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    Public And Private Sectors Strategy Help

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    Public And Private Sectors Strategy Help


    Public And Private Sectors Strategy Help

    Abstract:

    Strategic concepts and practices first evolved in the private sector, so they evoked much controversy when they migrated to the public sector from the late 1970s onwards. Partly this was about their (in)applicability to the distinctive features of government organizations, in particular their focus on public as well as private value, their situation in a political rather than a market environment, their almost exclusive capacity to use legal authority to achieve purposes, and the extent to which they often need to share power over personnel and resources with other public sector agencies. These and other factors complicated efforts to apply New Public Management and similar frameworks in strategy concepts in a governmental context. Partly also the traditional private-sector focus on single organizations did not resonate with the growth of network governance from the 1990s. The authors argue for an alternative model based primarily on the public value framework as a means of incorporating and going beyond traditional strategy thinking.

    Keywords: strategy; public sector strategy; public value; authorizing environment; network governance; comparing public and private sectors

    1. Introduction

    “Given that most of the tools and concepts of strategic management were developed in the private sector, is it valid to apply them to the public sector?” That was the opening question in a chapter on strategy 15 years ago (Alford 2001). Even at that time, it was already a question that had been asked for many years before. Since then much has happened, so the nature of both the private and public sectors, and therefore the task of managing them, has changed greatly—but not necessarily in the same way across the sectors. In this article, we revisit the issue. We ask whether and to what extent private sector strategy concepts and techniques are suitable for the public sector, and in what ways these concepts and tools might be modified to take account of the public sector realities now. However, to answer these questions is to beg further questions.

    For a start, there are many different strategic management tools and concepts—far too many to deal with adequately here (see (Alford 2001; Bryson 2004; Bovaird and Loffler 2003; Joyce 1999)). However, there is one framework that we argue is hegemonic in the field, which can legitimately be seen as representing the underlying logic of much of the strategy literature: the Harvard Business School’s Business Policy Model (BPM) (Christensen et al. 1982). BPM is demonstrably the most widely read and enduring strategic management framework. In the 1980s, it gave birth to a putatively public-sector version, known as the New Public Management (NPM) (Hood 1991). By virtue of this heritage, we will argue, NPM can rightly be cast as a proxy for the use of private sector approaches in government.

    BPM/NPM encompasses three factors that need to be considered in strategic management: what products to offer to what markets (the value to be created; the environment; and organizational capabilities). These are explained in more detail below, but for the present, suffice to say that they constitute categories each with varying possible contents but comparable across the sectors.

    At the same time, there is an emerging alternative model: the Public Value (PV) framework that starts from those categories, but provides a broader account of what sits in each category (Moore 1995, 2013). It therefore offers what might be called an “immanent critique” (Antonio 1981) of the dominant framework. Developed by Mark Moore and his colleagues in the Harvard Kennedy School1, this framework both draws upon but also provides the most compelling critique of the BPM, and hence of deploying private sector techniques in public sector management. Because it is built on comparable categories, as will be explained, it facilitates identification of key similarities and differences between the sectors.

    Thus, leaving aside its longstanding military antecedents, our attention here is to the nature of strategy in the BPM and the NPM, and to the public value framework. One important dimension is the extent to which the strategy model is oriented to content or to process (Alford 2001). The content role is about deciding what to do, utilizing concepts, analytical tools and organizational techniques (Andrews et al. 2006). It includes ideas of strategy like: setting long-term direction; and positioning, fit or alignment between purposes, means and the environment. This has been relatively significant in the private sector, and given rise to further content-focused strategic ideas (Boyne and Walker 2004; Andrews et al. 2009). The process role (Alford 2001) is one in which the issue is not so much what decisions might emanate from the strategic approach, as it is the pattern of deliberation. In the latter case, the task of the manager is less to find substantive solutions as such, but more to engage relevant actors to identify and deliberate about solutions and implementation opportunities. The key issues are such matters as: Who will take part in consultation or deliberations? Who will guide the proceedings? What information will be available? How much opportunity will each participant get to speak? Will proceedings be conducted in a large plenary or small groups or some other form? And many others .

    . . Much of the research on strategy in the public sector tends to focus on the on the process role. A smaller proportion pays attention to the content role (e.g., (Vining 2016)), but tend to frame it in economic rather than broader terms. However, over recent decades, the content role became more important (from a lower base), but it augmented rather than displaced the process role, with the rise of public management interest in democratic deliberation, public participation, consultation, information-sharing and similar artifacts of democratic polities. Increasingly, public managers find themselves as initiators or responders, organizers, shapers, information-providers, advocates or devil’s advocates in public deliberation processes. This raises normative questions as to the roles of public managers in democratic decision-making (Alford et al. 2016), but more important for our purposes are its ramifications for strategy and strategy-making. Is attention to the strategy process more necessary in the public sector? How much should public managers play a role in the political domain?

    This article seeks to complement others in this special issue of Administrative Sciences. Whereas Andrews et al. (2017) elucidates the forms of strategy implementation in the public sector, we are concerned here with strategy-formulation. In addition, whereas Vining (2016) provides a useful elaboration of how various analytic constructs might apply to aspects of strategy in government organizations, we seek to compare how the various concepts might be put together as whole strategic frameworks, going beyond traditional public administration, New Public Management or collaborative network governance—with public value as an anchor for this reconsideration. Thus, we analyze the antecedents and evolution of strategy-making, and apply them to two illustrative case studies. Using these categories, we take each of the elements of NPM, and then of public value management, and assess how appropriate they are to the public sector. We conclude that the broad categories within the BPM are applicable to the distinctive characteristics of the public sector, but the contents of those categories mostly are not. For example, both have to understand and deal with their environment, but their environments are made up of different types of actors—the private sector facing a market environment while the public sector deals with a more political environment. By contrast to BPM, the public value framework is more attuned to the distinctive realities of the government sector. It therefore opens up a greater scope for action, and a framework for thinking about it.

    2. The Rise of the Business Policy Model and New Public Management

    Corporate strategy and its BPM version first took root in the United States in the 1960s, then spread to Britain, New Zealand, Australia and northern Europe, and from there has been taken up globally. On this point we argue that: (1) the BPM is and has been the dominant strand of corporate strategy thinking; (2) NPM is derivative of BPM; and (3) by corollary, applying NPM to government organizations is tantamount to installing private sector techniques and concepts into the public sector.

    Strategy in either sector started from the commonsense notion of organizational planning, and indeed the very idea that managers might look ahead in deciding what to do—what Lindblom (1959) termed the “rational-comprehensive” approach. Perhaps because of its logical simplicity, rational planning has been enormously influential (Mintzberg 1988). However, it has also attracted criticism from various standpoints (starting with Lindblom’s “science of mudding through”), notably for its insufficient recognition of the turbulence and complexity of the worlds in which organizations operate (Stoner et al. 1985; Robbins and Barnwell 2006).

    A particular problem of the rational-comprehensive approach was its tendency to take the goal or purpose as given. There was not much structured thinking about what products the company should be offering to what markets; rather any change in the definition of the business tended to be incremental (Quinn 1980).

     

    Figure 1. Strategic factors in the private sector.

    Corporate management (in NPM form) was taken up by the public sector through various Corporate management (in NPM form) was taken up by the public sector through various avenues from the late 1970s and early 1980s (Boston et al. 1996). One was via leading consulting firms avenues from the late 1970s and early 1980s (Boston et al. 1996). One was via leading consulting firms who had worked in the Fortune 500 and imbibed their characteristic multi-divisional, performance who had worked in the Fortune 500 and imbibed their characteristic multi-divisional, performance driven corporate model, which they embraced as a “one best way” that they recommended to all driven corporate model, which they embraced as a “one best way” that they recommended to all their consulting clients (Saint-Martin 2004; Alford and Hughes 2008). Another was a desire to reap their consulting clients (Saint-Martin 2004; Alford and Hughes 2008). Another was a desire to reap efficiencies at a time when government was perceived as “too big”, bolstered by an increasingly widespread belief that the private sector is inherently more efficient. The public sector’s uptake of new management ideas continued in the 2000s and beyond with a focus on value creation, digitalization and involvement (Greve 2015).

    Finally, Harvard’s Prahalad and Hamel (1990) considered the organizational capabilities as distinctive or core competences, as well as the latitude for encouraging “stretch” in those capabilities. Latterly, this category has included “dynamic capabilities”, which Eisenhardt and Martin describe as ‘the organisational and strategic routines by which firms achieve new resource configurations as markets emerge, collide, split, evolve and die’ (Eisenhardt and Martin 2000, p. 1107). It is not surprising, therefore, that a comparison of NPM’s key elements with aspects of corporate management show a strong affinity between them, as Table 1 illustrates. The essential point is that all these concepts and techniques were derivative of the BPM, underscoring its centrality as a framework.

    Table 1. New Public Management compared with Business Policy Model.

     

    However, a slightly tangential perspective—public choice—has become more salient as the reform impetus has progressed, even though that perspective has not figured much in research on strategy. Public choice can be seen as an extension of the logic of BPM/NPM. The latter entails separation of principals and agents (or purchasers and providers) within the organization (e.g., executive agencies), whereas the former involves widening the separation so the agent or provider is in a different organization from the principal or purchaser.

    The NPM movement has witnessed a choir of critics over the years. Most are concerned with emphasizing that public sector bureaucrats are not managers or leaders as in the private sector, but civil servants in a rule-based system. Much of this traditional public administration critique concentrates on the differences between the two sectors. However, also important was that the business strategy model focused on the single organization. It did not take account of the fact that much corporate business entailed joint activity among a plurality of private, public or non-profit organizations—often referred to as network governance. This was becoming a burgeoning phenomenon as the 1990s wore on. Others Adm. Sci. 2017, 7, 35 6 of 17 have feared that public trust is being undermined. In addition, recently, original NPM-researchers, including Christopher Hood, have explained how it got to cost more but did not work well. Their Adm. Sci. 2017, 7, 35 6 of 17 conclusion seems to be that NPM did not live up to its promises (Hood and Dixon 2015).

    Thus, a good strategic approach is one that deploys what the private corporate sector has found to be useful—for example in articulating strategic intent, looking outward to the environment, or understanding incentives—while being cognizant of the distitinctive featurestrs of tthe public sector..

     

    3. The Public Value Framework

    We argue that the public value framework is considerably better suited to these distinctive We argue that the public value framework is considerably better suited to these distinctive realities than any other model of strategic management, especially in terms of strategic content. First realities than any other model of strategic management, especially in terms of strategic content. First foreshadowed by Allison (1986) (see also (Heymann 1987)), developed and conceived largely by foreshadowed by Allison (1986) (see also (Heymann 1987)), developed and conceived largely by Moore (1995, 2013) it is now being taken up by increasing numbers of practitioners and scholars Moore (1995, 2013) it is now being taken up by increasing numbers of practitioners and scholars (O’Flynn 2007; Alford and O’Flynn 2009; Benington and Moore 2011; Bryson et al. 2014, 2015; (O’Flynn 2007; Alford and O’Flynn 2009; Benington and Moore 2011; Bryson et al. 2014, 2015; Talbot Talbot 2009; Alford et al. 2017; Mulgan 2008; Barzelay and Campbell 2003; Llewellyn and Tappin 2009; Alford et al. 2017; Mulgan 2008; Barzelay and Campbell 2003; Llewellyn and Tappin 2003; 2003; Poister 2010; Meier et al. 2007; Weinberg and Leeman 2013). This framework acknowledges both Poister 2010; Meier et al. 2007; Weinberg and Leeman 2013). This framework acknowledges both the the public and “business” imperatives that government organizations face. Its categories recognize public and “business” imperatives that government organizations face. Its categories recognize that that there are key issues affecting most if not all public sector organizations—such as what value there are key issues affecting most if not all public sector organizations—such as what value should should be produced, which aspects of our environment should give the most weight to, or whether we be produced, which aspects of our environment should give the most weight to, or whether we should deploy our own staff or externally hired ones. However, analysis of the specific content in each should deploy our own staff or externally hired ones. However, analysis of the specific content in each category shows the from private.

     

    Figure 2. Strategic factors in the public sector.

    First, the public manager is responsible for ensuring the production not only of private value First, the public manager is responsible for ensuring the production not only of private value but but also public value—that which the citizenry receives collectively rather than consumes also public value—that which the citizenry receives collectively rather than consumes individually (for individually (for a more detailed discussion, see (Moore 2013)). Second, the environment a more detailed discussion, see (Moore 2013)). Second, the environment surrounding a government surrounding a government organization is not a market environment but an authorizing organization is not a market environment but an authorizing environment, made up of various actors environment, made up of various actors who between them can provide the permission, resources and to some extent the capabilities the organization needs to conduct its work (Salamon 2002). Third, the means by which government organizations produce include various kinds of external providers, ranging from contractors providing specified services through co-producers and volunteers to external collaborations operating on the basis of trust and commitment (Alford and O’Flynn 2012).

    4. Comparing the Models to Public Sector Realities

    The over-arching question, therefore, is how adequately this business framework characterizes public sector realities. Here we address the first of the two critiques of the BP model and of its cousin, NPM: its applicability to the requirements of the public sector (see Table 2). Such a comparison shows a modest degree of applicability of the Harvard model, mainly in form rather than in content. Each of the three elements can be seen as containing both private and public sector analogues; but they are different in substance. To explain this, we address two illustrative case studies.

    Table 2. NPM compared with public sector.

    4.1. Case 1: The New Zealand Department of Corrections

    In November 2008, New Zealand’s Department of Corrections (DoC) faced a dilemma2. A new coalition government led by the center-right National Party had just been elected and was seeking a dramatic reorientation of the justice system. There had been a 50% growth over the last decade in the number of prisoners, as well as those serving community-based sentences, stretching the prison system to breaking point. Current prison capacity was projected to be fully utilized by 2010, with serious ramifications for offenders, staff and the community. However, the new government’s “tough-on-crime” policies were likely to aggravate this problem. It had pledged to tighten bail laws, abolish parole for violent repeat offenders, toughen sentences for child abuse and gang-related offences, and review home detention in sex, drugs and violence cases. At the same time, the new government had pledged a crackdown on state services spending, stating that it would not consider any “budget bids” for new funding. An economy in recession and lingering uncertainty after the 2008 global economic crisis led Treasury to recommend public sector restraint as well.

    4.2. Case 2: Danish Decommissioning

    The official mandate of Danish Decommissioning (DD) is to dismantle and clean up after a nuclear test facility in Denmark and to contribute to a medium- and long-term solution for Danish radioactive waste. This follows a decision in Parliament to abandon nuclear power in Denmark. The focal public manager here is the management of Danish Decommissioning. Although the decision is taken at a senior bureaucratic and political level, there is no concrete resolution yet as to where in Denmark to put the radioactive waste.

    5. Applying the Concepts: An Analysis of Two Cases

    How applicable to DoC and DD are the two frameworks—BPM and NPM—described above? The short answer is: only to a limited extent. First, both DoC’s and DD’s services sit awkwardly with this private sector idea, at both the strategic and the transactional levels. DoC’s aim is to contribute to the overall Justice Sector outcome of a “safe and just society” through “upholding the integrity of sentences and orders”, “reducing re-offending”, and managing offenders “safely and humanely”. However, it does not have customers in the same sense as private companies do. The recipient of the services does not pay any money for them. At the same time, they typically do not “enjoy” the services.

    Indeed, they are disadvantaged for the sake of the broader citizenry, which jails convicted offenders either to contain them, to deter them, to rehabilitate them, or in some cases simply to enact retribution. In the DD case, a nuclear cleanup is a profoundly collective good affecting everyone within a radius (and beyond), even if they do not want it to. In any case, it is clear that there are fundamental differences of opinion about the best approach to dealing with offenders, ranging from incarceration to rehabilitation, and to questions of where to put the nuclear waste. To ask which is likely to be more valuable begs the question of what “valuable” means in this context. For the sake of simplicity, we adopt the corrections department’s own over-arching goal of “a safe and just society”, which translates at an operational level to “crime reduced”, which in turn requires reduction in various factors that influence crime rates (Department of Corrections 2008). The question, therefore, is whether crime is more effectively reduced by incarceration or rehabilitation. For the DD case the purpose is environmentally responsible decommissioning that is the official value provided. The extensive research about dealing with offenders seems at first sight to support the argument backed by many studies, that increased incarceration reduces crime (for a comprehensive survey, see (Stemen 2007)).

    Since the society as a whole benefits from decreased crime, it follows that, all else being equal, more punitive treatments are valuable. However, the association is fairly weak: a 10% growth in incarceration generates only a 2–4% decrease in crime (Spelman 2000). Also, the studies vary widely in their estimates (Stemen 2007). This picture will get worse as the prison population burgeons. As one senior scholar in this field summarized a review of numerous studies: “analysts agree with apparent unanimity that future increases in incarceration rates for such offenders will do less and cost more” (Stemen 2007). Thus, the research at large is inconclusive. There is, however, a more relevant answer embedded in the department itself, from looking at what was actually happening. In an election won by Labor in 1999, a citizen-initiated referendum had called for a “tough-on-crime” approach, which the government began to implement. However, the overall result of this incarceration focus was that the prison population increased by 50% between 1999 and 2008, and was forecast to increase a further 20% by 2016. Subsequent attempts to apply new community sentences also did not succeed. It is, therefore, reasonable to argue that rehabilitation is of value to the public—not only was it effective, but also it was considerably cheaper: it cost over $90,000 per year to keep an offender in prison, whereas home detention cost $25,000, and a community work order $2000. On a spectrum from rehabilitation to incarceration, the most valuable strategy for the Corrections Department is towards the less punitive end.

    6. Pursuing Public Value in a Governance Perspective

    However, the differences between public and private sector organizations have not been the only stumbling blocks to effectively implementing corporate strategy in government. Also emerging as an issue is another factor: that in many settings, multiple organizations have shared power with typically diverse issues and stakeholders, where no-one is wholly in charge (Crosby and Bryson 2005). These are situations where the single organization—no matter how coherent its own strategy—has only limited leverage unless it can persuade, maneuver, push, educate or financially reward the other actors to go along with it. These situations arise from or with the proliferation of increasingly complex problems such as climate change, homelessness or drug addiction. The intractability of some of these problems may mean there is no consensus about cause or remedy; they are sometimes referred to as “wicked problems” (Rittel and Webber 1973; Head and Alford 2014). The practical import of this is that a single leader of a single organization—even a bold, imaginative, influential one—finds it difficult to unearth causes, develop solutions and get others to implement them. In short, the essential unit of analysis is not the organization but the network, itself made up of plural organizations. Another contributory factor is growing popular enthusiasm for democratic participation, fuelled in part by greater access to education. Our second case study, Danish Decommissioning, sheds more light on the implications of multi-organizational circumstances for strategy.

    7. Discussion and Conclusions

    Being strategic in the public sector often entails the manager having to deal with politics while not being seen to step outside their constitutionally assigned roles. This calls for political astuteness of a high order (Hartley et al. 2015). Public managers should strive to align the different elements sketched out in Moore’s PV framework, to get the relevant stakeholders on the same page in addressing important issues. As we discussed, alignment here is not so much about finding the “perfect” or “optimal” solutions, but rather to make clear what the trade-offs are in certain decisions and approaches. To calibrate possible alignment scenarios is one of the key activities that public managers can engage in. Public value creation must be seen in a collaborative governance perspective. Organizations cannot optimize strategic intent on their own, as some of the NPM-literature seemed to assume, but they must increasingly work with other stakeholders and also citizens in wider democratic processes to achieve forward momentum.

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