Chapter 1
The core argument developed throughout the book is that some models of strategic
management now have enhanced applicability to many contemporary public sector
organizations. This is a contested view: political scientists might well stress the continuing
distinctively democratic nature of public administration, still unlike that of private firms’
approach to competitive strategy where there is less concern for a public deliberative
process.
Old school weberian bureaucracy
(i) Jurisdictions are fixed and official, ordered by rules, laws and regulations (thus the
Ministry of Foreign Affairs has legitimate jurisdiction over policy regarding a nation state’s
relations with other nation states);
(ii) The principle of hierarchy is the main coordination mechanism, whereby structures in
public bureaux are established with superior and subordinate relationships (so that there is a
vertical chain of office holders with lower ranks reporting upwards);
(iii) The management of the office relies on the written file (so a bureaucracy records
extensive information on cases and decisions for ease of reference and for future office
holders);
(iv) The occupation of offices is based on expertise and training (this meritocratic principle
suggests that offices cannot be bought or bestowed through political patronage);
(v) Full-time employment of personnel who are compensated and who can expect
employment to be a life-long career (as opposed to short-term appointments or ‘portfolio’
careers which mix posts in the public and private sectors); and
(vi) Administration of the office follows general rules that are stable and can be learned (as a
body of knowledge or even codified into a body of administrative law).
Crozier described some pathological manifestations of ‘vicious bureaucratic cycles’:
(i) the development of a vaster and vaster body of detailed, written and impersonal rules and
procedures specifying what is to be done in all conceivable circumstances;
(ii) the centralization of decision making at the top, putting great distance between those who
have to decide and those who have relevant information for these decisions;
(iii) the creation of hierarchical strata insulated one from another and exerting great pressure
for conformity on its members; avoidance of face-to-face relations and of interpersonal
conflict; and
(iv) the creation of parallel informal power relations around groups and individuals who can
cope with uncertain contingencies that always arise; but this can create the demand for yet
more rules, which brings us back to point (i).
So a key question is whether this classic Weberian bureaucratic form has changed or
whether it is still resilient? For this, one can look at New Public Management (NPM). The
book argues that the NPM has reshaped many public agencies – particularly at the
operational or service delivery level – to become more firm-like and that they now operate in
‘market-like’ conditions, including quasi markets. This shift is connected to the new political
economy of the 1980s and the rise of the New Right in the intellectual domain (think of
,Thatcher and Reagan). Agency theory has strong implications for public sector restructuring,
and provided additional intellectual impetus behind the NPM (Aucoin, 1990). It would
support, for instance, a move from vertical hierarchy to systems organized around contracts,
with strong incentives for senior managers, aligned with performance targets and
transparent performance indicators. It would advocate better information systems within
public bureaux so that more information on the performance of agents is made available to
political principals (and also citizens).1
Alternative reform narratives: There are, however, at least two other reform narratives
beyond the NPM that we need to consider, as NPM reforms were strongly contested
internationally, and countries such as France and Germany (and many others across the
world) undertook different reform trajectories and remained ‘low’ NPM-based jurisdictions.
First, we see the ‘policy network’ and governance strand, notably in the so-called ‘New
Public Governance’ (NPG) variant. It is a post-NPM narrative which reemphasizes
principles of collaboration within the public sector rather than NPM-style competition or
strong incentives and contracts. More sociological notions of high trust, reciprocity and
relational contracts replace in the NPG narrative concepts derived from organizational
economics. The use of networks rather than hierarchy or markets as a governance
mechanism is a core component of the NPG narrative, leading to practical reform doctrines
such as the ‘Joined Up Government’.
Second, the ‘Neo Weberian State’ narrative posits a trajectory of ‘Weber lite’ in some
countries where Weberian principles have historically been highly embedded, notably
including Germany, but which are now experiencing some modernization without moving into
the NPM cluster. While the central role of the constitutional State (or Rechtsstaat) here
remains accepted, there are some significant changes around the edges. There is first of all
a concern to promote a high-quality and user-facing ethos and more responsive services,
which may involve attempted organizational culture change. There is also an increased
interest in high levels of performance by public services agencies. Finally, the knowledge
bases of public bureaucrats broaden from their traditional core in administrative law to a
greater interest in management-based forms of knowledge.
So, is strategic management useful and meaningful only in the ‘current’ public sector
(because of specific and novel transformations introduced by macro-level changes in the
public sector through the spate of NPM-inspired and other narratives of reform)? If we look
at the scholarly debates in countries usually associated with a more limited impact of NPM,
hence allegedly ‘laggards’ in adopting strategic management approaches, we can in fact
detect a significant stream of literature that puts emphasis on a conception of the public
sector as a system of interdependent but relatively autonomous organizations whose
‘functioning’ may benefit from the systematic adoption of a managerial approach, in which
strategic management figures prominently. In sum, strategic management in public services
organizations is both contingent (models of strategic management have nowadays
enhanced applicability to many contemporary public sector organizations compared to what
they had in the past) and perennial (strategic management is part and parcel of managing
public services organizations, or at least managing them where improving performance is
one goal).
1
For a background on NPM, see chapter 1
,Chapter 2
One general question to bear in mind as the various schools are presented is whether they
analyze the content of strategy, the process of strategy making, or both themes. A major
divide in strategy studies is in fact between studies focused on content (on what contents of
the strategy may lead to superior organizational performance), usually having an overall
normative thrust, and studies focused on process formation (on how organizations’
strategies form over time), often having an overall interpretive or explanatory thrust. The
book sides with those advocating the perspective of overcoming the process–content
dichotomy in the strategy literature and bridging the two.
1 The design school and strategic planning: a firm’s strategy should be reflected in its
formal organizational structure: the famous dictum was that ‘strategy determines
structure’. So there was a strong focus on the analysis of corporate structure. The design
school essentially seeks to achieve a strategic fit between a particular organization and its
environment. Strategy making is normally seen as being led by senior managers and their
advisers and then handed to middle management to implement. The ‘strategic vision’
underlying the design should be kept simple, may be ‘bespoke’ to each organization (leading
to ‘case law’ rather than abstract theory) and should be formulated so that it is easy to
communicate to others. The design school uses two well-known analytic techniques to
assess the external environment (PESTEL) and the internal organization (SWOT) and then
the fit between them.
● Politics: The implications of an actual or a likely change of government; a reshuffle of
ministers in the ruling party; the announcement of a major new policy direction and
legislation;
● Economics: likely growth and taxation rates; prospects for public expenditure levels
at macro and agency levels;
● Sociological Factors: the effects of an ageing population, immigration or changing
family structures;
● Technology: new Information and Communication Technologies and e-govt; new
technologies in healthcare and their economic effects; genetically modified foods;
● Environment: a push for more ‘sustainable’ public policies; the influence from the
climate change agenda; changing patterns of car use and public transport; and
● Law: a push either to regulation or deregulation; the legal effects of a country joining
or leaving the EU (e.g. to social legislation); national changes to employment and
trade union law and how they could affect the public sector employer and the worker.
In a SWOT analysis, the analyst should look at the distinctive Strengths and Weaknesses of
the organization itself rather than the environment, and to conceive of the Opportunities and
Threats that environmental trends engender for the organization. The internal configuration
of the organization (its strengths and weaknesses) should match the external configuration
represented by the opportunities brought about by environmental changes and counter the
potential threats.
, The strategic planning school: The strategic planning school develops the design school
further, representing greater formalization. It fuelled the long-range planning movement
evident in large mature corporations in the 1960s. It was also associated with the growth of
corporate planning units and systems in these organizations. These tasks were often
undertaken by specialist planning staff based in corporate headquarters, using long-range
forecasting and operations management techniques, and then plans were passed down to
middle management to implement. Mintzberg considers its binary split between formulation
and implementation (and between thinking and doing) to be unhelpful, leading to loss of
ownership of the strategic plan by the bulk of the workforce and then as leading to major
implementation deficits as such an approach produces only ‘paper plans’ that have no basis
in reality. This school of thought became less popular during the 1970s. Increasing criticism
emerged in relation to the poor performance of elaborate strategic planning systems:
specialist corporate staff took over the process (marginalizing line management) and the
process then took over the corporate specialist staff who produced ever more elaborate
plans but ones devoid of strategic insight.
The strategic positioning school: This major school is strongly associated with the work of
Porter, with its disciplinary roots in industrial economics. Porterian approaches remain highly
influential within mainstream strategic management, emphasizing the importance of market
structure and its analysis. They propose a clear and conceptually based framework to
examine a firm’s competitive strategy within a given industry, unlike the ‘one off ’ analyses of
the design school. However, the Porterian model assumes a highly rational analytic and top
down approach to strategy formulation, which is then often given to middle management to
implement. Key Porterian models and concepts include – as a first main contribution – the
significant ‘five forces framework’ used to model competition at an industry level:
● The threat of new entrants (or firms that may be able to enter the market): how
strong are the barriers to any such market entry by firms? Such barriers include the
need for large amounts of capital investment to enter a market, the need to comply
with complex regulatory procedures or ‘softer’ factors such as well-established
brands. The higher the barriers; the more difficult it will be to displace incumbents.
● The bargaining power of a firm’s suppliers (such as its various subcontractors and
suppliers of raw materials): what is the nature of the relationship between the firm
and these suppliers (e.g. over prices; the terms of subcontracts)? Who has most to
lose from the end of any contracts and to what extent are substitute
subcontractors/suppliers available?
● The bargaining power of a firm’s customers: to what extent are customers
(individual or corporate) able to put pressure on a firm to cut costs, raise quality or
launch new productThis will depend on how concentrated buyer power is, how well
informed buyers are and the extent to which they are prepared and able to switch to
new suppliers.
● Threat of substitute products (products that can use new technology to substitute
for a traditional product): given a high rate of technological change, it is possible that
radical new products can emerge which can displace existing products (e.g. email
replacing letters) through lowering costs or increased acceptability to consumers.
● Intensity of rivalry amongst competing firms: the forces already reviewed taken
together all influence the nature of competition and the extent of rivalry between firms
in an industry. This may vary from relative cooperative strategies involving alliances
