Important Concept An introduction

SSP3024 Public Sector and Corporate Management 2016/2017

A. Administration Vs ManagementIn the 1970s & 1980s there was a debate about:(a) the role of market and politics(b) the role of the state in producing goods

and services.Issues raised by the debate:

Differences between how organizations located in the public and private domains are structured and managed. i.e. the question of differences in the processes of running public and private organization

1. First View – Yes– Differences in the ways the

organizations in the two domains are run

– Managementi. Associated with the rationalist

approach to organization decision making

ii. Rationalist approach sees managers as the agents for achieving organization goals and corporate growth

iii. Through the use of most efficient resources.

• Administrationi. Associated with the public sectorii. Public officials implement policies

determine by political executivesiii. Policies implemented must be within

the framework of the lawiv. Efficient use of resources is secondary

matter.

2. Second View- Mgt & administration are simply different terms for describing similar activities. The words can be used interchangeably- This view explains that managerial practices and activities of managing are generic. i.e. managerial practices in the private organizations could be transferred to public organizations and vice versa.

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3. Third View◦ New changes in management approach

that emerged in the 1980s◦ Different from traditional ‘public

administration’ and ‘private business mgt’

◦ Led to the new public sector mgt◦ According to Perry and Kraemer (1983),

NPM merges traditional public administration with the instrumental orientation of business mgt

◦ NPM addresses the unique nature of public organizations which come from:

i. The scope and impact of their decisionsii. Their fundamental political character

B. Public Administration1. Two major areas of importance

– Provision of services– Enforcement of laws and regulations

The service functions include:- Maintenance of roads & highways- Administration of grants and loans

The regulatory functions include:- Regulation of trade practices (esp. that of restrictive in nature)- Enforcement of employment regulations etc.

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2. Meaning of Public Administration Term is easier to explain than define Some definitions:i. “The use of managerial, political and

legal theories and processes to fulfill legislative, executive and judicial governmental mandates for the provisions of regulatory and service functions for the society as a whole or for some segments of it” (Kernaghan and Siegel, 199: 6; cf Rosenbloom, 1986)

ii. “the application of organizational decision-making, and staffing theory and procedures to public problems” (Kernaghan and Siegel, 199:6; cf Vocino and Rabin, 1981).

iii. “the study and practice of the tasks associated with the conduct of the administrative state” (kernaghan and Siegel, 1999:6; cf Richardson and Baldwin, 1976)

iv. “the coordination of individual and group efforts to carry out public policy” (Kernaghan and Siegel, 1999: 6; cf Pfiffner and Presthus, 1967)

• 3. Distinguishing Factors in Administration of Public & Private Organizations:

• (a) service-versus-profit distinctions• (b) politicians concerned with

winning public support• (c) accountability• (d) human resource management

system• (e) the “public nature” of PA

• (a) Service-versus-profit distinctions– Most commonly cited mission of the PA

• i. bureaucrats assist political executive

• ii. bureaucrats response to the demand of the public

• Iii. Public organization (PuO) operates less efficient than private organization

– Raison d'être of private organization is profit (i.e. its bottom line)

– PuO receives money through annual appropriations from public treasury. Not worrying about profit. Most government operations are monopolistic (e.g.. Police), so public has no choice from competing organization for the delivery of services.

– PrO – compete efficiently in the market place.

– Government provides ‘public good’• i.e.. Goods that benefit all members of the

society (e.g. national defense & pollution control)

• Public good funded through general tax system

• Benefits – difficult to measure• Private good (e.g. a packet of cigarette) –

based on ‘user pay’

(b). Politicians concerned with winning public support

to win political support politicians often make decisions that are not efficient in many respects.

More concerned about what the public think about their personality & policy initiatives

Public judged them this way rather than on how well do they manage their departments.

• (c) Accountability• one of the major constraints on

productive mgt in the Pu sector (Annual Report of the Auditor General of Canada, 1993) because of “the body of administrative regulations and the conflicting accountability requirement that limit managerial authority & autonomy”

one factor that hinders efficiency in government.

in government many factors affecting accountability:◦(a) scale & complexity of the operation◦(b) desire for political control of the

bureaucracy◦(c) search for consistency & coordination

lines of authority & responsibility clearer in PrO

• (d) Human Resource Mgt System• complicated and rigid (e.g. in job

classification, personal rules and staffing)

• harder to hire & fire• other things to consider include:

ethnicity (hire not according to merit or technical proficiency).

(e) The ‘Public Nature’ of PA requires it to be conducted with

publicity.many government deliberations done are

closed doors.however, compared to PrO, many

governmental decisions are subjected to public scrutiny.

e.g. construction of a new airport attracts more attention than the construction of an industrial plant even though its social & economic impact may be greater.

• THEREFORE – 2 major characteristics accounting for differences between PuO & PrO:

• (i) scope & complexity of governmental activities, and

• (ii) the political environment in which those activities are conducted.

• Kernaghan & Siegel (1999) argue that given those 2 considerations – “the issue of whether public or private administration is more efficient is not the most relevant concern”. The critical question is “whether PA is conducted as efficiently as can reasonably be expected”.

Uniqueness of the Public Sector• Lawton and Rose (1994: 6-7) argue about the

uniqueness of the public sector;Public Sector organizations not exposed to

competitive world of the market. Hence no incentive to reduce costs or operate efficiently.

Objectives are usually ill-defined & expressed in vague terms such as serving the public, maintaining law and order, reducing inequality, reducing poverty or improving health.

Strategic planning is difficult because of the short-terms considerations of politicians.

• The PuSector organization is susceptible to greater and more open accountability with politicians, pressure groups, taxpayers and voters all having an interest in the performance of the PuSector.

• All functions of the PuSector limited by statutes.

• The PuSector is funded by taxation and not by charging for its services.

• Certain goods have to be provided by the state. Defense, law and order and street lighting are consumed collectively and are, in theory, equally available to all. The provision of such ‘public goods’ cannot be left to the vagaries of the market.

Role of the State to be Reduced• Reduced expenditure on the PuServices.

This will allow income tax to be reduced.• Taking out of state control companies and

industries that are best operated by PrOrganizations.

• The sales of assets.• Exposing services to competition.

Transition from Public Administration to Public Management

• Survey conducted by the OECD in its 12 member countries incl. Finland, Greece, Turkey, the USA and the UK on the new approach in PuSector mgt. found out a number of gen. themes emerging.

• (a) a move away from central government to more localized forms of government;

• (b) an increasing role for the not-for-profit sector in the provision of services;

• (c) increase in the use of PrSector for delivering services;

• Central government taking on more strategic role; and

• Increasing awareness of costs and the need to examine alternatives to central taxation as the main revenue.

Perception about Administrators and Managers

Administrators are seen as:◦ following rules and regulations;◦The carrying out of decisions that are taken by

others; and◦Following routines, bureaucratic, risk-avoiding.

Managers are seen as◦Dynamic◦Entrepreneurial◦ Innovative◦flexible

The Framework of Cooperate Governance

Governance is the process of directing and controlling an organization.

Corporate Governance deals with issues about leadership, stewardship, control, performance management, accountability and ethics in an organization.

Until recently, corporate governance is a concept that is considered to be the preserved of the PrSector. But the need to adopt this framework into the public PuSector has been adopted.

• Barrett (1999) for example see Corporate Governance as this:

“What we are basically addressing in discussions relating to the mgt and operation of PuSector organizations, and also private businesses where they are involved, are ways to improve organizational performance and accountability. Good corporate governance is central to this focus… In particular…on using corporate governance approaches to improve performance and accountability in the changing operational framework that is developing with greater privatization and commercialization of the PuSector involving PrSector provision of PuServices (sometimes in competition with the PuSector. It is not an issue about shifting the goals posts but it is also about playing on a different surface with different rules”