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Understanding and Managing Public
Organizations
Chapter 3
What Makes Public Organizations
Distinctive
Public Versus Private:
A Dangerous Distinction?
• The generic tradition in organization theory
• Findings from research
• The blurring of the sectors
– Mixed, intermediate, and hybrid forms
– Functional analogies—doing the same things
– Complex interrelations
– Analogies from social roles and contexts
• The importance of avoiding oversimplifications
Findings from Research
• Many major studies sought to develop typologies and taxonomies.
• These studies mostly failed to produce evidence of a strict division between public and private organizations.
• Pugh, Hickson, and Hinings (1969)—classification offifty-eight organizations into categories, only eight of which were government.
• Predicted government was more bureaucratic—more rules and procedures—but the prediction was not confirmed.
• They did find that government organizations had more outside influence.
• Overall, studies are inconclusive.
Blurring of the Sectors
• Mixed, Intermediate, and Hybrid Forms
• Perform business functions but owned and operated by
government
• U.S. Postal Service
• National Service
• Government-Sponsored Enterprises
• Fannie Mae
• Freddie Mac
Functional Analogies
• Hospital and schools can perform the same functions
whether labeled private or public.
• NPM calls for the use of business procedures in
government.
Complex Interrelations
• Government arranges for some services by private
organizations
– Vouchers
– Franchises
– Grants
– Private corps that handle some aspects of Medicare
Analogies from Social Roles and Contexts
• Governments use laws, regulations, and fiscal policies to
influence private organizations.
• At what point do private organizations become an
extension of government?
The Importance of Avoiding
Oversimplifications
• If clear demarcations are impossible, what does that say
of critics who claim public organizations are less
efficient?
• Be careful what you label
– Reporting
– Interest group access applies in different ways to the different
labels
Public Organizations:
An Essential Distinction
• The purpose of public organizations
• Market failures or incapacities
• Public goods and free riders
• Individual incompetence
• Externalities or spillovers
• Political rationales for government
Mixed Intermediate, Politics, and Markets
• Dahl and Lindblom (1953) provide a useful analysis of
the reason for public organizations.
• There are two fundamental vehicles—political authority
and economic markets.
• All nations use a combination of both.
• There are advantages and disadvantages to both.
Mixed Intermediate, Politics, and Markets
Political Hierarchy
• A complex array of
contending groups and
institutions
• Produces a complex
hydra-headed
hierarchy—“a polyarchy”
• Can direct economic
activities
Economic Markets
• An alternative price
system in free economic
markets
• Can control economic
production and allocation
decisions
Concept of Public Values
• Parallel to market failures.
• Focus on political and institutional processes by which
public values are identified, and furthered or damaged.
• Moore implicitly defined public values by discussing
differences between production processes and
circumstances justifying public production.
• Public value consists of what governmental entities
produce with due authorization form the public,
considering efficiency and effectiveness.
Mark Moore and Public Values
• Public managers “must produce something whose
benefits to specific clients outweigh the costs of
production.”
• Moore envisions a proactive public manager.
• It’s not all about efficiency.
• The Accenture Public Sector Value Model builds on
Moore
• Cole and Parston (2006): value emerges from the production of
governmental activities considered together with the cost-
effectiveness of producing those outcomes.
Recent Models on Public Values
• The Accenture Public Sector Value Model builds on Moore• Cole and Parston (2006): value emerges from the
production of governmental activities considered together with the cost-effectiveness of producing those outcomes.
• Bozeman—a society’s public values. There can’t be a disconnect between value as agency sees its mission and the public preferences. • Core public values can fail because of flaws in the policy making
system. For example, core public values are skirted if the public favors gun control but no such policy is enacted.
The Meaning and Nature of Public
Organizations and Public Management
• Approaches to defining public organizations and public
managers
• Agencies and enterprises as points on a continuum
• Ownership and funding
• Economic authority, public authority, and “publicness”
Agencies, Enterprises, and Hybrid Organizations
The continuum between government ownership and private enterprise. Below the line are arrangements
colloquially referred to as public, government-owned, or nationalized. Above the line are organizational forms
usually referred to as private enterprise or free enterprise. On the line are arrangements popularly
considered neither public nor private.
Private nonprofit
organizations totally
reliant on government
contracts and grants
(Atomic Energy
Commission,
Manpower
Development
Research
Corporation).
Private corporations
reliant on
government
contracts for most
revenues (some
defense contractors,
such as General
Dynamics
Crummen).
Heavily regulated
private firms
(heavily regulated
privately owned
utilities).
Private
corporations with
significant funding
from government
contracts but
majority of
revenues from
private sources.
Private corporations
subject to general
government
regulations such as
affirmative action,
Occupational Safety
and Health
Administration
regulations.
Private
enterprise
Government
ownership of part of a
private corporation
State-owned
enterprise or
public
corporation
(Postal Service,
TVA, Port
Authority of NV)
Government
agencyGovernment
sponsored
enterprise,
established by
government but
with shares traded
on stock market
(Federal National
Mortgage
Association).
Government
program or
agency operated
largely through
purchase from
private vendors
or producers
(Medicare,
public housing)
Public and Private Ownership and Funding
Department of Defense
Social Security
Administration
Police departments
Defense Contractors
Rand Corporation
Manpower Development
Research Corporation
Oak Ridge National
Laboratories
U.S. Postal Service
Government-owned utilities
Federal Home Loan Bank
Board
General Motors*
IBM
General Electric
Grocery store chains
YMCA
Public Ownership Private Ownership
Public Funding
(taxes,
government
contracts)
Private Funding
(sales, private
donations)
*These large corporations have large government contracts and sales but attain
most of their revenues from private sales and have relative autonomy to withdraw
from dealing with government.
Source: Adapted and revised from Wamsley and Zald (1973).
“Publicness”: Political and Economic Authority
Economic
Authority
Private firm
managed by
ownerClosely held private
firm, professionally
managed
Corporation
heavily reliant on
government
contracts
Government-
sponsored
enterprise
Government
corporation or
government
organization funded
through user fees Government
agency (funded
from taxes)
Political
Authority
Government-
industry research
cooperativeCorporation with
shares traded
publicly on stock
market Research
university
Private
nonprofit
organization
Professional
association
Small
voluntary
association
Source: Adapted from Bozeman (1987).
Typology of Organizations Created By Cross-Classifying Ownership, Funding, and
Mode of Social Control
Bureau
Government corporation
Government-sponsored
enterprise
Regulated enterprise
Governmental
enterprise
State-owned enterprise
Government contractor
Private enterprise
Public
Public
Private
Private
Public
Public
Private
Private
Public
Private
Public
Private
Public
Private
Public
Private
Polyarchy
Polyarchy
Polyarchy
Polyarchy
Market
Market
Market
Market
Meier (1993)
Walsh (1978)
Musolf and
Seidman (1980)
Mitnick (1980)
Barzelay (1992)
Aharoni (1986)
Bozeman (1987)
Williamson (1975)
Bureau of Labor Statistics
Pension Benefit Guaranty
Corporation
Corporation for Public
Broadcasting
Private electric utilities
Government printing office that
must sell services to
government agencies
Airbus
Grumann
IBM
Ownership Funding
Mode of
Social
Control
Representative
Study Example
Source: Adapted and revised from Perry and Rainey (1988).
Problems and Approaches in
Public-Private Comparisons
• Problems and challenges
- Need to control for size, task, other factors
- Difficulty in obtaining the very large samples needed to represent the “sectors”
• Research approaches
- Some theorize from assumptions, past literature, and their own experiences.
- Interviews with executives and managers who have served in both public agencies and private business firms
- Comparisons of public and private organizations within functional categories (hospitals, schools, refuse collection)
Problems and Approaches in
Public-Private Comparisons
• Comparisons of managers in small sets of government
and business organizations
• Comparisons of public and private samples from census
data, large-scale social surveys, or national studies
– The National Organizations Survey
Problems and Approaches in
Public-Private Comparisons
• Other issues
• Accountability differs by labeled type.
• Commercialization of nonprofits.
• Is a defense contractor private if all revenues come from
government?
• Is a government enterprise “public” if you can buy stock in it?
• Is an independent agency less governmental than a traditional
agency?
Distinctive Characteristics of Public Management and Public
Organizations: A Summary of Common Assertions and Research
Findings
I. Environmental factors
I.1. Absence of economic markets for outputs; reliance on governmental
appropriations for financial resourcesI.1.a. Less incentive to achieve cost reduction, operating efficiency, and effective
performance
I.1.b. Lower efficiency in allocating resources (weaker reflection of consumer
preferences, less proportioning of supply to demand)
I.1.c. Less availability of relatively clear market indicators and information (prices, profits,
market share) for use in managerial decisions
I.2. Presence of particularly elaborate and intensive formal legal constraints as a
result of oversight by legislative branch, executive branch hierarchy and oversight
agencies, and courts1.2.a. More constraints on domains of operation and on procedures (less autonomy for
managers in making such choices)
1.2.b. Greater tendency for proliferation of formal administrative controls
1.2.c. Larger number of external sources of formal authority and influence, with greater
fragmentation among them
Distinctive Characteristics of Public Management and Public Organizations: A
Summary of Common Assertions and Research Findings
I.3. Presence of more intensive external political influences
1.3.a. Greater diversity and intensity of external informal political influences on decisions (political bargaining and lobbying; public opinion; interest-group, client, and constituent pressures)
1.3.b. Greater need for political support from client groups, constituencies, and formal authorities in order to obtain appropriations and authorization for actions
Distinctive Characteristics of Public Management and Public Organizations: A
Summary of Common Assertions and Research Findings
II. Organization-Environment Transactions
II.1. Public organizations and managers are often involved in production of publicgoods or handling of significant externalities. Outputs are not readilytransferable to economic markets at a market price.
II.2. Government activities are often coercive, monopolistic, or unavoidable. Government has unique sanctioning and coercion power and is often the sole provider. Participation in consumption and financing of activities is often mandatory.
II.3. Government activities often have a broader impact and greater symbolic significance. There is a broader scope of concern, such as for general public interest criteria.
II.4. There is greater public scrutiny of public managers.
II.5. There are unique expectations for fairness, responsiveness, honesty, openness, and accountability.
III. Organizational roles, structures, and processes
III.1. Greater goal ambiguity, multiplicity, and conflict
III.1.a. Greater vagueness, intangibility, or difficulty in measuring goals and
performance criteria; the goals are more debatable and value-laden (for example,
defense readiness, public safety, a clean environment, better living standards for
the poor and unemployed)
III.1.b. Greater multiplicity of goals and criteria (efficiency, public accountability and
openness, political responsiveness, fairness and due process, social equity and
distributional criteria, moral correctness of behavior)
III.1.c. Greater tendency of the goals to be conflicting, to involve more trade-offs
(efficiency versus openness to public scrutiny, efficiency versus due process and
social equity, conflicting demands of diverse constituencies and political
authorities)
Distinctive Characteristics of Public Management and Public
Organizations: A Summary of Common Assertions and Research
Findings
III.2. Distinctive features of general managerial roles
III.2.a. Recent studies have found that public managers’ general roles involve many of the same functions and role categories as those of managers in other settings but with some distinctive features: a more political, expository role, involving more meetings with and interventions by external interest groups and political authorities; more crisis management and “fire drills”; greater challenge to balance external political relations with internal management functions.
Distinctive Characteristics of Public Management and Public
Organizations: A Summary of Common Assertions and Research
Findings
III.3. Administrative authority and leadership practices
III.3.a. Public managers have less decision-making autonomy and flexibilitybecause of elaborate institutional constraints and external political influences. There are more external interventions, interruptions, and constraints.
III.3.b. Public managers have weaker authority over subordinates and lowerlevels as a result of institutional constraints (for example, civil service personnel systems, purchasing and procurement systems) and external political alliances of subunits and subordinates (with interest groups, legislators).
III.3.c. Higher-level public managers show greater reluctance to delegateauthority and a tendency to establish more levels of review and approval and to make greater use of formal regulations to control lower levels.
III.3.d. More frequent turnover of top leaders due to elections and political appointments causes more difficulty in implementing plans and innovations.
III.3.e. Recent counterpoint studies describe entrepreneurial behaviors and managerial excellence by public managers.
Distinctive Characteristics of Public Management and Public
Organizations: A Summary of Common Assertions and Research
Findings
III.4. Organizational structure
III.4.a. Numerous assertions that public organizations are subject to more red tape, more elaborate bureaucratic structures.
II.4.b. Empirical studies report mixed results, some supporting the assertions about red tape, some not supporting them. Numerous studies find some structural distinctions for public forms of organizations, although not necessarily more bureaucratic structuring.
III.5. Strategic decision-making processes
III.5.a. Recent studies show that strategic decision-making processes in publicorganizations can be generally similar to those in other settings but aremore likely to be subject to interventions, interruptions, and greaterinvolvement of external authorities and interest groups.
Distinctive Characteristics of Public Management and Public
Organizations: A Summary of Common Assertions and Research
Findings
III.6. Incentives and incentive structures
III.6.a. Numerous studies show that public managers and employees perceive greater
administrative constraints on the administration of extrinsic incentives such as pay,
promotion, and disciplinary action than do their counterparts in private organizations.
III.6.b. Recent studies indicate that public managers and employees perceive weaker
relations between performance and extrinsic rewards such as pay, promotion, and job
security. The studies indicate that there may be some compensating effect of service
and other intrinsic incentives for public employees and show no clear relationship
between employee performance and perceived differences in the relationship between
rewards and performance.
Distinctive Characteristics of Public Management and Public
Organizations: A Summary of Common Assertions and Research
Findings
III.7. Individual characteristics, work-related attitudes and behaviors
III.7.a. A number of studies have found different work-related values on the
part of public managers and employees, such as lower valuation of monetary
incentives and higher levels of public service motivation.
III.7.b. Numerous highly diverse studies have found lower levels of work
satisfaction and organizational commitment among public than among private
managers and employees. The level of satisfaction among public sector
samples is generally high but tends consistently to be somewhat lower than
that among private comparison groups.
Distinctive Characteristics of Public Management and Public
Organizations: A Summary of Common Assertions and Research
Findings
III.8. Organizational and individual performance
III.8.a. There are numerous assertions that public organizations and employees
are cautious and not innovative. The evidence for this is mixed.
III.8.b. Numerous studies indicate that public forms of various types of
organizations tend to be less efficient in providing services than their private
counterparts, although results tend to be mixed for hospitals and utilities. (Public
utilities have been found to be efficient somewhat more often.) Yet other authors
strongly defend the efficiency and general performance of public organizations,
citing various forms of evidence.
Distinctive Characteristics of Public Management and Public
Organizations: A Summary of Common Assertions and Research
Findings
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