week2 rainey chapter_3

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)



• 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



• 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)



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.



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.



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.



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.



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.



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.



Findings

week2 rainey chapter_3

Education