Get under the skin of it
8. Public Sector Strategic Management
8.4 Public Sector Management
From the middle of the 20th century the public sector in many western economies developed in a relatively protected environment. Firstly budgets and targets were set and the industries carried out their function within budget or not. The targets and budgets were reviewed (usually annually) and adjusted as necessary. This description is very simple and covers over a complex and often politically fraught process. What emerge are two sets of people, elected executives (who design the strategy – set budgets and targets) and professional public servants (who carry out the functions).
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Ostensibly the elected executive having the resource would appear to control the strategy of the public sector whilst the public servants would be concerned with implementation. This divide is reflected in the education of public sector professionals; whilst in the private sector managers would do academic courses with ‘management’ in the title public sector managers would do courses with ‘administration’ in the title. Here perhaps is the root of the perception that strategy was non-existent or played down in the public sector as governments decided on strategy whilst the public servants ‘simply’ administered them.
Towards the end of the 20th century, economic, demographic and political changes (particularly a shift to the political right) created a different agenda in the public sector. In the private sector the mission statement and the strategic objective allow organisations to be more focussed in times of tight resource. Conversely, the new times of tight resource in the 1970’s onward may have caused the migration of strategic thinking from the private sector to the public sector and the increase of management over administration. This migration can be considered in terms of a general social movement towards managerialism so the Government manages the economy rather than leads the country.
Margaret Thatcher’s notions of ‘prudence’ and ‘good housekeeping’ through to Grey’s (1999) argument that ‘we are all managers now’ has perhaps created an environment more accepting of
‘management’ generally. Clearly the scenario is complicated by ideological concerns and buying into US models of public spending i.e. the contraction of the State and the responsibility of the individual over the responsibility of the State. The then UK Prime Minister Mrs Thatcher’s comment that there ‘was no such thing as society’ was emblematic of this change in the prevailing political perspective.
The pre-eminence of the individual was not just in terms of responsibility; hand in hand went the notion of the right to choose. With choice usually being generated through competition – thus we move from having public services available to us – to becoming consumers such that health care and education providers were to be no different to General Motors selling cars or Tesco selling groceries. These notions translated into a particular set of circumstances for public sector services;
that of having to improve service levels and choice whilst at the same time improving efficiencies driven by budget reductions – all of which introduces complexity, instability and ambiguity.
Instability and ambiguity were introduced into local government in the 1980’s due to the introduction of Compulsory Competitive Tendering (CCT) by the Conservative Thatcher government. CCT was designed to abate what Thatcher saw as profligate and inefficient local government services exemplified by the restrictive practices of the public sector workforce.
Local government was forced legally by CCT to put out to tender all forms of public works. To begin with ‘blue collar’ services e.g. housing and road/street maintenance, refuse collection etc.
then ‘white collar’ services e.g. administration, legal and audit services. We see perhaps the centralisation of local government where local administration of central government directives became the increasing new role of local ‘government’.
Post CCT Sir Robin Butler (1996) suggested that the three main themes of reform in the public sector in the previous twenty years were:
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x The creation of public sector agencies with specified targets, greater delegation of power and more accountability to CEO’s.
x Greater competition through untying the supply chain, market testing, purchaser/provider split and delegated budgeting.
x Changes in the management structure of the Civil Service. (Butler, 1996)
Butler (1996) explores these developments and similar ones in the USA and New Zealand (all at the time left of centre governed) as evolving from:
x The conflict between the demand for lower taxes (initiated by right of centre governments) in conjunction with new and improving public services;
x The escalation in the concept of the customer (e.g. rather than student or patient) and their individual requirements;
x Growing distrust in hierarchies and command structures and a desire to make decisions much closer to the point of delivery;
x Use of IT and communication technology to delayer and speed up the bureaucratic process.
Many of these issues lead us to a more private sector sensibility when thinking about the evolution of the public sector. Dunleavy and Hood (1993) consider NPM (new public
management) as the term that encapsulates downsizing and outsourcing of services (Hood, 1995) as well as the drive to bring the reporting and management techniques of the private sector into the public sector. Management guru and doyen of competitive strategy Michael Porter, has been employed by a number of governments to advise them on how to be more competitive.
NPM is strongly associated with the seminal and influential ‘march of history’ language of Osborne and Gaebler (1992). Dunleavy and Hood (1993) see this in terms of going ‘down grid’
which means reducing the impact of rules and procedures in the exercise of power in favour of the discretionary power of individuals (usually the managers). And going ‘down group’ which means making the public sector less distinctive from the private sector. Dunleavy and Hood (1993) go on to outline the possible futures of the new public sector that develop on from the slide of going ‘down group and grid’ to highlight other potential consequences of the
commercialisation of the public sector. These four futures are useful in that they outline the environments within which strategy might have to operate.
The movement from the Public Bureaucracy State with its distinctiveness and core competency to the Minimal Purchasing State of letting contracts and the incursion of private sector
organisations to provide public services is probably the most expected locus of development. The state’s role is ‘steering rather than rowing’ as Osborne and Gaebler (1992) put it. Here the increase in competition and opening of markets creates a globally competitive public sector where citizens of the UK may have their water supplied by a French company, gall stones removed in Germany and letters delivered by a Dutch firm.
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Dunleavy and Hood (1993) outline four different possibilities.
1. Gridlock Model
2. Public Bureaucracy State 3. Minimal Purchasing State 4. Headless Chicken Model
In the Headless Chicken model public services are over managed at the level of individual service providers whilst at the same time under managed overall due to a lack of guidance. Some similarities develop in diversity and innovation but differences in pay scales etc. may prevent migration between the private sector and public sector to fully integrate management processes.
In the Gridlock model the distinction between public sector and private sector is blurred as private sector organisations deliver many services. However, the public sector rules and procedures are maintained due to the strength of the regulatory bodies and the fear of litigation.
The US health care system is an example of this process where fear of litigation limits practitioners in their delivery of service.
what‘s missing in this equation?
maeRsK inteRnationaL teChnoLogY & sCienCe PRogRamme
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