organizations (see, for example, Daft, 2013; Kiel, 1994; Peters, 1987; Quinn, 1988). For public organizations, the pressures include public and political hostility, funding reductions, and other challenges that many offi cials and experts depict as crises affecting all levels of government (Gore, 1993; Kettl, 2009; Light, 2008; National Commission on the Public Service, 1989, 2003; Partnership for Public Service, 2002; Thompson, 1993; U.S. General Accounting Offi ce, 2002a; U.S. Offi ce of Management and Budget, 2002; U.S. Senate, Committee on Governmental Affairs, 2001).

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Advancing Effective Management in the Public Sector 451

Somewhat paradoxically, in view of all the references to crisis and pres- sure, a growing literature has concentrated on successful organizations. Peters and Waterman ’s In Search of Excellence (1982), which described many excellent corporations, became one of the best-selling popular books about management in history. It appears to have been the starting point for a profusion of similar books about successful corporate management that have been pouring out ever since (see, for example, Collins, 2001; Collins and Porras, 1997; Lawler and Worley, 2006).

Similarly, pressures on the public sector have prompted many authors and offi cials to defend the value and the record of government (Esman, 2000; Glazer and Rothenberg, 2001; Light, 2002b; Neiman, 2000) and pub- lic organizations (Milward and Rainey, 1983; Rainey and Steinbauer, 1999). In the leading book mounting the case in favor of government organiza- tions, Goodsell (2004) pointed to substantial evidence that public orga- nizations and employees frequently perform well and defy many of the negative stereotypes that echo in the media, popular opinion, and political and academic discourse. As described in previous chapters and later in this one, so many other writers have described effective public managers and organizations that books and articles on this topic represent a genre in the literature on administration. 1 The debate over whether public orga- nizations perform well, or as well as private fi rms, has many complexities. Previous chapters have discussed the many constraints on public organiza- tions that can hamper their performance—complex sets of goals and dif- fi culties in measuring performance, political interventions and turnover, externally imposed rules, inadequate resources and funding, policies and programs that are poorly designed by policymakers in the executive and legislative branches, and many others. It is fairly common for research to fi nd that when public services are directly compared to privately delivered forms of the same service, the private sector displays more effi ciency (Savas, 2000)—but not always (Donahue, 1990; Hodge, 2000; Sclar, 2000). In fact, Downs and Larkey (1986) described one national study that found that federal agencies showed higher rates of increase on productivity measures during the late 1960s than did a large sample of private fi rms. Individual agencies provide further examples. Studies have found that the U.S. Postal Service, the target of criticism and the brunt of jokes for decades, shows a much higher level of productivity per worker than any other postal service in the world, coupled with lower fi rst-class mail rates than all but two other nations—Belgium and Switzerland—in spite of contending with greater geographic distances and other complexities. In addition, as Chapters Ten and Thirteen illustrate, there are many examples of innovative behaviors

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452 Understanding and Managing Public Organizations

in public organizations and of studies that have found receptivity to change among public employees and no difference between the public and private sectors in general innovativeness.

In fact, the population of private and nonprofi t organizations displays abundant weaknesses in many ways. Scholarly analyses and media reports regularly detail failures and bankruptcies, massive expensive blunders, and patterns of fraud and abuse in many of these organizations, sometimes in the most prestigious and reputable of them. In the fi rst several years of the twenty-fi rst century, such reports reached a crescendo. At times the litany of problems is so long that one wonders whether these sectors can serve as useful guiding models for the public sector. Conversely, just as with the public sector, the list of successes by business and nonprofi t organizations is long and impressive, often involving accomplishments that would have seemed miraculous to people living even a few decades ago.

The point, then, is not to belabor invidious questions about whether one sector is better than another, but to underscore the challenge of pursu- ing excellence in all managerial settings. Many public and private organiza- tions perform very well. What can we learn from studies of them?

Profi les of Corporate Excellence

To examine some profiles of corporate excellence, we might delve back into the recent history of the management literature. Peters and Waterman ’s In Search of Excellence (1982), now somewhat dated, apparently became so popular because it forged beyond complicated debates about organizational effectiveness and put forth stimulating observations about management in excellent fi rms (although the authors’ conclusions actu- ally echo much of the earlier literature on human relations in organiza- tions and organizational responses to complexity). Peters and Waterman described these fi rms as placing a heavy emphasis on “productivity through people” (p. 14). They did not merely mouth that value, the authors said; they “live their commitment to people” (p. 16), and they “achieve extraordinary results with ordinary people” (p. xxv). They defi nitely try to attract and reward excellent performers, but they also emphasize both autonomy and teamwork.

The firms studied by Peters and Waterman devoted careful atten- tion to managing their organizational culture. They developed coherent philosophies about product quality, business integrity, and fair treatment of employees and customers. Along with the stories and slogans that

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Advancing Effective Management in the Public Sector 453

fl ourished in these companies, these philosophies emphasized the shared values that guided major decisions and motivated and guided perfor- mance. The fi rms nurtured the philosophies through heavy investments in training and socialization. “Without exception,” the authors noted, “the dominance and coherence of culture proved to be an essential quality of the excellent companies” (p. 75). The fi rms behaved as if they accepted the principle that “soft is hard”; that is, that the intangible issues of culture, values, human relations—matters that many managers regard as fuzzy and unmanageable—can and must be skillfully managed.

The successful firms sought coherence in their approach to man- agement, with the shared values of the culture guiding the relationships between staff characteristics, skills, strategies, structure, and management systems. In so doing, they accepted ambiguity and paradox as part of the challenge. Organizing involves paradoxes, wherein one tries to do con- fl icting things at the same time, under conditions that often provide little clarity. The paradoxical aspects are evident in some of these companies’ approaches to management, which Peters and Waterman describe in these terms:

• A bias for action . These companies tended toward an approach that one executive described as “ready, fi re, aim.” They avoided analyzing deci- sions to death and took action aggressively.

• Staying close to the customer . Deeply concerned about the quality of their products and services, people in these companies sought to stay in close touch with their customers and to be aware of their reactions.

• Valuing autonomy and entrepreneurship . Many of these companies provided autonomy in work and encouraged people to engage in entrepreneurial behaviors. They often tolerated the failure of well-intended, aggressive initiatives.

• Enhancing productivity through people . As noted earlier, the companies emphasized motivating and stimulating their people through respect, participation, and encouragement. They often used imagery, language, symbols, events, and ceremonies to do this.

• A hands-on, value-driven approach . The people in these fi rms devoted much attention to clarifying and stating the primary beliefs and values that guided the organization, to clarifying what the company “stands for.”

• Sticking to the knitting . The companies stayed focused on the things they did well and avoided ill-advised forays into activities that diluted their efforts and goals.

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454 Understanding and Managing Public Organizations

• A simple form and lean staff . The companies often had relatively simple structures and small central staffs. Some massive corporations achieved this by decentralizing into fairly autonomous business units, each like a smaller company in itself.

• Simultaneous loose and tight properties . The companies balanced the need for direction and control with the need for fl exibility and initiative. They might have had “tight” general guidelines and commitments to certain values, but they allowed considerable fl exibility within those general values and guidelines. The approach that the Social Security Administration took when it adopted its modular work units (described in Chapter Thirteen) appears to fi t this pattern. The change followed a clear, general concept—modularization—with fi rm commitment from the top, yet units could adopt the concept experimentally and fl exibly. They could make reasonable adaptations, but not radically depart from the basic idea. This example suggests the ways in which many of these approaches mesh together. A relatively clear idea for a change, coupled with relatively clear and appealing values expressed as part of that idea, provides both a source of motivation and direction and a reasonable framework that higher levels can fi rmly insist on, without being rigid or dictatorial.

At about the same time as Peters and Waterman ’s book appeared, Americans became increasingly interested in the success of Japanese fi rms, which had been competing so effectively against American companies in many key industries. Observations of these fi rms revealed similarities to the particularly successful American companies. In one prominent book on the topic, Ouchi (1981) observed that many Japanese fi rms offered lifetime employment and avoided layoffs in hard times. They expressed a holistic concern for their employees. They moved slowly in evaluating and promoting personnel. They used more implicit control mechanisms, such as social infl uences on employees. They practiced collective decision mak- ing and collective responsibility, and developed relatively nonspecialized career paths.

The Japanese companies sought to develop trust on the part of their employees so they would have the confi dence to contribute to the organiza- tion in many ways. They emphasized work groups as the basis for collective decisions and responsibilities. The companies emphasized the develop- ment of philosophies or styles that guide organizational objectives, oper- ating procedures, and major decisions, such as new product lines. They supported these philosophies through extensive training programs. Ouchi

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noted that some successful American corporations, such as IBM, Procter & Gamble, Hewlett Packard, and Eastman Kodak (which were included in Peters and Waterman ’s study), had orientations similar to some of these aspects of Japanese management.

The appearance of books such as these, especially the Peters and Waterman book and several sequels and television programs on the same theme, produced a movement within management circles in the United States. Numerous similar books appeared, and many corporations took steps to emulate the purported patterns of excellence. More and more annual reports proclaimed a company philosophy, typically including sono- rous expressions of devotion to employees, customers, and high-quality products. The annual report of one high-tech fi rm described the company as a “closely knit family” of forty thousand.

Predictably, controversy followed this material on corporate excel- lence and Japanese management. The generalized observations about the characteristics of successful fi rms leave some questions about just how valid they are and how closely they apply to any particular organization. It is not always clear how one carries out some of the prescriptions these books offer—especially how one weaves them all together. Also, Peters and Waterman themselves noted that some managers told them that cul- ture is only one of many important aspects of their organization. Other features, such as sound technical and production systems, can fi gure just as crucially. Some of the supposedly excellent companies that Peters and Waterman studied encountered diffi culties later. A strong downsizing trend among corporations in the United States soon began to erode any claims that successful corporations placed great value on their people. Nevertheless, there are important reasons to look back at Peters and Waterman and Ouchi as representative and leading examples of the wave of books on corporate excellence. For one, these books make valuable and fascinating points, including the importance of people and organiza- tional culture, the inevitability of paradox and ambiguity and the necessity to manage them, and the feasibility of managing complex organizations successfully. Many of these points and themes still echo in the manage- ment literature and in the professed philosophies of numerous organi- zations, and they echo in the accounts of effective public management reviewed in earlier chapters and in this one. However, a large number of the studies of effective public management have followed a similar pattern of providing general case descriptions of purportedly effective, innovative, and high-performance public managers and organizations. This raises many of the same issues about how clear, valid, and widely practiced are

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the values and practices that the authors conclude are responsible for the organizations’ success.

Research on Effective Public Organizations

Strikingly, the corporate excellence literature turned on their heads some frequent observations about the problems of public organizations. The Civil Service Reform Act of 1978 institutionalized the belief that weak links between pay, fi ring, and performance cause public organiza- tions to perform poorly, and this belief has continued to play a strong role in discussions of governmental reforms (Rainey and Kellough, 2000). The writers on corporate excellence said that although the best profi t- oriented fi rms tried very hard to recognize and reward excellent perform- ers, they also emphasized a culture of communication, shared values, and mutual loyalty and support between the organization and its employees, as well as decentralization, flexibility, and adaptiveness. Although gov- ernmental reforms have sometimes claimed to pursue such conditions, and sometimes have involved efforts to do so, the reforms tend to mix such themes with the message that dysfunctional government agencies and many poor performers in them need to be fi xed, through such mea- sures as pay-for-performance schemes and streamlined procedures for firing and discipline (Rainey and Kellough, 2000; Walters, 2002). This raises the question of how government can actually pursue enlightened reforms in a context of constant criticism and skepticism—a question all the more important as government confronts the apparent human capi- tal crisis described shortly. At the same time, it shows the importance of paying attention to the reports of effective government organizations, because in many of these reports one fi nds applications of some of the important values and philosophies that successful private corporations reportedly apply.

In one of the earliest examples of research on government organi- zations, resembling the approach of Peters and Waterman, Gold (1982) studied ten successful organizations—five public and five private. He chose healthy organizations with well-respected products or services that appeared to be good places to work; the public organizations were the U.S. Forest Service; the U.S. Customs Service; the U.S. Passport Offi ce; and the city governments of Sunnyvale, California, and Charlotte, North Carolina. The private organizations were a regional theater organization; the Dana

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Corporation (an automobile parts manufacturer); Hewlett Packard; L. L. Bean; and Time, Inc. He found that the ten organizations had certain common characteristics:

• They emphasized clear missions and objectives that are widely commu- nicated and understood throughout the organization.

• The people in the organization saw it as special because of its products or services, and they took pride in this.

• Management placed great value on the people in the organization, on treating them fairly and respectfully, and on open, honest, informal communication with them.

• The managers did not see their organization as particularly innovative, but they emphasized innovative ways of managing people.

• Management emphasized delegation of responsibility and authority as widely and as far down in the organization as possible. They involved as many people as possible in decision making and other activities.

• Job tasks and goals were clear, and employees received much feedback. Good performance earned recognition and rewards.

• The handling of jobs, participation, and the personnel function was aimed at challenging people and encouraging their enthusiasm and development.

Gold did fi nd some distinctions between the public and private organi- zations, however. The public organizations did not articulate their mission as clearly and consistently as the private ones did. Apparently the private organizations’ focus on profi t as an element of their objectives helped in this regard. The managers in the public organizations, however, talked about excellence in the professionalism of the staff and about smoothly run operations and processes. The public organizations also had a harder time promoting from within—an approach that the private fi rms emphasized as a way of building experience, knowledge, and commitment among their employees.

As indicated by the many references cited earlier in this chapter and in previous ones, these types of studies have continued to appear. At one point, Hale (1996) summarized the conclusions of some of the most recent studies of high-performance public agencies. She concluded that in high- performance organizations, leaders defi ne their key role as providing con- ditions that support employee productivity and that support employees in providing the organizations’ customers with what they want and need from

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458 Understanding and Managing Public Organizations

the organization. These organizations, and their leaders, typically hold the following values:

• Learning . They support learning, risk taking, training, communication, and work measurement.

• A focused mission . They emphasize clarifying their mission and commu- nicating it to the members of the organization, its customers, and other stakeholders.

• A nurturing community . They provide a supportive culture, with a focus on teamwork, participation, fl exible authority, and effective reward and recognition processes.

• Enabling leadership . They facilitate learning, communication, fl exibility, sharing, and the development of a vision and commitment to it.

Later, Rainey and Steinbauer (1999) sought to further develop the sort of summary that Hale undertook. They bluntly asserted that public organi- zations can be very successful and effective, by reasonable standards, and as effective as business fi rms. They pointed to various examples of effec- tive performance of government agencies, such as the low administrative expenses of the SSA, which represent only about 0.8 percent of the total benefi ts that the SSA disburses (Eisner, 1998). They sought to pull together the studies of high-performance and excellent government organizations and looked for common patterns and generalizations, as illustrated in Table 14.1 . As that table indicates, and as summaries of these types of stud- ies here and in Chapter Thirteen also show, these studies vary widely in their methods, in the concepts and terms they use, in the degree to which they provide clear evidence in support of their conclusions, and in other ways. This makes it a diffi cult task to describe and summarize them, and it takes a lot of time and space to do so. Exhibit 14.1 , however, provides a set of propositions that Rainey and Steinbauer offered as a result of the review.

Obviously one can criticize this set of propositions and debate its ade- quacy on many grounds, such as the clarity of the concepts and the ade- quacy of the evidence supporting them. It does make the point, however, that numerous researchers and authors are advancing evidence of success- ful, effective organizations and management in public organizations. This in turn suggests that many public organizations are managed as well as or better than private ones, and that many public managers perform very effectively. These propositions raise the challenge of continuing to develop our knowledge of how public organizations achieve these effective perfor- mances and change for the better.

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Advancing Effective Management in the Public Sector 459

Trends and Developments in the Pursuit of Effective Public Management

Besides the research on effective public organizations, a number of trends and developments related to the pursuit of effective public management are worthy of attention. A vast array of such activities and initiatives goes on constantly, and previous chapters have covered many of them, such as the Government Performance Project, applications of the Balanced Scorecard in the public sector, and the Government Performance and Results Act and the efforts at strategic planning that it required (all covered in Chapter Six). It is diffi cult to decide which additional developments to cover, but everyone interested in public management should be aware of the devel- opments covered here. They serve to illustrate certain points about the context and dynamics of the theory and practice of management in general and of public management.

Total Quality Management

In the past two decades, organizations throughout the public and private sectors have undertaken Total Quality Management (TQM) programs. The widespread implementation of these programs makes it important for public managers and students of public management to be aware of TQM. As we will see, TQM also raises challenging alternatives for manage- ment, and it has clearly infl uenced the objectives of current government reform efforts described later in this chapter (for example, focusing on the customer, the use of teams, and continuous improvement) and the litera- ture on public management (for example, Beam, 2001). It also provides an interesting and signifi cant example of the dissemination of ideas and techniques in public and private management (Berman and West, 1995).

The term Total Quality Management refers more to a general movement or philosophy of management than to a specifi c set of management pro- cedures. Different authors take different approaches to TQM. W. Edwards Deming, one of the founders of this movement, who developed many of the original ideas behind it, did not refer to his approach as Total Quality Management. In fact, he disapproved of this label. Yet a review of some of Deming ’s seminal ideas provides a useful introduction to TQM (Dean and Evans, 1994; Deming, 1986; Juran, 1992).

Deming was an industrial statistician. Writing in the 1950s, he advocated using statistical measures of the quality of a product during all the phases of its production. He called for this approach to replace the quality-control

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TABLE 14.1. CHARACTERISTICS OF HIGH-PERFORMANCE GOVERNMENT ORGANIZATIONS

Gold (1982) Hale and

Williams (1989) Wilson (1989)

Mission or Public Orientation

Emphasis is on clear mission and objectives.

Contact with customers is increased to better understand their needs.

Mission is clear and refl ects a widely shared and warmly endorsed organizational culture.

Political support is from external stakeholders.

Leadership and Managing Employees

Employees take pride in the organization and its product.

Focus is on treating employees fairly and respectfully through honest and open communication.

Emphasis is on delegating responsibility and authority as widely as possible.

Management aims at challenging and encouraging people.

Management emphasizes innovative ways of managing.

There is an increase in discretionary authority for managers and employees for greater control over accountability.

Increased employee participation taps their knowledge, skills, and commitment.

Executives command loyalty, defi ne and instill a clear sense of mission, attract talented workers, and make exacting demands of subordinates.

Leaders make peer expectations serve the organization.

Discretionary authority for operators is maximized.

Executive takes responsibility for organizational maintenance.

Implementation perspective is bottom up.

Task Design and Work Environment

Great value is placed on the people in the organization.

Job tasks and goals are clear.

Partnerships allow the sharing of knowledge, expertise, and other resources.

State-of-the-art productivity improvement techniques are employed.

Work measurements are improved to provide a base for planning and implementing service improvements and worker evaluation.

Goals are clearly defi ned.

There is widespread agreement on how critical tasks are performed.

Agency is given autonomy to develop operational goals from which tasks are designed.

Agency is able to control or keep contextual goals in proper perspective.

Source: Portions of this table are adapted from Rainey and Steinbauer, 1999, p. 359; and from Hale, 1996, p. 139.

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Advancing Effective Management in the Public Sector 461

Denhardt (2000) Popovich (1998) Hale (1996) Holzer and

Callahan (1998)

There is dedication to public service and understanding public intent.

Emphasis is on serving the public, which represents democratic values.

Organization aims for mission clarity and understanding.

Open and productive communication among stakeholders is maintained.

Mission is focused, clarifi ed, and communicated to organization members.

Organization is customer focused.

Partnerships are built with public and private organizations and citizens.

Leader demonstrates commitment to mission.

Manager builds sense of community in organization.

Manager clearly articulates values.

Managers insist on high ethical standards.

Leadership is empowered and shared.

Employees accept responsibility and performance accountability.

Employees are empowered.

Organizations allocate resources for continuous learning.

Employees accept accountability to achieve results with rewards and consequences.

People are motivated and inspired to succeed.

Enabling leadership emphasizes learning, communication, fl exibility, sharing, and vision development.

Leaders manage for quality using long-term strategic planning, with support from top leadership.

Human resources are developed and employees are empowered through team building, systematic training, recognition, and a balance between employee and organizational needs.

Change is seen as natural, appropriate (pragmatic incrementalism).

Approach to change is creative and humane.

Commitment is to values.

Outcomes are defi ned and focus is on results (performance measures).

New work processes are instituted as necessary.

Organization adjusts fl exibly and nimbly to new conditions.

Organization is competitive in terms of performance.

Work processes are restructured to meet customer needs.

Learning is emphasized, and learning, risk taking, training, communication, and work measurement are carefully supported.

Nurturing-community culture is supportive and emphasizes teamwork, participation, fl exible authority, and effective reward and recognition.

Technologies that are adapted include open access to data, automation for productivity, cost-effective applications, and cross- cutting techniques that deliver on public demands.

Performance is measured by establishing goals and measuring results, justifying and allocating resource requirements as necessary, and developing organizational improvement strategies.

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462 Understanding and Managing Public Organizations

EXHIBIT 14.1 Propositions About Effective Public Organizations

Public agencies are more likely to perform effectively when there are high levels of the following conditions:

Effective relations with oversight authorities (legislative, executive, judicial). Authorities are • Attentive • Demanding • Supportive • Delegative

Effective relations with other stakeholders • Favorable public opinion and general public support • Multiple, infl uential, mobilizable constituent and client groups • Effective relations with partners and suppliers

Effective management of contracting and contractors Effective utilization of technology and other resources Effective negotiation of networks

Responsive autonomy in relation to political oversight and infl uence

Mission valence (the attractiveness of the mission) • Diffi cult but feasible • Reasonably clear and understandable • Worthy and legitimate • Interesting and exciting • Important and infl uential • Distinctive

Strong organizational culture, linked to mission

Effective leadership • Stability of leadership • Multiplicity of leadership—a cadre of leaders, teams of leaders at multiple levels • Leadership commitment to mission • Effective goal-setting in relation to task and mission accomplishment • Effective coping with political and administrative constraints

Effective task design • Intrinsically motivating tasks (interest, growth, responsibility, service, and mission

accomplishment) • Extrinsic rewards for task accomplishment (pay, benefi ts, promotions, working

conditions)

Effective development of human resources • Effective recruitment, selection, placement, training, and development • Values and preferences among recruits and members that support task and

mission motivation

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Advancing Effective Management in the Public Sector 463

procedures often used in industry, which assessed the product only at the end of the production process. Deming included this commitment to sta- tistical quality control in his general philosophy of management. He put together fourteen tenets of his approach. These tenets, frequently quoted in the TQM literature, include the following:

• Publish a statement of company aims and purposes for all employees to see, and demonstrate commitment to the statement on the part of management.

• Have everyone in the company learn and adopt the new philosophy. • Constantly improve the production system. • Institute training, teach leadership skills, and encourage self-improvement. • Drive out fear and create trust and a climate of innovation. • Use teams to pursue optimal achievement of company goals. • Eliminate numerical production quotas and management by objec-

tives, and concentrate on improving processes and on methods of improvement.

• Remove barriers to pride of workmanship.

Although some of these tenets sound simple, many have profound implications for an organization ’s basic approach to organizing and man- aging. For example, these principles led Deming to oppose individualized performance appraisals because they damage teamwork, fail to focus on serving the customer, and usually emphasize short-term results. Compare his orientation to the themes in civil service reforms and government pay reforms described in Chapter Nine (for example, pay-for-performance plans based on individual performance appraisals, and the streamlining

High levels of professionalism among members • High levels of special knowledge and skills related to task and mission accomplishment • Commitment to task and mission accomplishment • High levels of public service professionalism

High levels of motivation among members • High levels of public service motivation among members • High levels of mission motivation among members • High levels of task motivation among members

Source: Adapted from Rainey and Steinbauer, 1999.

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464 Understanding and Managing Public Organizations

of procedures for fi ring and disciplining employees). In contrast, Deming argued that to make the commitment to improving quality work, people have to feel free to contribute their ideas about problems and improve- ments. Hence, the leaders of the organization must “drive out fear.”

Deming argued that his approach to management represented a gen- eral philosophy that must receive total commitment from the organization. Measures of quality should be used at all phases of production and should be the basis for continuous efforts to improve quality. The organization should strive to improve relative to its own previous quality measures as well as to those of comparable organizations. The quality measures should be based on the preferences and point of view of the organization ’s customers.

When Deming fi rst began to advance his ideas, they received little atten- tion from managers in the United States. The Japanese, however, embraced his ideas enthusiastically, and the Deming Award became a very prestigious award in Japan for excellence in management. As Japanese fi rms joined the list of the most successful fi rms in the world and began outcompeting U.S. fi rms in many markets, managers in the United States decided that they needed to pay some attention to what this fellow Deming had to say. For example, Deming was instrumental in the Ford Motor Company ’s adop- tion of a corporate strategy and philosophy based on a commitment to quality (Dean and Evans, 1994). The general acceptance and adoption of these programs became so widespread that in 1987 Congress passed legis- lation establishing the Malcolm Baldrige National Quality Award Program (named for a former U.S. secretary of commerce), which annually rec- ognizes organizations with excellent quality management programs and achievements.

Well-developed TQM programs tend to involve such conditions and principles as the following (Cohen and Brand, 1993; Dean and Evans, 1994):

• An emphasis on defining quality in terms of customer needs and responses

• Working with suppliers to improve their relationship to the quality of the organization ’s production processes and products

• Measurement and assessment of quality at all phases of production, with commitment to continuous improvement in quality; benchmark- ing quality measures against similar measures for similar organizations as a way of assessing improvement and general level of performance

• Teamwork, trust, and communication in improving quality; use of deci- sion-making and quality-improvement teams involving participants from

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Advancing Effective Management in the Public Sector 465

many areas and levels of the organization that are involved in the pro- duction process

• Well-developed training programs to support teamwork and quality assessment and improvement

• A broad organizational commitment to the process, from the top-executive ranks on down, that encompasses strategy, cultural development, com- munication, and other major aspects of the organization

In well-developed programs, top executives demonstrate commit- ment and leadership. Symbols, language, communication, and training are coordinated around the quality program. In some of the companies, for example, every employee receives sixty days of quality training within two weeks of joining the organization, and everyone, including the CEO, takes the training. The training often involves coverage of a fairly standard set of analytical procedures, including such techniques as cause-and-effect (“fi shbone”) diagrams; fl owcharts; and procedures for counting and tab- ulating data related to production quality, and for analyzing causes and interpretations.

Although the TQM movement originally focused on industry, it swept through government as well, with applications in many different types of agencies and at all levels of government (Council of State Governments, 1994). Consistent with the theme of this book, the basic principles of TQM emphasize that successful total quality efforts depend heavily on commit- ment and strategic implementation (Cohen and Brand, 1993). The prin- ciples of TQM are often general, stressing leadership, culture, incentives and motivation, groups and teams, and many of the other topics covered in previous chapters. Failed TQM efforts often display the opposite of these qualities—insuffi cient leadership, weak culture, weak management of the change process, and poor provisions for motivation and teamwork.

TQM has its detractors, who criticize it as one more management fad that will soon be supplanted by another. Signifi cantly, early in the twenty-fi rst cen- tury, fewer and fewer organizations appeared to be implementing TQM pro- grams, and many organizations appeared to be abandoning them, although many similar approaches—such as high-performance work systems and high-performance organizations—continued in various ways (Appelbaum, Bailey, Berg, and Kalleberg, 2000; Lawler, Mohrman, and Benson, 2001). However, TQM obviously has very challenging and interesting features, espe- cially for government. It proposes a management philosophy quite opposed to the one that has prevailed in many government reforms in recent years (Peters and Savoie, 1994; Rainey and Kellough, 2000). Also, its history

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illustrates the need for comprehensive, strategic approaches to many inno- vations in management—approaches that apply many of the ideas covered in previous chapters.

The Reinventing Government Movement

Osborne and Gaebler ’s book Reinventing Government (1992) became a best-seller during the early 1990s and influenced many government reforms in the years since its publication (Brudney, Hebert, and Wright, 1999; Brudney and Wright, 2002; Gore, 1993; Hennessey, 1998; Kearney, Feldman, and Scavo, 2000). Its approach and its success resemble those of Peters and Waterman ’s In Search of Excellence , and one can appropriately characterize Reinventing Government as the public sector equivalent of that book. Like the other studies of excellence in public management described earlier, it provides provocative and challenging ideas about approaches to public management and the delivery of government services. Interestingly, however, its perspective on the state of performance in the public sector was mixed. The authors introduced the book with the claim that in many ways government is failing and breaking down. Yet they also argued that government plays an essential role in society and has to defi ne and carry out that role effectively—hence the need for reinvention. In particular, the authors attacked the old-fashioned, centralized, bureaucratic model that dominated many government agencies and programs. They called for more entrepreneurial activities to supplant that approach.

Signifi cantly, however, to support their call for a more entrepreneur- ial approach in government, they cited many government practices they had observed around the country that were already quite effective, such as decentralizing, encouraging privatization, encouraging control of pro- grams at the community level, increasing attention to the “customers” of government programs, fi nding ways for government to make money on its operations (“enterprising government”), and increasing competition among government programs and between government and the private sector. Exhibit 14.2 summarizes their strategies for more entrepreneurial government. They illustrated the use of these strategies through numerous examples from government programs.

Their proposals had a rapid, major impact, including the establishment of the Clinton administration ’s National Performance Review, described later. REGO (reinventing government) became a widely used term in the federal government and in other government circles. The REGO trend heavily infl uenced a broad array of developments, including the

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EXHIBIT 14.2 Osborne and Gaebler ’s Strategies for

Reinventing Government

CATALYTIC GOVERNMENT

“Leverage” government authority and resources by using private- and nonprofi t-sector resources and energies, through such strategies as privatization of public services and public-private partnerships.

Have government “steer” rather than “row,” by emphasizing directions and priorities but letting private and nonprofi t organizations deliver services and carry out projects.

COMMUNITY-OWNED GOVERNMENT

Empower local communities and groups. Allow more local control through such strate- gies as community policing and resident control of public housing.

COMPETITIVE GOVERNMENT

Introduce more competition between government and private organizations, within gov- ernment, and between private organizations through such strategies as competitive con- tracting, private competition with public services, and school choice and voucher programs.

MISSION-DRIVEN GOVERNMENT

Focus government programs on their missions rather than on bureaucratic rules and pro- cedures, through such strategies as fl exible budgeting procedures (such as expenditure control budgets) and more fl exible personnel rules and procedures (such as broader, more fl exible pay categories).

RESULTS-ORIENTED GOVERNMENT

Place more emphasis on outcomes rather than inputs, through greater investment in performance measures, including using them in budgeting and evaluation systems.

CUSTOMER-DRIVEN GOVERNMENT

Give customers of public programs and services more infl uence over them. Pay more attention to customers through procedures such as customer surveys, toll-free numbers, TQM programs, and complaint tracking. Give customers more choice through voucher systems and competition among service providers.

(continued )

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reinvention of the civil service system of the state of Florida and an entre- preneurial effort at getting a hotel built in downtown Visalia, California. These two examples are quite significant, because according to some observers they were unsuccessful. Wechsler (1994) concluded that the civil service reform efforts in Florida had little important effect. Gurwitt (1994) reported that the Visalia episode had bad results. There, government offi - cials wanted a hotel built downtown to support economic development efforts. Pursuing entrepreneurial strategies, they tried to avoid spending government funds to subsidize the development of the hotel. They bought land and worked out an arrangement with a developer to lease the land from the city and build a hotel on it. This way, the city would make money on the arrangement through the lease payments. Unfortunately, the devel- oper folded, and rather than give up on the project and take a loss, the city assumed more than $20 million of the developer ’s debts.

ENTERPRISING GOVERNMENT

Find ways to earn money through user fees, profi table uses of government resources and programs, and innovative cost-saving and privatization projects.

ANTICIPATORY GOVERNMENT

Prevent problems before they occur rather than curing them after they do, through stra- tegic planning, futures commissions, long-range budgeting, interdepartmental planning and budgeting, and innovative prevention programs in environmental protection, crime, fi re, and other service areas.

DECENTRALIZED GOVERNMENT

Decentralize government activities through such approaches as relaxing rules and hierar- chical controls, participatory management, innovative management, employee develop- ment, and labor-management partnerships.

MARKET-ORIENTED GOVERNMENT

Use economic market mechanisms to achieve public policy goals and deliver public services, through such techniques as pollution taxes, deposit fees on bottles, user fees, tax credits, and vouchers.

Source: Adapted from Osborne and Gaebler, 1992.

EXHIBIT 14.2 (Continued )

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Several studies have sought to assess the implementation of REGO reforms at different levels of government. Brudney, Hebert, and Wright (1999) found limited implementation in state governments of reforms representing REGO ideas, except for fairly widespread efforts at strategic planning, but a later survey showed some increase in the implementation of REGO reforms (Brudney and Wright, 2002). Kearney, Feldman, and Scavo (2000) surveyed 912 city managers and found high levels of agree- ment with principles and ideas similar to those proposed by Osborne and Gaebler. The city managers, however, were less likely to have taken action to implement the principles and ideas than they were to express agreement with them. Interestingly, studies of reinvention initiatives have tended to fi nd that leadership support played a strong role in their implementation (see, for example, Brudney and Wright, 2002; Hennessey, 1998).

As these examples and studies show, the REGO ideas have been infl u- ential, but also controversial. For example, some critics have raised con- cerns about thinking of citizens as customers of public organizations. In addition, many of the REGO proposals, such as efforts to privatize public services, have been going on for centuries, and Frederickson (1996), a leading scholar in public administration, has likened them to “old wine in new bottles.” Yet, like many new approaches, the proposals can also be regarded as stimulating and challenging, and the research and examples just described underscore a main theme of this book: challenging new ideas require effective implementation, and in government, implementa- tion requires effective public management.

The National Performance Review

The REGO movement infl uenced the Clinton administration ’s National Performance Review (NPR). As with the other developments described in this chapter, the NPR deserves attention as a major reform effort in public management. Some experts regarded the NPR as unprecedented in terms of the activity it generated and the attention it received (Kettl, 1993). The NPR involved a review of federal operations by a staff in Washington under the leadership of Vice President Gore. Among other activities, Gore con- ducted meetings with employees in federal agencies, ostensibly to gather ideas about problems and solutions, but also with the obvious intent of making a symbolic statement.

In many ways, the NPR ’s tenor was similar to that of the reinventing government movement (see Exhibit 14.3 ). The fi rst report (Gore, 1993) argued that the federal government needed a drastic overhaul to improve

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EXHIBIT 14.3 The National Performance Review:

Major Priorities and Initiatives

1. Cut Red Tape • Streamline the budget-making process . Use biennial budgeting; relax OMB

categories and ceilings; allow agencies to roll over 50 percent of funds not spent. • Decentralize personnel policy . Eliminate the Federal Personnel Manual; allow

departments to conduct their own recruiting, examining, evaluation, and reward systems; simplify the classifi cation system; reduce the time to terminate employees and managers for cause and to deal with poor performers.

• Streamline procurement . Simplify procurement regulations; decentralize GSA authority for buying information technology; allow agencies to buy where they want; rely on the commercial marketplace.

• Reorient the inspectors general . Reorient the inspectors general from strict compliance auditing to evaluating management control systems.

• Eliminate regulatory overkill . Eliminate 50 percent of internal agency regulations; improve interagency coordination of regulations; allow agencies to obtain waivers from regulations.

• Empower state and local governments . Establish an enterprise board for new initiatives in community empowerment; limit the use of unfunded mandates; consolidate grant programs into more fl exible categories; allow agency heads to grant states and localities selective waivers from regulations and mandates; give control of public housing to local housing authorities with good records.

2. Put Customers First • Give customers “voice” and “choice.” • Make service organizations compete. • Create market dynamics and use market mechanisms.

3. Empower Employees to Get Results • Decentralize decision making. • Hold federal employees accountable for results. • Give federal workers the tools they need. • Enhance the quality of work life.

4. Cut Back to Basics • Eliminate what we don ’t need. • Collect more. • Invest in productivity and reengineer to cut costs.

Source: Adapted from Gore, 1993.

its operations—a reinvention similar to that in many corporations that had reformed themselves in the face of international competition in the 1980s. Yet the report—and Gore, in his public statements and actions (such as his meetings with agency employees)—took the position that federal

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employees were not to blame for the problems in government. The struc- tures and systems were the problems, the report said, and it emphasized the importance of listening to federal employees’ ideas and observations. The report announced numerous initiatives to reform the structure and operations of the federal government, as well as many change efforts within federal agencies. Exhibit 14.3 summarizes some of the major priorities and initiatives announced in the fi rst report of the NPR. As the exhibit suggests, the NPR emphasized the need to reform many of the constraints on federal agencies discussed in this book. The reforms would decentralize and relax personnel and procurement regulations, for example.

Many of the NPR reforms also refl ect the management trends described in this book—including the prescriptions of Peters and Waterman, TQM, REGO, and others—with an emphasis on serving the customer, decentral- ization, empowerment, and relaxed controls. The report thus provides an interesting example of the infusion into government reform of trends and ideas in business management.

Predictably, the NPR was controversial in public administration circles, in terms of whether it was well conceived and whether it would have lasting and benefi cial effects. Without question, however, it caused a lot of activity in federal agencies. Among other steps, the NPR announced and carried out a major reduction of the federal workforce, mentioned in several previ- ous chapters (U.S. Offi ce of Management and Budget, 2002). This gave rise to questions about whether such cuts were really the result of an ulterior motive behind the glowing discourse about reforms, and whether the NPR was simply part of the recent trend of presidents attacking the bureaucracy for political effect (Arnold, 1995). In addition, many of the NPR initiatives were implemented by executive order, including one instructing federal agencies to reduce their internal regulations by 50 percent and one elimi- nating the elaborate federal personnel manual. Such measures seemed to have little impact.

Subsequent NPR reports announced additional reforms. An executive order directed federal agencies to publish customer service standards, and a great many did (Clinton and Gore, 1995). Follow-up reports announced indications of progress, such as reductions in regulations, cost savings of $58 billion, and a variety of steps in different agencies to improve opera- tions and services (Gore, n.d.). One of the efforts under the NPR involved a presidential directive ordering federal agencies to set up so-called rein- vention laboratories to work on improving their procedures. Some of these reinvention labs reported successes in fi nding improved and innovative ways of carrying out their agency ’s business, although they also encoun- tered many obstacles to change (Sanders and Thompson, 1996).

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Thompson (2000) assessed the impact of the NPR by examining results of surveys of employees and other sources of evidence, and through an in- depth case study of its implementation in the SSA. He concluded that the NPR did effect impacts in the major reduction in federal jobs, in reducing administrative costs in the federal government, in reforming the federal procurement system, in empowering front-line managers and employees, and in establishing labor-management partnerships. He found little evi- dence of impacts in the reform of the civil service system in order to decen- tralize it, in enhancing service delivery to the public, and in reengineering and streamlining work processes in agencies. He also found very limited impacts within the SSA.

It was easily predictable, moreover, that the success of the NPR would depend on the political fortunes of the administration that sponsored it. As if to provide a perfect example of one of the frequently noted obstacles to change and reform in government, Vice President Gore lost the presi- dential election to George W. Bush, and soon the activities associated with the NPR were terminated. A search for its Web site now takes you to a “cybercemetery” at North Texas State University, where its documents are archived.

Ultimately, the NPR illustrated many of the obstacles to reform in gov- ernment. At the same time, however, it represented a historic initiative in the pursuit of improved public management. Whether or not it was the right thing to do, a massive reduction in federal employees represents a major impact. Also, reforms of the procurement system and the reductions in federal administrative expenses represent important accomplishments. The NPR, in addition, documented many examples of effective public management. It received relatively strong support from top executives (the president and vice president), it made an effort to involve organi- zational members (the federal employees) in change and to enlist their support, and it advanced measures for decentralized diagnosis and incre- mental improvement of performance problems (the reinvention labs). Signifi cantly, it clearly exerted far more infl uence on the federal govern- ment and its agencies than did Reagan-era reform efforts such as the Grace Commission.

The President ’s Management Agenda

The second President Bush was the fi rst president to have a management degree, and early in his administration he indicated an interest in manage- ment by issuing the President ’s Management Agenda . The agenda announced

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fi ve primary government-wide initiatives: Strategic Management of Human Capital, Competitive Sourcing (employing competition to decide whether federal employees or private contractors should provide federal services), Improved Financial Performance, Expanded Electronic Government, and Budget and Performance Integration. The U.S. Offi ce of Management and Budget (OMB) then issued agency scorecards to twenty-fi ve major fed- eral agencies that were based on discussions with experts in government and universities (U.S. Office of Management and Budget, 2002). The scorecards used a “traffi c light” grading system for each of the fi ve gov- ernment-wide initiatives. A green light meant success, yellow meant mixed results, and red meant unsatisfactory. In the early phases of this process, of the 130 traffi c lights awarded to the twenty-six agencies on the fi ve ini- tiatives, only nineteen were yellow, one was green, and the rest were red. OMB then began to publish an additional listing of the agencies, award- ing green, yellow, and red lights on the basis of the progress they were making in the fi ve areas. The fi ve agenda priorities refl ected important management issues in the federal government and at other levels that had advocates other than the Bush administration. In some ways they refl ected priorities that the NPR and other reform efforts have also emphasized. How much reform and progress the agenda and the traffi c lights accom- plished will also be an agenda item for researchers and observers in public management in coming years.

Performance Measurement and the PART

As many of the developments described here indicate, during the last decades of the twentieth century and the fi rst decade of the new century, experts and public offi cials emphasized improving government ’s perfor- mance in various ways. Governments at all levels in the United States and other nations adopted systems and procedures for measuring governmen- tal performance and for “performance management” procedures to try to use the measures to improve performance (Moynihan, 2008). Among many examples of such developments, the New York City Mayor ’s Offi ce of Operations (2009) publishes on its Web site a Citywide Performance (CPR) “tool.” This performance reporting system provides information on hundreds of performance indicators for all the agencies of the city government. The Web site allows a citizen to choose a city agency and then review the agency performance report, which reports on the agency ’s performance against numerous performance indicators for that agency.

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At the federal level in the United States, the George W. Bush admin- istration ’s management improvement efforts, described earlier, included development of the Program Assessment Rating Tool (PART) (Gilmour, 2006). The Offi ce of Management and Budget (OMB) in the Executive Offi ce of the President developed the PART and conducted assessments of over eight hundred federal programs within federal departments and agen- cies. With oversight by OMB examiners, representatives of each program responded to a series of questions about four categories of the program ’s activities and accomplishments, in program purpose and design, strategic planning, program management, and program results (performance on strategic goals). On the basis of the program ’s responses, OMB examiners assigned a score from zero to one hundred in each of these categories. Then the examiners assigned an overall performance score that combined the four categories of indicators, with different weightings on the catego- ries. The category for program results had the highest weighting. OMB then assigned the program a grade of effective, moderately effective, inef- fective, or “results not demonstrated.”

OMB offi cials intended that the PART results would be used in deci- sions about the programs’ budgets and would thus contribute to the goal of integrating budget and performance of the President ’s Management Agenda described earlier. The PART was intended to support assigning program budgets on the basis of results. Gilmour and Lewis (2006a) analyzed PART scores and program budget allocations. They found relationships between the two, but not the sorts of relations that supported the original intent of the PART. Gilmour and Lewis reported that the PART scores showed a relation to budget decisions for small and middle-sized agencies, but not for large agencies. This could indicate that larger programs are more entrenched and have more political support for defending their budgets. They also found that the “results” component of PART scores had a smaller impact on budget decisions than the “program purpose” component, which included questions about the clarity of the program ’s goals. This fi nding does not indicate a strong relationship between actual program results and budget decisions.

The PART sparked controversy. OMB officials claimed that the PART procedures were very open. In developing the procedures, the OMB consulted professional associations and other agencies, such as the Government Accountability Offi ce. The results were available on the OMB Web site. However, critics, such as Democrats in Congress, complained that the control of the process by the OMB under a Republican president could bias the assessments against programs that Democrats tend to favor. Other

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concerns focused on the diffi culty of agreeing on acceptable and fair per- formance measures. Among other problems, sometimes the results for one program depend on the performance of another program. As discussed in Chapter Six, stating appropriate goals and measuring goal achievement raises challenges for organizations of all types, and especially public and nonprofi t organizations.

The assessment of this assessment procedure became interesting in itself. Lewis (2008) found evidence that programs headed by career civil servants received higher PART scores than did programs headed by politi- cal appointees. This appears to weigh against the claims that the PART involved partisan bias against programs not favored by the Republicans. In addition, Gilmour and Lewis (2006b) used a variable that identifi ed whether a program was located in a department or agency that tended to have more support from Republicans or from Democrats, and found that this did not make much difference. Both Lewis (2008) and Moynihan (2008) carefully consider the controversy over the PART. They come to balanced, but generally favorable conclusions about the value of the PART, at least as a carefully developed effort to provide performance informa- tion about a large and diverse set of federal programs for which compa- rable performance information had not been available. At the time of this writing, a search of the U.S. Offi ce of Management and Budget Web site ( www.omb.gov ) indicates that PART has been placed in an archive, and the latest guidance for PART is dated 2008.

The Human Capital Movement

As mentioned earlier, other people besides members of the Bush adminis- tration have advocated reforms and improvements in the fi ve areas that the President ’s Management Agenda targeted. The issue of human capital has ori- gins and imperatives similar to the human capital issues in many state gov- ernments (see, for example, Abramson and Gardner, 2002). This emphasis at the federal level responded in part to a purported crisis.

The term human capital attracted its share of ridicule. A Dilbert cartoon in 2002 portrayed Dogbert, one of the regular series characters, talking to Dilbert ’s boss, who is always insensitive and inept, about human capi- tal. Dogbert asked the boss if he preferred to refer to the employees as human capital or livestock . The boss said he preferred human capital because if they were to use the term livestock , the employees might demand hay. Human capital may sound somewhat dehumanizing because it conjures up the image of using human beings like machines or other capital stock.

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Proponents of this movement, however, intended totally opposite implica- tions. They called for leaders to regard the human beings in their organi- zations as their most valuable asset. They argued that in the information age, when human knowledge and intellectual skills play such a crucial role in organizational success, leaders need to realize the value of investing in the human beings in their organizations and to help people develop their knowledge and skills. Moreover, organizations need to strategize, plan, and invest in making sure that this human-capital emphasis infuses the organi- zation ’s operations and its long-term development.

In addition to the OMB, David M. Walker, comptroller general of the United States from 1998 to March 2008, served as one of the main propo- nents of the human capital focus (U.S. General Accounting Offi ce, 2002a, 2002b; Walker, 2001). Also, Senator Voinovich of Ohio advanced legislation on human capital issues that was included in the legislation authorizing the Department of Homeland Security, but Voinovich ’s legislation applied the requirements to all federal agencies. The legislation required, for exam- ple, that each federal agency appoint a chief human capital offi cer to be responsible for strategic planning for human capital, aligning the strategic planning with the agency ’s mission, and fostering a culture of performance and improvement.

The human capital movement was driven in part by concerns over a growing crisis in human capital in the federal government, a crisis that the situation in state and local governments tends to mirror. As one example of the problem, in 2010, 50 percent of the U.S. Senior Executive Service was projected to be eligible for retirement within fi ve years (National Academy of Public Administration, 2010). As still another challenge, the rapid changes in information technology and other areas have forced changes in the sorts of skills and personnel needed in all types of organizations. These changes usually involve imperatives for bringing in more highly educated, trained, and skilled employees, for which organizations in the public, non- profi t, and private sectors compete aggressively.

In response to these developments, the participants in this movement concentrated on exhorting federal agencies to take human capital seri- ously, advising them on how to do it, and recommending or crafting legis- lation to set in place some of the structures and requirements to support it (such as chief human capital offi cers). The General Accounting Offi ce (GAO, now called the Governmental Accountability Offi ce), for example, issued frameworks, checklists, and a model to guide agency efforts (U.S. General Accounting Offi ce, 2002a, 2002b). The GAO model provided a

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conceptual framework, guidelines, and pointers on how to achieve success in establishing four “human capital cornerstones”:

1. Leadership: to establish a commitment to human capital management and to establish the role of the human capital function

2. Strategic human capital planning: to achieve integration and alignment of the human capital function with the organization ’s strategy, mission, and operations, and to produce data-driven human capital decisions

3. Acquiring, developing, and retaining talent: making targeted investments in people to ensure that human capital approaches are tailored to meet organizational needs

4. Results-oriented organizational culture: involving empowerment and inclu- siveness to ensure that unit and individual performance are linked to organizational goals

The long-term infl uence of the legislation, admonitions, traffi c lights, frameworks, and guidelines coming from the human capital movement is diffi cult to evaluate conclusively. The imperatives motivating this activity, however, continue to represent major issues at all levels of government in the United States and other nations, and continue to receive empha- sis by federal agencies and organizations concerned with public service (Partnership for Public Service, 2013b; U.S. Government Accountability Offi ce, 2013).

Managing Major Initiatives and Priorities: Privatization and Contracting Out

These recent developments illustrate the point that effective manage- ment and organization in the public sector remains a crucial, dynamic challenge—a challenge that becomes especially apparent when we observe the implementation (or failed implementation) of new initiatives in gov- ernment. As a concluding effort in this book, this section applies the framework shown in Figures 1.1 and 1.2 , and the topics included in that framework, which have been elaborated on throughout the book, to the topic of organizing for and managing a recent trend in public manage- ment: the increasing emphasis on privatization of public services. As men- tioned at the beginning of this book, effective management and leadership require sustained, careful, comprehensive approaches to the challenges

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of organizing and managing. The discussion that follows suggests how the conceptual framework presented at the outset, together with the concepts and ideas from the preceding chapters, can support the development of such an approach to this topic and, in doing so, suggest how it can be applied to other important topics, such as the management of volunteer programs (Brudney, 1990), of information technology initiatives, and of many other issues.

Although privatization has a long history in the United States and other nations, it has received greater emphasis lately as a strategy for deal- ing with tightened budgets in the public sector (and the consequent need for reducing costs and increasing efficiency) and for escaping alleged weakness of government through innovative and fl exible ways of deliver- ing public services. Yet proponents of privatization often overlook the point that privatization increases the imperative for effective public management rather than relaxing or easing it.

Managing Privatization

Government contracts with private providers are nothing new in the United States, but privatization has increased a great deal in the past sev- eral decades, with governments at all levels sharply increasing their con- tracts with the private sector (Chi, 1994; Cooper, 2003; Greene, 2002). In addition, privatization has increased in service areas where it has been rare in the past, such as the operation of prisons. As Chapters Five and Six mentioned, the expansion of privatization has raised questions about the “hollow state,” third-party government, and the changing nature of gov- ernment and public management (Kettl, 1993, 2002; Milward, 1996; Moe, 1996; Smith and Lipsky, 1993). Privatization, then, is a widely and increas- ingly utilized mode of service delivery that imposes problems on public managers but also offers them strategic options (Cohen, 2001). Managing privatization effectively thus represents one aspect of excellence in public management.

During the past few decades, a wave of privatization initiatives has swept the globe, with nations on all continents trying to transfer govern- ment activities to private operators. Most nations have many more gov- ernment-owned enterprises than the United States does, and in most of these countries privatization was concerned with how to sell or transfer such enterprises to private owners and operators. In the United States, by contrast, privatization primarily involves government contracts with private or nonprofi t organizations to deliver public services and carry out public

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policies. Actually, privatization of public services can take many forms besides selling the operation or contracting it out, including the following:

• Granting a franchise to private operators • Providing vouchers to service recipients to purchase services from pri-

vate providers • Using volunteers (for staff support or service delivery, for example) • Providing subsidies and fi nancial incentives to private operators, such as

tax incentives, grants, and subsidization of startup costs • Initiating self-help or coproduction programs, in which citizens perform

services for their own benefi t or share in providing them • Selling off or shedding activities to private operators, or simply ceas-

ing them so that private operators can take them over (Zahra, Ireland, Gutierrez, and Hitt, 2000)

For the most part, however, privatization in the United States involves contracts with nongovernmental organizations. As mentioned, contracts and similar arrangements such as grants and franchises have been part of government for a long time. In 1798, for example, Eli Whitney, the famous inventor, received a contract from the government to provide ten thousand muskets in two years; it took him ten years to fi nish the project (Dean and Evans, 1994, p. 5).

Privatization Pitfalls and Ironies

The example of Whitney ’s eighteenth-century time overrun highlights one of the many pitfalls of privatization. In recent years, proponents of priva- tization, some of whom show an obvious ideological bias toward private business and against government activity, have promoted privatization as a bold new initiative. Yet the Whitney example and thousands of simi- lar ones remind us that privatization is as old as the republic and that, although it has produced many benefi ts, its history has been fraught with scandals and problems. In addition, rather than offering a private sector alternative to government, privatization can lead to governmentalization of the private sector, in which government increasingly draws segments of the private sector into its sphere of activity (Moe, 1996). Private contrac- tors and service providers can then become just one more interest group, lobbying for government policies favorable to themselves and their indus- try or service area (Smith and Lipsky, 1993). The greatest irony of priva- tization, however, is that it increases demands for excellence in public

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management rather than alleviating them. Proponents tout it as a cure for bad government, but it takes excellent government to make it work. The discussions of third-party government in earlier chapters point out that contracting out and other forms of privatization, grant programs, and operation of government services by nongovernmental organiza- tions strain the lines of management and accountability. Public managers become increasingly responsible for programs and services over which they have less control. They can infl uence the outcomes of such programs and services only through the vehicles spelled out in their contracts with private service providers, rather than through direct administrative con- trol. Major issues, such as the legal liability of government and public man- agers, can become more complex and uncertain (Cooper, 2003). As the history of privatization has shown, private service providers may perform poorly or even illegally. As Sclar (2000) points out, “you don ’t always get what you pay for” (see also Kuttner, 1997). Armed only with relatively loose lines of control and accountability, government offi cials nevertheless share responsibility for such failures. Strong advocates of privatization continue to claim that it produces more effi cient and effective delivery of public services (Savas, 2000). Conversely, Hodge (2000) reports a meta-analytic study of hundreds of studies of privatization in many different nations and concludes that privatization can lead to modestly lower costs; such gains, however, tend to concentrate in certain service areas, such as refuse collection and building maintenance, with no appreciable gains apparent in other service areas. In spite of such controversies over just how benefi - cial privatization can be, it persists as an option, not only because some ideologues simplemindedly promote it, but in part because it can offer a valuable alternative for government managers. It can produce savings and effi ciencies, fl exibility in management, and other strategic advantages. Thus, to avoid the problems and take advantages of the promise, success- ful privatization requires skillful public management.

What does successful management of privatization involve? We now have a well-developed literature on privatization and contracting out that considers their pros and cons and what needs to happen for such strategies to work well (Brown and Potoski, 2003; Chi, 1994; Cooper, 2003; Donahue, 1990; Fernandez, Malatesta, and Smith, 2013; Malatesta and Smith, 2011, 2013; Rehfuss, 1989; Romzek and Johnston, 2002; Savas, 2000; Sclar, 2000; Van Slyke, 2003; Warner and Hebdon, 2001). Exhibit 14.4 presents some of the conditions that should be in place for successful privatization and con- tracting out, according to the professional literature. As noted, proponents

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EXHIBIT 14.4 Conditions for Successful Privatization and

Contracting Out

Following are the conditions necessary for successful privatization, especially through contracting out, organized by the components in Figure 1.1 :

1. ENVIRONMENT

Bidders . There must be a set of competitive bids for the contract. Bidders need to be experienced in the service area, have a good record, and be qualified on such criteria as having the capacity to operate in the geographic area where the service is needed and in the manner required by the size and scope of the required operation.

Political environment . The environment should be free of inappropriate political pres- sure for privatization, especially pressure to select a particular provider.

Resource support . Authorities should be willing to provide resources to support the provisions for privatization listed in the sections that follow.

Legal and institutional environment . The privatization initiative must conform to federal and state government mandates. For example, federal statutes may require payment of prevailing wages; state laws may limit contracts to the present fi scal year. Liability issues should be carefully reviewed.

2. GOALS AND VALUES

The privatization initiative should support the agency ’s mission and its primary goals and values. Governments should usually avoid contracting out certain core functions, such as those involving public safety and security, deadly force, and the handling of public funds.

The goals and values of the privatized activity should be clear (see Performance and Effectiveness at the end of the exhibit).

3. LEADERSHIP, STRATEGY, AND CULTURE

Agency leaders should be carefully involved with privatization policies and activities, including their coordination with agency strategies and culture.

(continued )

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482 Understanding and Managing Public Organizations

4. STRUCTURE

Specialization and responsibility . Responsibility for privatization and contracting out should be clearly defi ned. Qualifi ed personnel need to be hired, trained, and otherwise set in place to supervise and run the process. For example, agencies need expertise in contracting processes, in legal issues related to contracting out (or vouchers, franchis- ing, or other modes), and in accounting and fi nancial issues, such as cost accounting and comparisons of the cost of in-house service provision versus contracting out—all coordinated with expertise in the policy or service area involved. Responsibilities for contract development and monitoring need clear defi nition.

Departmentalization or subunits . Agencies should have effective organizational struc- tures for contracting out, with effective locations of offi ces and units with expertise and responsibility. For example, small agencies may have a central contracting offi ce as well as contracting offi cers in an administrative services unit; larger agencies may have contracting and privatization units in larger subunits. Departments may place subunits in charge of monitoring contracts.

Agencies may need to maintain the capacity to take over the activity if the con- tractor goes bankrupt or the contracting process otherwise encounters problems. The responsible units need to be clearly designated and provided with appropriate resources (for example, to maintain the necessary equipment and personnel).

Hierarchy and centralization . Accountability, reporting, and authority relationships should be effectively designed, with clear arrangements for reporting and review of contracts and contracting-out processes and for involvement and awareness of appropriate managers and executives.

Rules and regulations . Appropriate rules and procedures should be in place for the provisions mentioned previously (reporting, review, taking back the contracted activ- ity) and subsequently (precontracting procedures, monitoring).

5. PROCESS

Power relationships . Authority and power relationships related to issues of contracting out should be clarifi ed. Authority and accountability relationships with the contractor, and the responsibilities of the contractor, should be clear and carefully reviewed and specifi ed. (For example, details such as the responsibility for maintaining equipment and machinery should be clarifi ed. Required approvals, such as agency authority to approve the contractor ’s decision to raise user fees, should be clear. Quality control and review procedures should be clarifi ed.) Incentives for effective performance and sanctions for poor performance should be clear and effective.

Decision-making processes . Precontracting and contract selection and supervision processes should be well developed. Precontracting processes should involve careful

EXHIBIT 14.4 (Continued )

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Advancing Effective Management in the Public Sector 483

specifi cation of needs and requirements and of the pros and cons of contracting out, including cost comparisons. Meetings and communications with potential bidders about RFP details and goals should be carefully planned. Processes for monitoring and evaluation, and for related evaluative decisions and actions (sanctions and incentives), should be clear and well developed.

Communications . As previously suggested, communications with potential bidders and contractors and among responsible agency personnel should be well planned, with responsibilities and procedures well clarifi ed.

Change and innovation . The role of contracting out and privatization in relation to change and innovation should be carefully developed, to make use of the advantages of these strategies for gaining access to new fl exibility, technologies, personnel, and other opportunities.

People . The effects on agency personnel should be assessed. Often new contracting- out initiatives should not go forward if there is sharp employee resistance, without effective plans for responding to the resistance.

Effective plans for existing employees should include provisions for supportive dis- charge of those employees as necessary (that is, effective management of downsiz- ing). Contractors can sometimes offer existing employees attractive alternatives, and contracts can sometimes include provisions that the contractor will hire some existing employees. Analysis of the costs of contracting out should include consideration of the costs to the jurisdiction of layoffs or reduced employment.

6. PERFORMANCE AND EFFECTIVENESS

Privatization initiatives should have performance measures associated with them that are monitored and used in evaluation, with incentives and sanctions attached, as feasible.

These measures should include public sector performance criteria, such as equity, representativeness, responsiveness, and community and social goals (see the earlier Goals and Values section).

make very strong claims for privatization as a panacea for the alleged ills of government. They point to a fairly consistent set of research fi ndings that indicate that private organizations often provide services at lower costs per unit of output compared to government agencies. Other authors, however, point to some problems with many of these studies and to the complica- tion introduced by the fact that government organizations often have to pursue different goals and values from those of private organizations, even in the same service areas (for example, see the sections in Exhibit 14.4 on goals and values and on performance and effectiveness). In addition to not

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focusing on the many examples of problems with private sector contracts and how to avoid them, these studies, frequently conducted by economists, tend to overlook the issue of management.

A growing body of experience and research has increasingly docu- mented the problems that can occur and the conditions that need to be in place for effective contracting out. These authors implicitly present a contingency theory of privatization in that they suggest the contingencies that managers have to deal with in successful privatization initiatives. As suggested in Exhibit 14.4 , they tend to emphasize such contingencies as the following:

• Having a range of contractors submit competitive bids for the contract, to avoid monopolistic bidding situations

• Effectively managing strong employee or union opposition to the con- tract (see “People” under “Process” in Exhibit 14.4 )

• Carrying out effective precontract planning and analysis, including such precautions as well-developed cost comparisons and meetings with potential bidders

• Establishing effective contracts, with clear stipulation of goals and per- formance criteria and provisions for monitoring, evaluation, incentives, and sanctions, which must include consideration of equity, effects on the community, social goals, and other typical public sector issues

The professional literature emphasizes contingencies such as these as well as the others indicated in Exhibit 14.4 . Not all of them apply in all situations. For example, there may be situations in which effective relations with a single long-term contractor provide better results than soliciting competitive bids from many providers. Still, we now have a growing consen- sus on a set of contingencies to be managed in successful contracting out.

Recognizing and managing such contingencies thus becomes one part of excellence in public management. As suggested earlier, however, a more general objective of Exhibit 14.4 is to illustrate an approach to privatization that involves a comprehensive and well-developed approach to organizing for the challenge and managing it. The suggestions in the exhibit are limited by space and time and could be richly expanded with ideas from the earlier chapters. For example, one could approach privati- zation initiatives as matters of change management, drawing on the ideas in Chapter Thirteen about managing successful change. One could com- bine change management with a strategic planning process that focuses on privatization and contracting out specifi cally, or one could draw those

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topics into a broader strategic plan to coordinate privatization with the overall organizational strategy. In dealing with how privatization affects the culture of one ’s organization, one could draw on the discussion in Chapter Eleven about leadership and culture, with its ideas about how leaders can infl uence such matters as employee concerns about privatization initiatives and how they mesh with their agency ’s mission and values. In these and many other ways, the framework for the book and the deeper treatment of its components illustrate another view of privatization (perhaps a limited one that managers and researchers will revise or even discard in favor of a better one) as a challenge to excellence in organizing and managing in the public sector.

Conclusion

The foregoing discussion of the management of privatization initiatives and programs emphasizes the general point that although the concepts, theo- ries, and ideas covered in this book do not offer a scientifi c solution, they can certainly support the development of a well-conceived, well-informed orientation toward excellence in public organization and management.

It is consistent with the theme repeatedly stated in this book that its conclusion should be brief. Effective understanding and management of public organizations do not sum up neatly into a set of snappy aphorisms. The preceding examples are intended to illustrate ideas and topics devel- oped in earlier chapters of the book, which have been applied as compre- hensively as possible to management initiatives. The framework offered in this book may need some improvements for some people and for various situations, but knowledge of the ideas and materials herein should still be valuable to those with a sustained commitment to excellence in public management. Ultimately, it is the general determination to maintain and improve public management that remains essential.

The government of the United States, including all of its levels and adjoining private activities, amounts to one of the great achievements in human history. Like private and nonprofi t organizations, public organiza- tions routinely provide benefi cial services that would have been considered miracles a century ago. Yet they also have the capacity to do great harm and impose severe injustice. The viability and value of government depend on legions of managers, employees, supporters and critics, who share a deter- mination that this great institution will perform well, and that through its performance the nation will prosper.

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Instructor ’s Guide Resources for Chapter Fourteen

• Key terms • Discussion questions • Topics for writing assignments or reports • Case Discussion: The Case of the Crummy Contract • Case Discussion: The Case of the Vanishing Volunteers

Available at www.wiley.com/college/rainey .

Note

1. Books and articles that discuss effective public management, or report empirical evidence of it, or that emphasize an important role for public managers in gover- nance, include the following: Beam, 2001; Behn, 1994; Borins, 1998, 2008; Cohen and Eimicke, 1995; Denhardt, 2000; DiIulio, 1989, 1994; Doig and Hargrove, 1987; Gold, 1982; Halachmi and Bouckaert, 1995; Hargrove and Glidewell, 1990; Holzer and Callahan, 1998; Ingraham, 2007; Jreisat, 1997; Kelman, 1987, 2005; La Porte, 1995; Light, 1997; Linden, 1994; Meier and O ’Toole, 2006; Moore, 1995; Moyni- han and Pandey, 2004; O ’Toole and Meier, 2011; Poister, 1988b; Popovich, 1998; Porter, Sargent, and Stupak, 1986; Riccucci, 1995; Tierney, 1988; Wilson, 1989; Wolf, 1993, 1997.

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