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MASTER OF PUBLIC ADMINISTRATION DISSERTATION STRATEGIC PLANNING IN COMMONWEALTH DEPARTMENTS Beyond Managerialism: From Bounded Rationality to Bounded Uncertainty Jules A. Wills University of Canberra 1991

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MASTER OF PUBLIC ADMINISTRATION

DISSERTATION

STRATEGIC PLANNING IN COMMONWEALTH DEPARTMENTS

Beyond Managerialism: From Bounded Rationality to Bounded Uncertainty

Jules A. Wills

University of Canberra

1991

Dedication

This work is dedicated to my wife Faye who indulged, supported and endured my study for the Masters degree.

Acknowledgements

I acknowledge most gratefully the advice and encouragement of Mr Derek Volker and Mr John Bowdler, respectively Secretary and Deputy Secretary to the Department of Social Security, to pursue the Master's program. I also appreciate the assistance provided by the department in enabling me to undertake full time study as part of the post-graduate scholarship scheme.

My thanks to Dr John Halligan for his counsel and help in entering the MPA program. I extend my gratitude to my lecturers,tutors and fellow students from whom I learned much.

Finally I thank Dr Alan Jarman who as my supervisor challenged and tested my ideas and offered sage advice born of contingent experience.

CONTENTS

Title

CHAPTER 1

CHAPTER 2

CHAPTER 3

Content Page

INTRODUCTION

Background 1 Organizational Planning 2 Public and Private Domains 4 Public Management: Problems and Prospects 6

Managerialism: The Limits of the Debate in the APS 8 The Managers 10 FMIP Goals 11 Program Management & Budgeting 13 APS Corporate Strategic Management: Beyond Managerialism 13 Aim of the Paper 15

THEORY OF PUBLIC SECTOR ORGANIZATION

Introduction 17 Concepts of the Environment 18 Environmental Filtering 20 Environmental Filtering and Strategic Management 25 Gluck's Strategic Management Model 26 Filtering and APS Reform 28 The Politics of Reform 30

COMPLEXITY, UNCERTAINTY AND CONTINGENT DECISION MAKING 33

Contingency Model - Organizational Decision Making after Environmental Filtering 39 Internal Environment 39 Structure 40 Technology 40 Resources 41 Decision Making 42 The Model in Operation 44

Title Content Page

CHAPTER 4 THE ENVIRONMENT AND ORGANIZATIONAL PLANNING 48

CHAPTER 5

Environmental Scanning Internal Environment External Environment Data Gathering Information and Decision Making Polictical Environment Economic Environment Social Environment Technological Environment Reprise

APS PARADIGMS

50 51 51 52 52 53 54 54 55 56

CHAPTER 6

CHAPTER 7

Introduction 57 Strategic Management Paradigms 57 Strategic Management in the Public Sector 60 APS Paradigms 63 Meta-Policy: Combining the Paradigms in the APS 65 FMIP and Program Budgeting 68 Devolution 71 APS Management and Leadership under Managerialism 72 Public Entrepreneurialism 75

HUMAN RESOURCE MANAGEMENT IN THE APS 77

The Evolving Nature of Work 78 Concepts of Human Resource Management 79 Australian Public Service SEP Agreement 83 HRM and SEP in practice in the APS 84 Strategic HRM 85 Summary 86

PLANNING MODELS 87

Definitions and Context of Strategic Planning Corporate Strategic Planning and the Public Sector

89

90

Title Content Page

Strategic Planning Reservations and Constraints 93 The Australian Scene 94 Strategic Corporate Planning Methods 95 The Glasson and Goode Study of the APS 94 Current Planning Weaknesses 99

CHAPTER 8 EXAMPLES AND ASSESSMENT OF APS PLANNING 101

The DILGEA Corporate Plan 102 Comment 104 The DITAC Corporate Plan 104 Australian Institute of Sport 106 Community Serices of Victoria 107 The Department of Social Security Experience 108 Operations 108 DSS Strategic Planning Processes - Preparations 109 DSS Planning 112 The DSS Plan - Content 114 The DSS Plan - Format 115 Lessons from DSS Strategic Planning 116 Comparison of Processes 117 A Revised Benchmark 119

CHAPTER 9 CONCLUSION 120

BIBLIOGRAPHY 125

ANNEXES

B.

DSS Strategic Planning - Part B Discussion Topics for Managers

Monitoring and Revising DSS Plans

136

138

C. Comparison of planning sequences 139

CHAPTER 1

INTRODUCTION

He should go over his accounts with his master frequently. Soothsayers, fortune tellers, necromancers and astrologers should not be consulted! Cato

Background

Longer term planning in Commonwealth government departments today is generally considered to be an extrapolation of annual program plans and budgets with some reference to forward estimates. Public sector planning is constrained obviously by the vagaries of political control, strictly enforced budget processes and the general uncertainty of the future. However, the ascendency of political management and the spread of the 'managerialist' ethos have also meant that departments have become more attuned to organizational survival and enhancement through planned and demonstrated performance under the dictates of the Financial Management Improvement Program (FMIP) and Program Management and Budgeting (PMB). Concomitantly, there has been a growing movement emphasizing greater staff motivation, satisfaction and development to achieve improved efficiency, effectiveness and economy. These Human Resource Management (HRM) concepts and directions have been enshrined as part of comprehensive industrial award restructuring and articulated in the Second Tier Wage Agreement (STWA) and the Structural Efficiency Principle (SEP) reforms implemented over the last five years.

The mounting pressures on senior Commonwealth managers to meet the increasing expectations of political and administrative superiors as well as subordinates highlight the longstanding management problem of balancing task and staff orientation (Blake & Mouton, 1964; Laurent, 1978). It is

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inevitable that the spread and impact of strategic HRM combined with the devolution of managerial operations and related controls will affect the traditional, hierarchical chains of command and decision making in the public sector. Accordingly, public managers will need to have a greater awareness of the long term effects of internal and external environments on organizational operations, structure, resources and technology. Achieving these multiple aims in the public spotlight will require an effective management framework and changed attitudes of public managers both toward public policy making and accountability.

One available option is to introduce strategic management which is a common tool of large scale, private sector organizations (Hax and Majluf, 1984; Barnett and Wilsted, 1988; Wheelen and Hunger, 1989). It is designed to assist executives to determine corporate objectives and to develop an appropriate operational framework and timetable for activities. Strategic management represents the culmination of corporate management development in a rapidly changing economic environment over the last 40 years.

Organizational Planning

Long-range planning was introduced in the turbulent post-war years of the 1950s in an attempt to project environmental trends and to establish objectives and programs to stabilize and guide the firm's operations. In the 1960s, the emphasis changed to business policy and particularly the entrepreneurial decision making of company executives in developing production and marketing systems. The next stage in the 1970s incorporated the coordination of functional managerial efforts under strategic planning to set specific corporate goals after analyzing market opportunities and threats and assessing company strengths and weaknesses. Strategic management emerged in the 1980s and built on strategic planning by analyzing the industry and each business unit's strategy and extending the formulation and implementation of corporate strategy throughout the company. Moreover, strategic management has integrated the planning function with other administrative systems such as management control, communication and information, and motivation and rewards, all of which are supported in practice by an organizational structure and balanced against the organizational culture. This relationship is demonstrated in Figure 1.1 (Hax and Majluf, 1984:74).

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This evolution to strategic management has been well summarized by Barnett and Wilsted (1988:8):

'business policy examined the decision maker; strategic planning studied the process the decision maker used; and what is now strategic management analyzes how to manage the entire process of planning, formulating and allocating across time and among multiple businesses.'

S t r a t e g i c M a n a g e m e n t Integrat ion of A d m In Istra tlv e s y s t e m s , St ructure a n d Cul ture In S t r a t e g i c a n d

O p e r a t i o n a l M o d e s

P L A N N I N G

S Y S T E M ] O R G A N I Z A T I O N

S T R U C T U R E

C O M M U N ICAT 10 N S

& I N F O R M A T I O N

S Y S T E M

S tra te g lc & O p e ra tlo n a I M o d e s

H U M A N SID E

- In d Iv Id u a Is

- g ro u p

O R G A N I Z A T I O N C U L T U R E

M A N A G E M E N T

C O N T R O L

S Y S T E M

M O T IV A T 10 N

&

R E W AR D S

S Y S T E M

C r e a t i o n of c l imate c o n d u c i v e to - a c h l e v e m e n t o f

o rg a n Iza tlo n a I o b Je c tlv e s

- sa t l f ac t lon of In d Iv Id u a I n e e d s

Figure 1.1

While there are great and obvious differences between the governing ethos, ethics and operations of the private and public sectors, there is also some common ground for business management techniques. Strategic management employs a global and integrative approach which is applicable to public administration. Indeed, strategic management methodologies and practices provide the basis for the entire FMIP concept championed by the Department

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of Finance (DoF, 1984). However, the basic objective of the program, arguably, has not been achieved in practice because of a preoccupation with managing resources to the detriment of social justice, program delivery and staff management (Considine, 1988; Nethercote, 1989; Yeatman; 1990). Despite such criticisms, the government has pursued the expansion of strategic management during the past five years. The prescribed rectification process would see departments building upon the base established by FMIP, expanding the role of existing corporate planning, expanding time horizons and embodying qualitative as well as quantitative objectives within their planning schema.

This proposition assumes that the public sector's current trappings of business management are valid and viable tools for public administration and that further enhancement is necessary.

Public and Private Domains

The traditional differences between business and public administration regarding environment, role and focus will continue to be debated; however, many private sector practices have been adopted by governments in pursuit of efficiency, effectiveness and economy. These terms have become the watch words of managerialism and require some explanation.

Metcalf and Richards (1987: 26) note that public administrators are having to learn a 'litany of resource-results ratios' as well as defining these terms and their inter-relationships. The Australian Public Service (APS) describes efficiency and effectiveness in terms similar to those in House of Common reports of the early 1980s which led to the introduction of the Financial Management Initiative in the British Civil Service (DoF, 1989). Efficiency is expressed as a formula:

The extent to which program inputs are minimized for a given level of program outputs or to which outputs are maximized for a given level of inputs.' (DoF, 1989:10)

On the other hand, effectiveness relates to outcomes and the extent to which program outcomes achieve stated objectives. To avoid confusion, DoF observe that the phrase effective administration 'tends to relate mainly to

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efficiency'. Program outcome or impact is determined by the 'consequences of program outputs' and encompasses both the implementation processes and the ultimate effects on clients and the environment. Alternatively, Metcalf and Richards (1987) consider effectiveness to be the comparison of actual and planned output. It is argued that strategic management will allow both efficiency and effectiveness to be measured.

Generally, once definitions are agreed these concepts and indications of performance should be politically neutral. This is not always the case in practice when politicians, in particular, find that descriptive terminology can prove to be double-edged in public and fiscal debate and in policy analysis. Notwithstanding, ail parties would agree that any desired outcomes of public programs need to be placed in the proper context of social management and public organization. Equity is also an issue in this context.

The role of the public domain is to organize collective purpose and pursue collective values and choices through the political process. As such it presents unique management challenges:

'...community values can be sought and concepts of the public interest can be searched for. Equity can be sought and justice can be established; cooperation can be sought as well as competition. Community can be given meaning. The ordering of society can be undertaken.' (Stewart and Ranson, 1988 :15)

It follows that Governments have basic, distinctive tasks such as establishing laws and maintaining order with other public needs and policies established as a condition of government. This means that sometimes difficult choices are required. Compared to their private sector counterparts public agencies and their managers are purportedly constrained by legislation; have multiple goals and unmeasurable ends; have no accountancy-based 'bottom line'; operate in a complex political, economic and cultural environment; offer free or subsidized services; are subject to intense parliamentary and media scrutiny and pressure; require equal treatment of clientele; and, have somewhat limiting organizational structures and straitened employment conditions (Caiden, 1971; Gunn, 1988).

5

Public Management: Problems and Prospects

These similarities and differences have prompted the emergence of a convergence theory of public management described by Perry and Kramer (1983:24) as 'a merger of the normative orientation of traditional public administration and instrumental orientation of generic management1. The notion is that managers in both sectors face coincident and catholic issues in dealing with the environment, decision making, organizing and managing staff, finances, information and change. Indeed, there is scope for mutual benefit as government can gain from 'best practice' processes, suitably adapted, such as strategic management, goal setting and performance indicators, while business may learn about effective implementation of policies and programs. Gunn (1988) cautions, however, that in the public arena, management effectiveness should be the primary consideration followed in turn by efficiency and economy.

Johnson (1983) stresses the historical interchangeability of 'administration' and 'management' citing the works of Fayol, Urwick, Gulick and Barnard. But, he also acknowledges their terminological divergence to the current stage where administration has become synonymous with bureaucratic, rule-bound organization and management is identified with private enterprise and market forces. Administration suggests broader perspectives and monitoring overall performance of tasks within prescribed operating conditions. Management, on the other hand, concentrates on organizing staff and material resources for the 'efficient and effective performance of predetermined tasks' (Johnson, 1983: 171). Administrators have been characterized as arbitrators, literate and legally skilled, mistake and risk avoiders, procedure-driven and time-insensitive. By contrast, managers are protagonists, numerate with economic skills, success seekers and accepting of, but minimizing risks, results-driven and time-sensitive (Kingdom, 1990; Metcalf and Richards, 1987).

Stereotypes and caricatures and associated perceptions abound, even in modern government departments and businesses. Nevertheless, research by Barrett and Fudge (1981) indicated that a lack of public effectiveness, especially in service delivery, was tantamount to incompetence and inefficiency. A more fundamental criticism was that bureaucratic government agencies and their style were intrinsically unsuited to the function they are required to complete. It is in the light of this opprobrium that management

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techniques are seen increasingly as the operational remedy for the perceived defects of public administration.

The implementation of the managerial approach has, according to Halligan and Power (1990), raised the organization and execution of public policies to the status of a philosophy - managerialism - which now shapes the behaviour of the executive branch in general (see also Painter, 1987:179). To some the emphasis given to efficiency aspects of managerialism is reminiscent of Taylor's scientific management, synonymous with Weberian hierarchies, promoting an impersonal view of individuals, transforming mathematics into ethics and encouraging mores in which wastefulness through inefficiency is considered immoral (Rosenbloom, 1989).

The distinguishing characteristics of public management have been summarized by Overman (1984:15) as:

* The inclusion of general management functions such as planning, organizing, control and evaluation in lieu of discussion of social values and conflicts of bureaucracy and democracy.

* An instrumental orientation favouring criteria of economy and efficiency in lieu of equity, responsiveness or political salience.

* A pragmatic focus on mid-level managers in lieu of the perspectives of political or policy elites.

* A tendency to consider management as generic or at least minimize the differences between public and private sectors in lieu of accentuating them.

* A singular focus on the organization with external relations treated in the same rational manner as internal operation in lieu of a focus on laws, institutions and political processes.

A strong philosophical link with the scientific management tradition in lieu of close ties to political science of sociology.

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Hence, when compared to such criteria public servants seem destined to become 'managers' rather than 'administrators'. However, officials will continue to face more formal rules, external political constraints and interruptions and accept more constrained incentive and reward systems than private sector managers. This dilemma may be lessened and the transition made more palatable by Rainey's (1989: 246) contention that:

'As the antigovernment sentiment of the 1980s increasingly confronts the evidence that government is indispensable, it becomes increasingly clear that we must have managers who accept these conditions as challenges... of highly effective public management'

Finally, it would be prudent to consider some timely reservations regarding panaceas in management styles for the government sector (Metcalf and Richards, 1987: 217):

'Public management requires innovation and fresh thinking rather than continued dependence on established practice and private sector models. There needs to be an array of models which reflect the circumstances of departments and the needs of programmes. Some can draw heavily on private sector experience. Some need development since they address problems which the private sector does not face. No single model of management comprehends the range of tasks and functions that government undertakes.'

Managerialism: The Limits of the Debate in the Australian Public Service.

The A^jstraliajij^ thrust for greater scrutiny by, and accountability for, efficient and effective employment of public resources is reflected in the ma7nager]alfst reforms oTtfie "public service. The Commonwealth's program mirrored many Sta^Governments' initiatives and Painter's (1987:177) observations on the causation of those changes are apposite. Firstly, many State functions had acquired multiple objectives and contradictory programs resultingfin~c^M^rand questions of overlap and priorities. Secondly, there was a political reaction against jarge government combined with an economic downturn and associated problems of resource coordination. In response, the stales^dopleTslrnliarpatterns of change comprising greater involvement of

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Ministers ('ministerialization'), new cabinet procedures, amended personnel and financial policies, and revised forms of planning and review.

The modern era of Commonwealth reform in the Labor government began with Ministerial statements on Reforming the Australian Public Service (Minister, 1983) and Budget Reform (Minister, 1984). These papers outlined a reformulation of roles and resources of ministers and sen/or officials, improvements injescjjrce allocation, pe j^nnelpo^^^ An Efficiency Scrutiny Unit was established in 1986 to measure and enhance financial efficiency and to streamline personnel management. Extensive Machinery of Government changes were made in 1987 which reorganized portfolio groupings and restructured Ministerial and cabinet responsibilities. STWA introduced staffing recategorization and job redesign for public servants in 1987 and SEP in 1989 consolidated elements of productivity andj^ltlsR|T1lQg eleTTTents^teb^^

The main supporting pillars of the administrative reforms, FMIP and PMB, came about due, in part, to pressure for public managers to be given greater operational freedom from procedural constraints and for less direct central control of departments by central agencies. These changes have drawn predictable criticism of the appropriateness and application of private sector business philosophy, practices and techniques within the public sector. The 'managing for results' ethos is viewed by some as an attempt to impose authoritarian administration as the driving force behind an organizational machine (Kingdom, 1990). From a sociological perspective, Yeatman (1990) considers that managerialism insulates public systems from the demands and complexity of its environment and ensures that responsiveness is to the executive levels of the line command rather than to the client base. The result, she believes, has spawned an administrative elite steeped in rationalized management ideals and culture, which in turn has 'modernized' the Australian public bureaucratic elite.

Similarly, Mclnnes (1990) considers that the impact of managerialism and the efficiency/smaller government nexus has created damaging performance legacies such as poor public sector morale and career opportunities; elitist and secretive alliances between the executive and senior bureaucrats; selectivity in policy advice through streamlined procedures; limited merit and equity

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commitments and individualistic responses by managers to new devolutionary powers. The anti-managerialist stand is encapsulated by Sawer (1989:138):

The dominance of economic paradigms insensitive to distributional outcomes, the commitment to public sector constraint as a solution to economic problems and the loss of faith in collective provision as contrasted with market provision are as important as "managerialist" practices.'

Others note that administrative economy is only one element in the much broader Hawke reform agenda of restoring political control over the bureaucracy, devising better structures for implementing government policy and scoring electoral points by highlighting reform itself as a political symbol (Halligan, 1987). As such, the appeal of managerialism to politicians has been its usefulness in breaking down existing vested interests and the entrenched powers of professionals-in-government. However, this approach to managing public affairs, while valuable in the short term, may be replaced eventually by traditional administratist values of sound principles and astutely administered structures of precedent (Halligan and Power, 1991).

In summary, the managerialists proposebetteroverall management of the pjubjjc^sjtotor political commaj id ja^ pnactices are seen as .contr j^ use of public money while achieving greater effectjyenessjn..sen^ce^ejiy^ry. Managers are given more freedom and responsibilityJojTjee^ of resources at the working level. On the other hand the anti-managerialists see the effects of this philosophy as a preoccupation with achieving efficiency at the expense of public policy development, public personnel management and client service. As such it undermines the value and ethos of government services and stresses efficiency processes that are more applicable to the marketplace than to meeting publicly determined needs.

The Managers

According to British commentators Metcaif & Richards (1987), once bureaucrats become program managers under the accountancy imperative that derives from managerialist economy, they and their staff can then be

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categorized into four main roles depending on program task and context: administrator, producer, integrator and innovator. The administrator performs a system maintenance function by interpreting and applying general principles to particular cases and working within policy parameters. The producer is concerned with achieving results within policy and resource constraints. Innovators emphasize the development of new policies to achieve existing objectives better or to prompt strategic changes of direction. Integrators use networks to negotiate terms for interorganizational participation, clarify organizational roles and ensure that innovators' visions are translated and communicated effectively and meaningfully.

Whether this regimental allocation of talent improves public sector efficiency or adds to official productivity must depend on the type and scope of the policy area concerned, the degree of administrative autonomy granted to executive managers by their political masters and the importance given to the notion and practice of public accountability.

In the APS, public managers have been given their operational framework through the FMIP. However, FMIP is a transitional stage leading to strategic management. Using Metcalf and Richard's categorization of staff functions, the predominant managerial role can be plotted by comparing the various management paradigms with the changing functions of public officers over time. In the traditional process bureaucracy the administratorholds sway. Under FMIP, the producer is the prominent character who concentrates on results but retains system maintenance duties. The eventual emergence of strategic management will highlight the role of the innovator as a public manager with strategic responsibilities. Integrators support their leaders at each stage.

Still, the APS has introduced FMIP only relatively recently and needs to incorporate its goals fully before significant further transformation can be fully implemented.

FMIP Goals

The express goal of the FMIP when it was introduced to the APS was to apply systematic approaches to the management of resources (PSB/DoF, 1984). Three years later, Finance (Holmes, 1987) expanded the objective to include

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achieving a more efficient and effective use of resources in the public sector. The tools to meet this aim included strategic planning, the formulation of policy proposals and the management of programs and activities. The expected outcomes would be:

improved advice to Government based on better understanding of the long-term resource implications of meeting Government objectives;

* greater ability to identify programs which are not meeting the objectives of Government;

* enhanced capacity to determine priorities between programs as a basis for allocation decisions; and

increased ability of agencies to change the direction or emphasis of programs and activities in line with change in the Government's priorities and associated resource allocation decisions. (PSB/DoF, 1984: 2)

The three main thrusts of FMIP are the reform of the budgetary and regulatory environment to encourage results-oriented management, the development of an integrated management framework in departments, and developing, where appropriate, service-wide standards and practices (Holmes, 1987).

The proponents of managerialism argue that the model is comprehensive in its coverage of both task and staff needs, noting that FMIP incorporates corporate management, program budgeting, organization design, management information systems and evaluation processes. But, it may be too simple to expound, as Jabes (1990) does, that public sector organizations can achieve lasting effects with face-lifts, as long as each operation is carried out with efficiency and effectiveness and accounts for the concerns of the employees. Indeed a department must make a concerted effort to devise and promote strategic policy and operational programs, ensure managers participate in objective setting and resource allocation processes, and grant managers the discretion to apply resources to meet all of the FMIP objectives.

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Program Management and Budgeting (PMB)

PMB is a major component of FMIP based on grouping activities with common objectives into structured programs within each portfolio. Each program contains performance indicators allowing progress to be measured and there is a 'formal system of evaluation to review the efficiency and effectiveness of programs' (Keating, 1990). The Government considers all programs in the context of overall outlay targets and policy priorities and allocates resources accordingly in the annual budget process. Public managers then, supposedly, have a clearcut, rationally based set of guidelines and resources to monitor and control their programs. Public agencies report their performance against these criteria to the Government, Parliament and the public (DoF, 1988).

The PMB structure is highly suited to the Metcalf and Richard's 'producer' role and Yeatman's 'technocratic managers'. However, Holmes (1989) concedes that there may be alignment difficulties in departmental structures where programs are interrelated, clients cannot fit neatly into a single program and there are requirements for cross program resources and management (for example in 'one stop shop' outlets).

Indeed, the organization design aspects and the flow-on effects of determining strategic policies, priorities, responsibilities and relationships within the FMIP/PMB framework are not necessarily straightforward despite the rhetoric of corporate planning.

APS Corporate Strategic Management: Beyond Managerialism

Whatever management model is adopted for the APS will depend on the extent to which public sector senior managers can progress beyond managerialism. Obviously, planners will need to convince politicians of the efficacy of any approach and that their efforts are not directed only to maintaining levels of public service employment or traditional client bases. A traditional caution might also be to ensure that public management is not presented as an end in itself rather than as a means for public policy advancement and community satisfaction. This is contrary to conventional wisdom about means remaining means. Because strategic management would provide a means of survival for public agencies it could be considered to be an end in itself. However, it is

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logical that if a public system is deemed to be required then it should be as self-serving as necessary to preserve its operating domain.

Strategic planning is the basis of strategic management and its employment in the APS is justified in the following manner. A government department serves political, that is social, ends by providing a service to the public which is funded by, and ultimately answerable to, the public. Its operating condition should, subject to review of its raison d'etre, remain healthy and viable. Organizations need to develop defences in the form of long term organizational goals and objectives rather than concentrating solely on the vagaries and minutiae of current policy implementation and fighting policy and management bushfires. A well-organized and prepared public body would also be better equipped to combat the cyclic tendency of politicians to 'bash and blame' the bureaucracy. Moreover, it would adapt more readily to the modified or replacement policy initiatives of changing governments by placing appropriate emphasis on longer term organizational goals and staff programs.

This is almost a form of organizational Darwinism whereby the fittest, best prepared and most flexible entities can survive threatened or actual change. In this context,-organizational survival is not an unreasonable aim (Michael, 1976) and should be considered in Maslovian terms as the basic requirement leading to self-actualization, that is serving the public to the best of its abilities.

Strategic planning would provide a level of stability and continuity for the organization. It would also enable executives to present non-political, organizational development plans to incoming politicians of a different ideological complexion, thereby easing the uncertainty accompanying such a handover. Even if an entire policy area were earmarked to be abolished from the public sector, its controlling department would be better placed to transfer almost intact to the private sector (if that is an option) if it has considered and acted upon its strategic options as part of its strategic considerations. Corporate planning, as it is currently practised within the APS under FMIP is too short term in its outlook of 3-5 years.. It is also overly results-orientated and resource-driven in trying to reduce all longer term objectives into quantitatively measurable performance indicators. (Glasson and Goode, 1988) The corporate planning process is a good starting point for a sector in transition after significant reform but it represents a micro rather than a macro approach to planning. On the other hand, the transition from corporate planning toward

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strategic management will require public managers to travel beyond managerialism and to think in more global terms.

Aim of the Paper

This paper reviews the concept of strategic management for the public sector and submits the following proposition:

The FMIP corporate planning model does not provide sufficient long range planning capability for the public sector. Adapting strategic planning techniques from the private sector would enable Commohwealth departments to create a strategic management framework and to incorporate qualitative as well as quantitative organizational objectives as part of the enhancement of the term 'public service'.

In seeking to follow up this proposition Chapter Two canvasses the theory behind the interaction of organizations and their environments and examining ways in which public sector organizations contend with their surroundings and circumstances. The concept of environmental filtering at organisational, sub­group and individual levels to create internal perceived environments is introduced. Filtering is then related to an evolutionary model of strategic management and used to review APS reforms of the 1980s.

Chapter Three reviews organizational decision making in complex and uncertain environments and the role of filtering before constructing a contingency model. Chapter Four considers the role of strategic framework planning in organizations and the process of scanning the relevant environments. Chapter Five explores the operational practice and mores of the APS and juxtaposes strategic management paradigms to form a meta-pianning model. The trappings of managerialism and public leadership under FMIP/PMB are examined in some detail as a prelude to reviewing HRM practices and prospects in the APS in Chapter Six. Chapter Seven then defines the context and constraints of strategic planning in the public sector. Several models of planning are investigated and related to recent experience within Commonwealth Departments and other public agencies in Chapter Eight. Several lessons are derived from a comparison of local and overseas procedures in compiling strategic/corporate plans for public agencies.

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Finally, a process for strategic planning based on practical experience in the Department of Social Security and other public agencies is recommended as the revised benchmark for enhanced long term planning in the APS and as a basis for effective strategic management of public organizations.

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CHAPTER 2

THEORY OF PUBLIC SECTOR ORGANIZATION

Introduction

All organizations exist to achieve a particular purpose. They can be regarded as collections of people involved in decision making or as devices (tools) for meeting objectives (Simon, 1957). However, if the machine/tool analogy is extended it would incorporate considerations such as the sharpening and maintaining of cutting edges; the maintenance and oiling of the component parts; power requirements, sources, and stability; the provision of raw materials and distribution of finished items; the setting of output targets and operating tolerances; the skill of operators and a control system reporting on the acceptability of the finished product. The open system view recognizes these and many other issues and envisages organizations exchanging information, energy and materials through permeable boundaries with a broader suprasystem: the environment. (Kast and Rosenzweig, 1985)

Much has been written about the nature, substance and effects of the environment and particularly how it can be categorized and accommodated within organization theory. Jurkovich (1974) identified four main environmental factors - complexity, the routineness or non-routineness of a problem-opportunity state, the presence of organized sectors and the direct or indirect relationship of these sectors - and constructed a core typology of 64 types. Other researchers concentrated on volatility/stability, hostility, turbulence and interconnectedness aspects. But, all environmental theorists have been confronted with the 'commensurate complexity postulate' indicating that a theory of social behaviour cannot achieve simultaneously the goals of generalizability, accuracy and simplicity (Dess, Ireland and Hitt, 1990).

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This chapter addresses concepts of the environment and its relationship with public sector organizations. The idea of environmental filtering is developed and used to review APS reforms and decision making.

Concepts of the Environment

The environment can be considered in textual terms (Emery and Trist, 1965; Cooper, 1990) as an intermeshing of intangible pressures which envelop and penetrate an organization. Aside from the physical environment, each organizational entity exists symbiotically with others in a network of open systems which is subject to legal, political, cultural, peer, group, familial, religious, economic, ethnocentric, historical, informational, psychological and other influences. Each of these sociological domains can contain a host of subordinate or allied forces. Consequently, single or combined factors can affect the behaviour of organizational elements in their individual or combined operations.

Many of these influences are latent but many may become manifest. Kast and Rosenszweig (1985:137) have described the general environmental characteristics for organizations as follows:

Cultural- The values and norms of society including views on authority, rationalism and the science and technology that combine to define the nature of social institutions.

* Technological - The extent of scientific and technological knowledge, potential, application and progress.

* Educational - The population's literacy level, the sophistication of the educational system and proportion of professionals and specializations in the community.

Political - The nature of political organization, power, climate and party systems.

Legal - The constitutions, jurisdictions, legal system and specific laws affecting the operation and control of the organization.

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* Demographic - The statistics of the human resources of society including distribution, age, urbanization and client/customer particulars.

* Economic • The balance of private versus public ownership, economic planning, monetary and fiscal polices and frameworks.

While the effects of the environment can be described it is more difficult to define or conceptualize the environment itself. One way is to relate the multifarious components of the environment to the electromagnetic spectrum with the organization having a series of wideband receivers and an array of operators tuning in to appropriate frequencies and modulations. As with all communications systems, reception may be clear, garbled or non-existent (even when most needed). Alternatively, members of the organization may be pictured sitting before a bank of television sets all on different channels, with specialists concentrating on single screens and generalists scanning several sets. (This analogy may be closer to actual practice in some organizations where there is a computer terminal on each officer's desk.)

Obviously, the environment affects individuals as well as groups. Indeed, the overall perception of the environment and its contextual meaning for the operations and viability of an organization may well depend on the cognitive perceptions, acceptance thresholds and reasoned expectations of each organizational actor. Notwithstanding, the consequences of environmental activity will depend on a combination of separate and cumulative component interactions. Intellectual reactions to the environment are inherently dynamic: they can be self-cancelling, if for example a positive response to one environmental factor encounters an equal and opposite reaction from another factor; or there may be no impact if the information is patently irrelevant or incomprehensible and hence discounted. Similarly, environmental messages may reinforce existing ideas, policies or decisions, create new problems or identify new issues. If these responses are accepted and articulated they may trigger further, cascading feedback which could be perceived as active or passive, positive or negative (or some combination thereof) by the organization and by other sections of the environment.

These concepts and processes are further complicated by the horizontal and vertical overlapping of environments within organizations. Perrow's (1986: 124) description of the environment as a 'nested-box problem' where inside

19

each box is a smaller box, similar to a set of Russian grandmother dolls, conveys the idea of simultaneous complexity and containment, at least within a particular structure.

The amplitude of various sections of this continually changing, all pervasive and intrusive environmental web will oscillate between benignity and chaos. Emery and Trist (1965) described the content, movement and growth of the environment as having four discernible conditions: placid-random, placid-clustered, disturbed-reactive and turbulent. But, the transition from one activity state to another is problematic and defies exactitude. Moreover, the rate of change and increasing complexity of the technological and social spheres may create more environmental instability than other influences. Furthermore, autonomous conditions of stability, diversity, hostility and complexity will frustrate an organization's ability to comprehend its surroundings as well as forcing structural changes or processes (such as centralization in simple states or decentralization in a complex situation) to match its operations to the environment (Mintzberg, 1981). While these effects are readily apparent in the private sector, Joubert (1988: 43) observes that:

'.. the public sector is operating in an environment that is neither simple in terms of aims, nor stable, nor lacking in choice when it comes to means.'

The aggregate environment can enhance, threaten or have no effect on an organization (Hbreniak and Joyce, 1985). The reaction it evokes will depend on the conditioning and strengths and weaknesses of the group and the individual. A systemic environment with the power to intimidate or stimulate reassessment and analysis is essentially a human construct: it is formed because of resident perceptions following judgmental filtering of environmental signals and hence assumes a reified form. However, applying some of the hard-learned lessons of history it does not pay to be either paranoid or complacent about the environment. Hence the need to explore the interaction between the environment and its subjects.

Environmental Filtering

Organizations and the individuals and groups in them have mental shields or filters which can admit or deflect incoming environmental signals (Kast and

20

Rosenszweig, 1985; Ring, 1985; Foster, 1991). The individual has personal protection comprising personality, character, ego, socialization and other psycho-social defences. Moreover, McWhinney (1968: 269) observes that one of the organization's basic functions is:

'to buffer the individual from the impact of the chaotic interrelation of everything to everything. Ideally, organizations free the member effectively to deal with just so much of the environment as his intellect and psyche permit. The organization, through compartmentalization of tasks and responsibilities, circumscribes for each member the domain of environmental factors with which he must be concerned, and permits a match to be established between the complexity of the environment, the type of role and the modalities of decision-making which are appropriate in the functions performed by the members.'

The organizational 'moat' has its mission, culture, goals and objectives interwoven within its structure, technology and resources. These defences are multi-layered and are designed to stop or divert unwanted, irrelevant or pathological environmental meteorites from reaching the core elements of the body. Kast and Rosenzweig (1985) see these filters operating at the various boundaries within an organization - that is, between the societal environment and the strategic level, between the strategic and coordinative subsystem and the coordinative and operating levels. Beneficial, reinforcing or organizationally neutral or benign forces will be allowed to enter. Undesirable or unknown elements will be channelled into an assessment maze where they can be investigated, identified, countered, modified, defused, mollified or deferred.

When it comes to making organizational decisions involving the environment, limited human faculties and information processing capabilities and the constraints of information technology mean that all the facts and hence the 'real' situation will never be fully known to decision makers (Simon, 1948; Brewer and deLeon, 1983; LaPorte, 1975; Ring, 1989; Liu et al, 1990). However, these same protective filters will also sift information and data from the external environment and compare new intelligence against current or planned policies. For the purposes of this study data is putatively factual and generally quantifiable knowledge, while information is a structural form of speculation and may or may not be quantifiable. This filtering activity usually operates at senior management levels and serves not only to limit intrusive

21

influences but also to buffer or protect the organization, thereby creating a degree of stability, autonomy and independence (Kast and Rosenzweig, 1985). However, filters are also active at lower organizational levels, and between organizations, as will be discussed shortly.

The primary organizational filter is a judgemental device - a corporate sensitization and awareness determined by internal structure, technology, resources and contextual settings. A diagrammatic representation of the organizational filter is shown at Figure 2.1. Structure refers to hierarchy, specialization, centralization/ decentralization and control and reporting chains. Resources include funding, staff, equipment, facilities and information. Technology incorporates process, procedures, conversion methods, service, plant, hardware, software, communications networks and information exchange media. Ideally, data from the external environment is separated by the filter into its component segments and compared against the three determining thresholds. If the detail falls below preset levels of operational expectations, determined by current operations, it is deemed to be within normal operating parameters and for all practical purposes it is ignored; however, data at or above a particular threshold is deemed to have the potential to affect the organization and will be passed to the next stage.

This 'processed' data combines with other speculation (which might accompany the raw data) about the organization's future and is reviewed against contextual factors which ultimately determine the shape and character of the organization. Here, forces such as corporate culture and values, the strength and prevalence of leadership, management style, autonomy, personality, organizational ethos and mission, short and long term objectives, achievement orientation and political systems will influence the acceptability and perception of messages from the external environment. Indeed, Davis and Schwartz (1981) believe that a corporation's culture is such a dominant force that it will filter top management's perspective to the extent that it will limit the strategic options they are willing to consider.

In turn, the compared and contextually relevant intelligence will provide an input to the existing internal environment comprising the organization's own structure, resources and technology. The system is dynamic as the internal environment continues to set the thresholds for the data and context sections of the filter and constantly feeds organizational messages back to the external

22

environment. Filtering is similar to the operational and control phases of the Smalter and Ruggles (1966) model in identifying functions, structures, processes, style and comparison levels.

The filter does not distinguish between data that will be used for programmed (routine) or non-programmed (unique) decision making (Simon, 1960) within the internal environment of the organization. However, there may be some difficulty in distinguishing messages destined for non-programmed decision­making areas from the mixture of qualitative and quantitative information from the environment which proceeds directly to the contextual element rather than being compared within the data section.

E n v i r o n m e n t a l F lite rln g :vw:-:wXv>!ww:-ra^^

D A T A I N F O R M A T I O N

9 tru e tu r* R i i o u t c o T e c h n o to av

O U T P U T

C O N T E X T

IN T E R N A L E N VIR O N M E N T fc-

Figure 2.1.

Problems can arise when filtering mechanisms are bypassed and the self-contained atmosphere of internal, or task, environment is breached. For example, if 'normal' communication channels or chains of command in a public hierarchy are ignored and lower echelons in the organization receive the same

23

unfiltered broadcast information as higher management, intra- and inter-organizational relationships may be disrupted or confused. Figure 2.2 shows the location of filters in an organizational setting. Media reports and rumours are examples of unfiltered intelligence and they are ignored at their peril by managers who may need to act quickly to counter any breach with an organizationally acceptable response. Alternatively, politically astute managers or other organizers may wish to take advantage of a resulting 'mobilization of bias' (Bachrach and Baratz, 1962) and decide to take no action at all until situations develop to a point where they may benefit.

Environment Environment >

1'

O rga nlzatlon

S ub-group

Individual

Filters

Figure 2.2

Similarly, because buffering can never completely isolate internal operations, in the Thompsonian sense of protecting technological cores (Thompson, 1967), raw and 'processed' information will inevitably be compared at the organization's subsystems, and could, depending on the disparity, result in fluctuating confidence in leadership or serious questioning of the validity of organization policy or direction. Indeed, continuing inconsistency or incongruence of this nature may lead to goal displacement through

24

destabilization and eventually operational dysfunction if relevant feedback to the strategic management levels is ignored or discounted.

Major environments can also be formed between large organizations engaged in allied or competitive fields. Some bridging may occur in formal interdepartmental connections, collocated bureaux, third party contacts or through a common client base. This may lead to intra-organization cohesion once common 'enemies' and 'allies' are identified which, in turn, may increase inter-organization conflict. Alternatively, internal factions may emerge which sympathize with external groups thereby reducing overall organizational strength and countering the beneficial effects of filtering and buffering.

Filtering generally highlights the conservative nature of organizations and policies and reflects Allison's (1971) bounded rationality model: decision makers are reluctant to re-define current policies or futures and tend to stay with a dominant course of action. Previous decisions and policies can distort incoming information and promote 'garbage canning' and 'group-think' attitudes (Cohen, March and Olsen, 1972; Rosenthal et al, 1990). The effect is cumulative, especially in highly turbulent environments such as crises, when operational lag and load increase, reducing lead and gain: that is, the system may be swamped by events (Brewer and deLeon, 1983). An alternative view is that decision makers' beliefs about the environment significantly affect organizational performance outcomes regardless of the actual environment (Waddock and Isabella, 1989).

Environmental Filtering and Strategic Management

Just as the filters shown in Figure 2.2 interpose between the environment and the various operational elements of the organization, they also operate vertically and horizontally between environments, organizations, organizational sub-groups and individuals. While a simple matrix would show the discrete interactions between each of the aforementioned major elements, it would not reflect the dynamic nature or frequency of the contacts, the degree of impact or influence, or the complexity of the many inter-reactions resulting from filtering. Increasing or decreasing environmental turbulence obviously complicates matters further. Figure 2.3 gives a 'snap-shot' indication of the degree of response to a series of messages from one environmental influence following filtering interaction.

25

g Organization a Sub-group m Individual

: • '.tii •

ft •

mm •

Message 1 Message 2 Message 3 Message 4

response! Environmental Signals

time

Degrees of Impact of various environmental messages on the organization, sub-groups and Individuals

Figure 2.3.

This array of filters represents the operational framework and the related personal/institutional values structure for organizations and indeed for environments. By their nature they are generally regarded as convenient defensive networks to retain outmoded but comfortable practices while any change is usually incremental. However, more radical change is possible depending on the levels of internal resistance and the strength of external input. In this instance, arrays can provide a phalanx to spearhead organizational growth and development.

Gluck's Strategic Management Model

The four phase model of Gluck, Kaufman and Walleck (1980) (' the Gluck model') examines the relationship between formal planning and effective strategic performance and provides a useful vehicle to relate environmental filtering and public sector operations. The model outlines four sequential phases (or evolutions) each more advanced than its predecessor in terms of issue formulation, strategic alternatives, management participation and the

26

effectiveness of implementation. A diagrammatic representation of the four phases and the idea of filter arrays as thresholds between each phase is at Figure 2.4.

The First Phase involves basic financial planning and stresses operational control, annual budgeting and functional performance against budgetary targets. The Second Phase progresses to forecast-based planning as a more effective means for (growth) planning and employs environmental analysis, multi-year forecasts and better, if somewhat static, resource allocation methods. Phase Three concentrates on externally-oriented planning as a means to increase organizational responsiveness to markets and competition. Highlights of this stage include thorough situation analysis and competitive assessment, evaluation of strategic alternatives by individual strategic business units (SBUs) and dynamic allocation of resources. The Fourth Phase is mature, strategic management which aims to coordinate all resources for competitive advantage through three main mechanisms: a strategically chosen planning framework, creative and flexible planning processes that stimulate entrepreneurial thinking and a supportive corporate values system and climate.

The value system for each stage provides the key to understanding the evolution to strategic management: it begins with the basic tenet of meeting the budget; it then builds by predicting the future, progresses to thinking strategically and finally 'creating' the future. The common value themes for organizations practising strategic management emphasize teamwork, entrepreneurial drive, open communication and 'a shared belief that the enterprise can largely create its own future, rather than be buffeted into a predetermined corner by the winds of environmental change' (Gluck et al: 260). These sentiments are echoed by Bell (1983) who sees many benefits in 'futuristics' in terms of investigating alternative futures. Bell (1983:11) raises the possibility of increasing the chances of desirable futures by a more comprehensive examination of goals and values of those who are likely to be 'affected by particular stabilities or changes'.

27

Fitter

Planning Effectiveness

Basic Financial Planning

PHASE 1

Filter

Corporate Planning

PHASE 2

Strategic Planning

PHASE 3

Strategic Management

PHASE 4

Evolution of formal strategic planning

Figure 2.4

Filtering and APS Reform

In the APS, officials have always been charged informally with policy formulation and the formal implementation related to legislation. Responsibility for basic staff and financial planning is required, that is, meeting the criteria for Phase One of the Gluck model. The 1983 introduction of FMIP required fundamental changes in traditional values and practices to encompass corporate planning and public management techniques; this equates with the forecast-planning phase (Phase Two) of the model. However, the planning horizon remains limited to 3-5 years. Elements of the Third Phase, strategic planning, are emerging in the form of greater devolution of resources from the central agencies and the internal re-alignment of functions and responsibilities

28

in departments. However, the other features of the Third Phase and the extended creativeness and vision of strategic management, Phase Four, are missing so far as the formal requirements of the APS are concerned.

Notwithstanding, an extensive filter array had to be reset in order to expedite value shifts in the APS, which was treated as an organizational entity, from Phase One to Phase Two. In the event, it could be argued that this occurred more by government decree and imposed changes to structure, technology and resources than by persuasion of, and voluntary action by, the APS. These cultural changes are acknowledged as requiring time to become accepted and despite comprehensive alterations of organizational factors the overriding force for change lies within the contextual control of the filtering staff, most commonly the Senior Executive Service (SES).

As part of the political agenda for reform, APS environments were made deliberately more turbulent for organizations, sub-groups and individuals. Also, organizational interaction was exploited, organizational cultures were courted or threatened and individuals were subjected to a well conducted public relations campaign emphasizing the potential advantages of the proposed changes. A steady stream of environmental messages, delivered in the form of meetings, seminars, publications and ministerial statements, were directed at the entire public service by the Government. Over time, each department, sub-group and individual was sensitized (arguably the lower levels had little choice) until the response (acceptance or resignation) reached the threshold enabling advance into Phase Two. The reforms were legitimized by the passing of appropriate legislation.

In terms of the environmental filter (Figure 2.1) the transition to Phase Two saw structural changes occurring in departmental reorganization, devolution of financial and personnel management and restructuring lines of accountability to install the Minister as the formal head of the department. Resource allocations were modified by revised budgetary processes (principally FMIP and PMB) and an extension of financial planning to include a three year forward estimate period. Technology changes were emphasized as the basis for establishing computerized management information systems for collecting data, reporting on program implementation and conducting evaluations. Contextual elements in the filter centred on modifying corporate cultures and values both from the top-down' and from the 'bottom-up1. (Figure 2.2)

29

Management styles and potential improvements were stressed to managers and their controlling bodies - first division officers and unions respectively. Also, departmental autonomy of process was touted as a major advantage of change along with the promise of greater effectiveness resulting from corporate planning. Traditional accountability of the public service to the political executive and the need for increased productivity were accentuated constantly as the basis for reform.

The Politics of Reform

In retrospect, the contextual elements of the reform process were well handled by the politicians. They appear to have heeded Beckhard and Harris' (1977) suggested program for managing the political aspects of transition by: identifying target individuals and groups whose commitment was needed, defining a critical mass required to ensure effective implementation, and finally, developing and implementing a plan to obtain commitment from the critical mass. The Executive acknowledged that it was essential for organizational leadership to be involved and supportive of change. The reforms therefore required the active cooperation of senior APS officers who accepted the government's managerialist objectives and their likely consequences. In a classic stick and carrot approach, senior officers were offered the prospect of greater departmental control of routine financial and staffing processes while at the same time, the terms of their personal tenure were changed from a virtually permanent status to a limited, contract basis with general performance requirements.

Moreover, as noted in Chapter One, major changes were introduced in stages - 'Reforming the APS' policy paper in December 1983, public service streamlining and Efficiency Scrutiny Unit announcements in September 1986, the Machinery of Government changes of July 1987 - rather than being presented as a fait accompli and introduced en masse. Other coalitions and agenda were also in evidence and needed to be addressed. The Departments of Treasury and Finance, both powerful advisers to the Government, championed the FMIP/PMB reforms and designed their implementation in acceptable APS format and language. Indeed, Finance had established revolutionary changes in financial computing infrastructure and presaged service-wide changes in the late 1970s. While seemingly losing some overall control and functions as a result of these reforms, Treasury offset these

30

'losses' by obtaining more influence in less detailed and time consuming areas especially in regard to 'macro-economic' policy making. Sub-groups and individuals in the public service unions were also co-opted in return for promised changes in staffing policies and the application of award restructuring to the public workforce - a useful indicator and leader in industrial relations reforms. Here the context element of the filter triggered the notion of employee reward, incentive and work values. (A subsequent chapter will deal with the area of human resource management in the APS in greater detail.)

Other methods used to destabilize the status quo and paving the way for general acceptance of reforms included the promotion of internecine rivalry between Treasury, the Public Service Board, Industrial Relations and others. Hence, the politicians appealed to bureaucratic politics (Allison 1971; Caiden, 1971) with its notions of authority, status and power. As Tichy (1983) notes, resistance in these polities, at the individual level, relates to potential loss of power, an overdependence on powerful people whose influence may be affected by change or a perception that change would 'unleash competition for power1 which would be highly traumatic. At the organizational level, resistance might form due to perceived threats to dominant coalitions, a possibility of reduced resource allocations or the possibility of writing off sunk costs (the previous basis of power and status) within the organization.

In the event, the political agenda of regaining ascendency over the bureaucrats (Halligan, 1987) was assisted by the bureaucrats themselves who took the opportunity to glean operational advantages and to salvage some prestige from a potentially destructive transition. Indeed, departmental heads could be described as public entrepreneurs (Polsby, 1984) in achieving particular gains for their organizations and themselves. The amalgamation of several departments in 1987 resulted in more resources and greater scope of operations for the more skilful and experienced practitioners - in other words, organizational growth and more 'resident' power (Frantzich, 1983; Bell, 1983 ).

As a result of the shift to Phase Two, the APS is still, slowly, resetting its internal environment and respective corporate cultures. It will need to be convinced of the efficacy and rewards of yet another methodology to improve effectiveness, that is a formal move to Phase Three, after the recent and far-reaching reforms. Perhaps one of the major results of the reforms is that basic decision-making processes have been renovated, thereby highlighting issues

31

of complexity and uncertainty in a modern public sector. These facets will be examined in the next chapter.

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CHAPTER 3

COMPLEXITY, UNCERTAINTY AND CONTINGENT DECISION MAKING

Longstanding ideas and practices concerning decision-making in the APS have encouraged a disjointed incrementalist approach (Hirschman and Lindblom, 1962) to counter short-term uncertainty and have supported reactive methods to retain stability in the face of immediate environmental turbulence. The paradox is that new managerial and administrative arrangements, designed to reduce environmental uncertainty, are themselves suspected of generating uncertainty because "we know so little about the organizational and environmental consequences of implementing those new arrangements' (Michael, 1973:117). In practice, any change will need to be trialled in a jointed incremental (Hall, 1980), or 'reactive plus' manner until the institution accepts them over time as the new routine.

Gawthrop (1984: 50), an advocate of the use of organizational design methods to transform public sector management from incremental to anticipatory change (that is decision making) frameworks, has described the two extremes of styles in terms of ontological values and open systems characteristics as follows:

Change Framework

Ontological Sense

Incremental-reactive -consolidative

Anticipatory-innovative

Purpose Consequence History Order

ateleological atomistic spatial vertical

teleological holistic temporal horizontal

Large-scale and complex organizations such as Commonwealth departments are geared to the present and their incremental and consolidative responses:

33

'provide a specific network linking basic individual characteristics to organizational strategies of change in a manner that is mutually compatible, congenial and re-inforcing.' (Gawthrop, 1984:53)

Anticipatory and innovative organizations which strive toward strategic management are geared explicitly to the longer, not immediate, future. This implies giving greater attention to longer-range planning than is currently allocated. But, a procedural transition will be needed to accommodate a new planning regimen within the organization: from the reactive to the pro-active, from fortuitous feedback to designed control systems and from satisficing to goal-oriented, trial-and-error decision making. Risk is inherent in both decisional approaches but the more comprehensive methodology tends to reduce overall risk and the level of unintended consequences.

Further, while disjointed incrementalism appears to be a natural and preferred means to reduce situation/program uncertainty to acceptable levels for a short period, and particularly for crisis management in the face of danger, time and resource constraints (Rosenthal et al, 1989), its success over the longer term is questionable. Alternatively, while jointed incrementalism may, or may not, achieve the same short term reductions in uncertainty, it has the potential to reduce specific environmental uncertainty to a minimum over the long term. However, the type of decision making used in organizations, let alone the APS, will depend on a range of variables - internal context, strategies, design options and the external environment - which implies that contingency modelling may be able to assist decision makers in their deliberations.

Tosi and Slocum (1984) reject the deterministic criticisms of contingency theory and support Thompson's (1967) thesis that as well as being shaped by the environment, organizations are also influenced by choices made by members about strategy and organization design (Hbreniak and Joyce, 1985). They reason that reducing uncertainty in the environment, both externally and internally, by innovation, strategic choices and proactive planning, should increase comparative advantage over other organizations and reduce conflict within the organization. Strategic choices would influence the contextual element of the environmental filter as well as organization design, structure, location and technology. The decisions made by the organization would be fed back to all internal components and to the external environment. A schema

34

based on Tosi and Slocum's model and showing the various relationships and processes is at Figure 3.1.

Organizations also attempt to optimize their structure to reduce uncertainty caused by a complex environment (Lawrence and Lorsch, 1967). This is achieved in some measure by the process of environmental filtering which produces a more relevant internal environment within which organizational decisions are conducted. However, as seen earlier, the perceived environment may differ markedly from the 'true' external environment and this misalignment can affect subsequent decision making processes by the organization and its sub-groups and individuals.

External environment

I FILTER

Internal I environment I

1 *

Organizational structure, re sources,

location and technology

Decis ion making

Strategic c h o Ic e s J

Organization design

Figure 3.1

35

Filtering and the distribution of intelligence leading to decision making within the organization involves complicated information processing and channelling. Galbraith (1973) believes that increasing task uncertainty increases the information processing requirements of decision-makers, defining uncertainty somewhat narrowly as the gap between existing information and that required to perform the task. This approach clearly delineates between external and internal (task) environments. It also recognizes, by implication, the filtering process and the role of organizational design and strategic choice in creating internal perceptions of environments. Brewer and deLeon (1983) discern uncertainty for decision-makers more broadly as entities or situations which are indeterminate, problematical or not clearly defined, or where dependable, reliable or sure knowledge is unavailable.

In yet another approach, Miles (1980) considered uncertainty in terms of the lack of information for predicting future events and highlighted five main areas of uncertainty of relevance to managers:

* information availability, accuracy and clarity,

* cause-effect relationships,

outcome preferences,

time span of feedback, and

* the inability to assign probabilities to events.

Although these environmental pressures would seem to conspire against the best efforts of managers, Hrebiniak and Joyce (1985: 338) suggest that the open-system nature of organizations will provide some in-built assistance:

'Even if it is assumed that the environment of an open system is highly deterministic, controlling fully and precisely the ends or outcomes that are tolerated, organizational choice is still possible, due to the control over and selection of the means by which the prescribed outcomes may be achieved. Even in the most constraining and debilitating case of environmental determinism, equifinality indicates that organizational

36

choice nonetheless exists as a separate, independent variable important to development of a dynamic equilibrium with the external environment.'

Indeed, exercising these choices should include reducing internal uncertainty and decision overload. Galbraith (1973) concentrates on reducing decision overload by reducing the need for information, through the creation of slack resources or self-contained tasks, or by increasing processing capacity through investing in vertical information systems or creating lateral relations. The environmental filter serves also as an initial overload protector or circuit breaker by comparing incoming data against resident data about the organization's structure, technology and resources; it continually resets the reactive threshold of the data filter so that ideally only exception reporting is passed on for further examination. This takes place in the contextual section of the filter which combines filtered data and unfiltered information. Here the relevance of these external messages is considered and only organizationally pertinent intelligence is transmitted to the internal environment. A very narrow set of criteria within the filter may exclude crucial operational information resulting in unwarranted protection and distorting the internal environment and its responses to incoming signals (Brewer and deLeon, 1983). While the filter may prevent immediate overload, sustained input will eventually overcome the conservative and lag-producing nature of the filter and the internal environment will correspond to its external counterpart. Along the way, however, the organization should have recognized the trends, exercised strategic choices and taken action along the lines suggested by Galbraith.

Brewer and deLeon (1983:152-153) suggest a range of procedures to reduce uncertainty including modelling (forecasting, computing and 'strategizing'), generating and testing alternatives (heuristics, simulation and experiments), acquiring information (collecting, computing and investigating) and affecting consequences (contracting with the environment, diversifying and refining objectives). Brewer and deLeon also examine a less 'rational' set of remedies of reducing uncertainty based on the contribution offered by Laswell and concentrating on improving estimation as a function of decision making. In particular, the notion of contextual mapping is important, not only as an analytical tool for considering policy, but also as a major influence in filtering environmental data and information. Contextual mapping is:

37

'a comprehensive framework and collection of procedures intended to improve one's understanding of relationships between parts and wholes; to provide a sense of their interaction through time, from the past, to the present, and into the future; to remind the analyst of the multiple perspectives, goals and needs at stake in a given problem setting; and to give a basis for assessing the meaning or significance of each problem component including the symbolic or analytic representation of each. (Brewer and deLeon, 1983:152)

In this light, contextual mapping as a strategic decision process conducted by individuals, sub-groups and the organization itself, embraces and reinforces the internal culture which is a critical input to environmental filtering. To continue with the navigational metaphor, the cultural system provides its members with 'cognitive maps with which to understand and influence organizational behaviour.... and provides a social justification for what people are doing.' (Tichy, 1983: 254)

Other methods designed to assist decision making cited by Brewer and deLeon (1983:153) include the use of developmental constructs as an explicitly policy-oriented device (combining expert advice, scenarios, model building and normative speculation) to enable decision makers to adapt quickly to emerging conditions in changing contexts. Similarly, prototyping provides a means for determining specific consequences to those most likely to be affected by changes - in other words, directed trial and error implementation of decisions. More conventional forms of estimation exist in scenarios, games, computer simulations and the creation and use of decision seminars.

The employment of any of these alternative techniques, or any combination of them, would depend on existing or planned organizational designs and available strategic choices. All would be subject to the state of hostility, complexity and turbulence of the external environment as filtered to become the perceived environment. Regardless of the internal measures taken, the environment would continue to provide challenges and problems for the organization as a whole which need to be faced and overcome if the body is to survive and meet its stated mission.

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Contingency Model - Organizational Decision Making after Environmental Filtering

A contingency model for organizational decision making can be derived by juxtaposing the contextual environment model of Emery and Trist (1965) and a matrix of decision making options based on Thompson's (1967) model of cause/effect relationships and outcome preferences. (A similar approach was employed with success by Kouzmin and Jarman in 1989 to construct a crisis decision making model.) The following sections describe the construction, various components and operating levels within the model. A complete model is shown at Figure 3.2.

Internal Environment

As noted previously, Emery and Trist characterized the environment affecting organizations as having four major stages or conditions: placid-random, placid-clustered, disturbed-reactive and turbulent. The environmental filter will create a perceived, internal environment which may, or may not, reflect the actual nature of inter-relationships within the original. The filter will, by design, allow only the relevant external environments to be considered, that is 'elements over which the organization may have no direct control or formal authority but which can affect the outcome of the organization's mission' (Gawthrop, 1984: 61). In the main, Emery and Trist's nomenclature for external conditions can be retained for the internal environment with only minor adjustments. For example, 'stable' is preferred to 'placid-random' as it indicates that no major perturbation to the normal operating pace or condition of the organization has taken, or is taking, place. Of course, that level of operation may be significantly different from that of other organizations - in the extreme it may appear to be frenetic - in relative or comparative terms. 'Placid-clustered' and 'disturbed-reactive' reflect adequately the decreasing stability of the next two quadrants. However, 'organizational turbulence' reflects more accurately than simply turbulent' the instability and uncertainty within a body and the internal crises that it can foment.

It is important to note that there may be residual turbulence in any working environment due to previous interaction with outside influences. Moreover, internal uncertainty or insecurity may be generated by incongruent policies - a misfit or misalignment with the external environment - or dysfunctional

39

management. This turbulence will be conveyed to the contextual element of the filter and reflected in the consideration of outside intelligence.

Before problems, data or information concerning or connected with the organization are assigned to decision making processes, the major rational factors which support the environmental filter - structure, technology and resources - will, again, determine to some degree the manner and actual decision mode to be adopted for that particular issue.

Structure

Structure in an organizational context includes vertical and horizontal management control systems and operating forms (hierarchical and matrix systems), consideration of spans of control and specialization, the 'tightness' and 'looseness' of internal coupling (Perrow,1986), the degree of centralization/ decentralization and devolution and command reporting chains.

Structural arrangements in Thompson's (1967) framework incorporate bureaucratic, collegial, representative and anomic forms resulting from the appropriate combination of means and ends. They can be seen to relate to and align with the matrix formed by the environmental quadrants. That is, a stable atmosphere encourages bureaucratic structures which are effective in managing simple and routine tasks and operations. While Thompson nominates an anomic structure for organizational turbulence, a seeming contradiction in terms, the underlying notion is that formal structures under pressure may dissolve, are ignored or re-form into highly uncharacteristic configurations until the instability subsides. During disasters or other extreme circumstances, where the structural integrity of the organization may be affected, control of its operations may be transferred temporarily to an outside body. Even under normal operating conditions there will be some lead, but more likely lag, in structural adjustment to the changing rates of organizational uncertainty and it would be reasonable to assume therefore that bureaucratic, collegial or representative structures could exist in inappropriate conditions.

Technology

Technology is the nucleus of an organization's operations and provides another variable to be considered for decision making. Technology

40

incorporates an organization's functions as well as its facilities: it can describe operator and machine processes (cognitive and physical), existing rules and procedures, information and communications networks and flows, and control of input and output sequences.

In matrix form, comparing issue type and organizational workload enables four main technology categories to be derived: basic (low workload/simple issue), optimized (low workload/ complex issue), specialized (high workload/ simple issue) and dedicated (high workload/ complex issue). Under stable operating conditions basic technology (again a relevant term as equipment and technological infrastructure may range from hand-held calculators to mainframe computer networks and management information systems) would suffice to meet the routine throughput of organizational business. If workload remains relatively low but the issues requiring attention become more complex, some optimized or matched technology may be allocated for the duration of, for example, a time-limited project or study. A simple issue requiring high workload will generally attract specialized technology, such as meeting 'rolling' deadlines in multi-phased projects; or, in program-related studies that are undertaken over a longer period and which require frequent analysis, evaluation and reporting. If environmental pressure produces complex issues and high workload, the organization would tend to dedicate technology allocated to that set of tasks. Taskforce procedures, for example, would enable a consolidated response and release whatever technology is deemed to be suitable and necessary. This generally requires an executive order to make sufficient means available to the taskforce.

Resources

Resources can be allocated within organizations on the basis of operational need and intended application. The following categories can be derived: budget (structured need/known application), assigned (less structured need/known application), contingent (structured need/unknown application) and ad hoc (less structured need/unknown application). Under routine or standard operating conditions staff, funding, equipment, facilities and information would be directed according to historical needs and traditional applications through annual budgets, plans and programs. Once less structured or unplanned events intercede and are acknowledged, associated resources are most likely to be assigned reactively, but still on the basis o_f

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reasonably well known application. Greater instability arises when resources for structured operational needs are required for less well known applications, for example when the ends of projects are less well defined but the problem demands greater resource input. Hence, resources are generally allocated on a contingent basis which is consistent with the perceived need. In the final combination, less structured need and unknown application, resources are directed on an ad hoc, emergency basis in order to overcome an initial crisis or to reduce the scale and impact of a fast growing crisis situation.

Decision Making

The decision processes conducted by organizations include problem identification and definition, goal and option identification, option design and evaluation, option execution and after-action assessment (Kronenberg and Howard, 1986). Decision making is influenced by all of the preceding variables and the pervasiveness of the sensed environment and can be described in terms of problem status or priority and the nature of the problem confronting the system. The categories of decision making that result are: routine (simple problem/low status), jointed incremental (complex problem/low status), disjointed incremental (simple problem/high status) and directed incremental (complex problem/high status). A stable environment allows routine, rule-based, standard procedures to be followed in dealing with common and uncomplicated issues that present on a regular basis. Once the problem becomes more complex, with an increasing number of uncertain internal factors, greater scope of issues or longer range impact and falling beyond normal, established response mechanisms, a jointed incremental can be adopted if the problem's status or priority is relatively low. A range of solutions can be considered and implemented on a trial and error basis with suitable adjustments to processes along the way. The less urgent sections of the more extensive problems may be hived off to be considered by small teams and to provide a greater number of options within the larger context of a major program. If, however, the problem, although still simple, becomes urgent or achieves a higher status (for example in terms of accountability to external authority) then disjointed incremental responses will tend to supplant more comprehensive styles of decision making. Fewer options are reviewed and compromises are sought and obtained. Finally, if environmental forces produce a complex problem with high priority and/or status, the organization is most likely to resort to a directed form of incrementalism. Minimum research,

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limited consultation and restricted options are the hallmarks of this approach overlaid with strong autocratic direction and review of the solution under conditions of extreme pressure or crisis.

known

Means

FILTER

PERCEIVED ENVIRONMENT

placid-clustered

representative STRUCTURE

collegial

unknown known unknown

specialized 0 TECHNOLOGY optknued dedicated

complex

• high Workload

budget contingent RESOURCES

Need

assigned ad hoc less structured

simple

structure

known Application

• unknown

DECISION PROCESS routine ^ disjointed 4* ^ Incremental ^

simple

Jointed Incremental

low

d Ire c ted Incremental

Nature

problem

complex

high

Problem status/ priority

Figure 3.2

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CHAPTER 7

PLANNING MODELS

This chapter looks at planning theory and the range of corporate and strategic planning models for use in the A P S . The importance of planning in modern organizations is reflected in the priority given to the subject by Gulick (1937) in his classic exposition on executive organization resulting in the prescriptive P O S D C O R B (planning, organizing, staffing, directing, coordinating, reporting and budgeting). Gulick considered that planning was the primary functional element of the chief executive's strategic role in determining objectives for the enterprise and the methods for their accomplishment.

Planning has been described as a type of advanced decision making that accounts for the future systematically (Mackey, 1990). The planning concept and its processes apply equally to the private and public sectors in what Bowden (1985:110) calls 'a deliberately constructed analysis and documentation of intended action over time'. The plan provides a framework for action by, and a sense of direction for, all levels of the organization. However, any plan is subject to changing environments and to client and staff values: the operating system will need to recognize and adapt constantly to these changes.

The evolution of strategic planning and thinking has, by necessity, widened beyond task accomplishment and, as seen in the last section, it has by way of H R M recognized the need to include the human dimension:

'...an effective planning process should be responsive to the individual talents and capabilities that reside in the organization, to the personal aspirations of its members, to the organizational style and corporate values, and to long held beliefs and traditions; in essence, to the organizational culture' (Hax and Majluf, 1984:1).

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The unprecedented and rapid 'tempo of change' in society is cited frequently as the major reason for the application of strategic planning in the public sector (Bryson and Roering, 1988:995). Kemp (1989) believes that traditional planning practices are no longer appropriate because they exhibit characteristics that are short-term, single issue, hierarchical, low involvement, directive-based, staff and management oriented and operationally focussed. Instead, he suggests that strategic planning offers practices which are long-term, multiple issue, non-hierarchical, high involvement, consensus-based, community and politically oriented and policy focussed.

In practice some of Kemp's planning 'extremes' co-exist depending on whether their application is inside or outside the organization and if they are categorized as operational (day to day) or strategic (longer term) activities. Other differences are notable which may be less a matter of semantics rather than a reflection of American public sector experience. Notwithstanding, the underlying theme of reassessment is valid in highlighting the importance of strategic planning and the tacit acceptance of a planning hierarchy with different priorities at different management levels.The concentration on future rather than current activities and problems is also seen in the distinctions described by Stoner et al (1985), in commercial terms, and presented in the following table.

Operational Planning

Strategic Planning

Focus Operating problems Longer-term survival and development

Objective Present profits Future profits

Constraints Present resources, environment

Future resources, environment

Rewards Efficiency, stability

Development of future potential

Information Present business Future opportunities

Organization Bureaucratic/stable Entrepreneurial /flexible

Leadership Conservative Inspires radical change

Problem-solving

Reacts, relies on past experience

Anticipates, finds new approaches

Low risk Higher risk

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The same typology can be ascribed to that section of the 'non-business enterprise' within the public sector by replacing 'profits' with 'policies'.

The terminology surrounding the planning process and its applications can also be confusing. Perelman (1989) sees 'strategic plan' as a contradiction in terms as plans are most useful under predictable and controlled conditions, whereas strategy is essential precisely because future events are, by degree, unpredictable and uncontrollable. He notes further that strategy becomes more important as the feasibility of planning decreases; and, each element has different concerns: planning involves analysis of data while strategy involves the creation of ideas.

Definitions and Context of Strategic Planning

There are many definitions of strategic planning and it is interesting to observe the change in emphasis over the years in the following two descriptions by two leading advocates of the process:

'a continuous process of making present entrepreneurial (risk- taking) decisions systematically and with the greatest knowledge of their futurity; organizing systematically the efforts needed to carry out these decisions; and measuring the results of these decisions against the expectations through organized, systematic feedback' (Drucker, 1973: 125).

'a disciplined effort to produce fundamental decision and actions that shape and guide what an organization (or other entity) is, what it does, and why it does it' (Bryson, 1988:5).

Although both strategic and long-range planning focus on the organization, Bryson (1988) believes that strategic planning is preferable as it concentrates more on issues than on budgets and programs, it emphasizes environmental assessment and idealized visions of the organization rather than extrapolations of current trends, and it is more action-oriented than long-range planning.

Bryson (1988:11) also cites a number of authors who argue that strategic planning can greatly assist an organization:

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* Think strategically and develop effective strategies.

Clarify future direction.

* Establish priorities.

* Make today's decisions in light of their future consequences.

* Develop a coherent and defensible basis for decision making.

* Exercise maximum discretion in the areas under organizational control.

* Make decisions across levels and functions.

* Solve major organizational problems.

Improve organizational performance.

* Deal effectively with rapidly changing circumstances.

* Build teamwork and expertise.

Notwithstanding these promises, it would be imprudent to regard strategic planning as a panacea (Bryson and Roering, 1988). It is merely a set of concepts, guidelines and tools that are flexible enough to offer the prospect of better and more productive management. The foregoing list implies a great deal of cross matching of organizational structure and process as well as close consultation with the operating environment. Determining an operational framework that accommodates these complex interactions is the challenge that confronts strategic planners.

Corporate Strategic Planning and the Public Sector

Strategic planning involves a series of steps initiated by senior management followed by extensive consultation with different levels of management. Karagozoglu and Seglund (1980) see the strategic planning process in public sector enterprises as having three stages: the meta-planning of the strategic

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planning process itself; the synoptic plan based on an analytical, logical and comprehensive framework; and the negotiated action plan, which is geared toward implementation of the negotiated goals.

The concept would provide a sound basis for planning in public organizations, however there are several problems in changing from existing procedures and operational cultures. The traditional methods of designing strategies in the public sector, according to Mushkat (1987), are: incremental, to preserve the continuity and equilibrium by introducing only small-scale changes; branching, in which the search is for options from other policy domains or other systems; and inventive, by developing action plans that have no precedent. The incremental model seems to represent most accurately the normal and accepted process of strategy development in the public sector (Lindblom, 1979). Notwithstanding, Posey et al (1987) note that many authors (and governments) have suggested that public sector organizations adopt private sector management techniques such as strategic planning to cope with the drastic changes of recent years. These calls have been heeded and radical reform programs have been introduced into major, advanced public administrations.

TenDam (1986) warns however that developing even a simple strategy can be complicated. Planners wijl need to take a 'helicopter- view' or a clear view of external reality, be committed to long- standing success, be openminded, and be willing and able to follow through with consequential decisions.

Moreover, the definition of vision (Brassier, 1985) for public sector organizations involves strategic goal setting. Gabris (1989) describes this step as a disciplined process whereby decision makers reach a consensus on the identity and priority of fundamental goals. The idea is to include politicians in the discussions so that political objectives may be incorporated in long term planning. Holmes (1989) notes however that attempts by the ministry to discuss its strategic direction at retreats in 1984 and 1985 were not successful. Notwithstanding, strategic goal setting provides a mechanism for reducing risk while interfacing with the political environment, reducing environmental turbulence and increasing internal planning stability, and (potentially) enabling elected leaders to achieve consensus on tough and controversial policy issues. While it may be difficult to forget, TenDam (1986) reminds public planners of the service and the political markets it serves. Political support is essential for

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organizational survival and continuity but is only related indirectly to the agency's performance to its clients. Paradoxically, if conflict arises due to inappropriate political involvement in the planning process, strategic leadership may be needed to defend the common interests and culture of the organization. In other words, there is a delicate balancing act between excessive and inadequate participation by politicians in determining strategic requirements for a public organization.

Strategic issues in public affairs clearly need to be managed in relation to a sense of organizational mission and mandates and in the context of the operating environment. This contextual approach enables key issues to be recognized and analyzed quickly, although it does not provide specific instruction on the best way to frame issues other than to foreshadow them with some type of situational analysis (Bryson, 1988).

The shape of the organization also needs to be considered in strategic terms. Recent studies on the relationship among organization design characteristics and strategic planning systems in large organizations (Kakalis, 1989) indicate that public management approaches should remain flexible as far as long range planning is concerned. In the complex operating environment of public policy formulation and implementation, executive managers tend to assume greater responsibility for corporate planning and plans are reviewed more frequently and have shorter time horizons. However, Kakalis observes that increasing environmental complexity seems to increase planning extensiveness despite limiting an organization's planning horizon. This corresponds to an internal environment of organization turbulence (see Figures 3.1 and 3.2) and directed incremental decision making. The organizational feedback and continuing interaction with the external environment may decrease the perceived turbulence by resetting the threshold of the environmental filter but the time pressures for a reflexive/responsive approach will generally reduce the planning horizon. This environmental interaction by the A P S is observable particularly within the various stages of the annual budget cycle. Kakalis believes that designers of strategic planning systems should pay particularly close attention to planning extensiveness, the role of planning staff, the frequency of plan revision and the need to adapt planning horizons to varying strategic and environmental conditions. This appears to confirm earlier thoughts on contingency approaches to meta-planning and the need to remain flexible.

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Strategic Planning Reservations and Constraints

Posey et al (1987) cite the experience of community-based public sector organizations in New England which suggests that strategic planning efforts often fail, due in part to the differences between public and private organizations. Public organizations usually operate in a buffered environment lacking in highly developed management skills. Thus, when a major environment upheaval occurs, the agency can decline rapidly. Hence, paradoxically, while the agency needs to know how it can manage its own destiny, strategic planning may be effective only while the agency is healthy.

Then there is the relationship between the public-sector planner and the operating manager. Most approaches to implementing strategic plans are idealistic, rather than pragmatic, and Mushkat (1987) notes that participative model-building is not a mechanism likely to be widely embraced by public organizations. Public planners will need to resort to persuasion in their relationships with operating managers.

Despite the obvious usefulness and the theoretical merits of strategic planning Bryson and Roering (1988) suggest that using strategic planning in government to produce fundamental decisions and actions will not always succeed. Initiation of governmental strategic planning is more likely to succeed in units that have effective policymaking boards, strong process sponsors, good planning teams, and flexibility and experience in handling crises.

Similarly, Javidan and Dastmalchian (1988) note the lack of long range orientation in public sector organizations where the emphasis has been on reaction rather than on proactive planning. This lack of commitment to long-range planning has no doubt been reinforced by vague organizational objectives, a lack of market exposure, and limited top management authority. Overcoming these forms of resistance will require comprehensive educational programs to produce a cultural shift within the organization. Some suggestions include determining whether there is a need for strategic planning and communicating the need, preparing line managers for strategic planning through teaching and coaching, moving beyond vaguely stated objectives and stressing the need for elaborate action plans.

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Still, corporate planning in the public domain has been pioneered to some extent by local government authorities (Leach, 1982). Strategic planning techniques are currently being implemented by large councils such as Wollongong and Townsville (Phillips, 1990). And, with the growing interest in specifying service objectives and targets for public organizations, epitomized by the Citizen's Charter in Britain, public managers will no doubt be encouraged to engage in some form of strategic planning.

Morrtanari and Bracker (1986) have formulated a normative strategic management process for public sector agencies in the United States whereby each agency or department is considered to be the strategic public planning unit. Each department is seen as providing a particular service to an almost homogeneous segment of citizens and operating in its own context; hence, it needs to meet the demands of varied 'constituency publics' to be an effective service provider. Once these unique aspects of public-sector strategic management are recognized, Montanari et al believe that specific planning elements can be integrated into an established private-sector strategic management framework. Their recommended process involves developing context analysis and strategy, implementation strategy and strategy evaluation. These concepts are beginning to be applied in the A P S .

The Australian Scene

In Australia, longer-term planning in the A P S is contained within Department of Finance (DoF) FMIP principles which aim at whole organizations and stress: corporate planning, decision making, resources, performance, five year planning horizons and a participative management style (Holmes, 1989). In this context, DoF sees that the corporate (also referred to, interchangeably, as strategic) plan should incorporate government objectives and form the basis for developing portfolio program structures, organizational design, decentralization of authority, management information system requirements, resource allocation and evaluation priorities. To some observers this form of expression of purported organizational vision, mission and goals has generally 'become an encyclopaedic conglomeration of information about all of the organization's activities' (Baker, 1989:136).

According to DoF (1987) the corporate plan is intended to provide a means of external accountability by providing precise statements of policy, objectives

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and proposed methods for meeting those objectives. A corporate plan also helps to establish the corporate entity of public sector organizations and serves as 'the only real alternative to commercial profitability as a base for action and evaluation'. This comparison with business practices and the justification of corporate planning is elaborated in a later FMIP review (DoF, 1988; 37):

'Corporate planning processes aim to make goal setting and evaluation activities more systematic. In commercial organizations, such processes help the enterprise maintain a sense of direction. They may be even more important in this respect for public organizations. In many ways, plans and plan reviews provide a substitute for price and profit signals that guide decisions in a commercial enterprise.'

Holmes (1989) regards corporate planning as the basis for more detailed decision-making noting that is based on a statement of corporate vision resulting from government policies and preferred implementation strategies. The management challenge is to link the strategic and operational elements of the organization and corporate planning assists these processes by establishing a hierarchy and planning framework in such areas as: defining goals and objectives, addressing major issues, developing strategies, defining operational work plans to meet strategies, allocating resources and providing a base for monitoring and reviewing performance (DoF, 1987).

Strategic Corporate Planning Methods

A 1988 survey of FMIP (DoF, 1988) found that most Commonwealth departments and agencies had adopted some form of planning process. Apart from helping to define the basic purpose and nature of agency activities in response to rapidly changing environments, formal planning processes were seen to have contributed to staff involvement in defining organizational goals and to have assisted in communicating mission and goals to staff. The review also noted that planning had led to structural, linkage and evaluation changes: planning committees and procedures had been established to prepare planning documentation; subsidiary plans had been developed and were affecting resources management and policy decisions; and, agencies were developing information to assess performance and linking evaluation processes to corporate planning.

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Still, while there are general guidelines, there is no 'authorized' or standardized version of strategic planning for departments. Some of the more applicable and relevant of the many available models are discussed below.

The strategic planning process is effectively a strategic audit of the organization which considers external and internal factors and includes alternative selection, implementation and evaluation and control. The audit provides a basis for programming organizational activities after problem identification (formulation, search, explanation and interpretation) and systematic analysis (Quade, 1964; Smalter and Ruggles, 1968).

The Wheelen and Hunger (1989:25) framework for preparing this audit has the

following sequence:

* Evaluation of an organization's current performance - current mission, objectives, programs, policies and strategies.

* Examination and evaluation of an organization's strategic managers - its

executive management.

* A scan of the external environment - to locate strategic factors that pose opportunities and threats (or as Montanari [1986] suggests for the public sector: advocates and adversaries).

* A scan of the internal corporate environment to determine strategic factors that are strengths and weaknesses.

* Analysis of the strategic factors to pinpoint problem areas and review and revise the organizational mission and objectives as necessary.

* Generation, evaluation and selection of the best alternative strategy in

the light of the analysis of the previous step.

* Implementation of selected strategies through programs, budgets and

associated procedures.

Evaluation of the implemented strategies through feedback systems and the control of activities to ensure their minimum deviation from plans.

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Bryson (1988:48) assessed the relevance and applicability of strategic planning models to public sector operations. His conglomerate version, which involves eight major planning steps, although broader in scope and addressing meta-planning as the starting point, also contains elements of the strategic audit :

* Initiating and agreeing on a strategic planning process.

* Identifying organizational mandates.

* Clarifying organizational mission and values.

* Assessing the external environment: opportunities and threats.

* Assessing the internal environment: strength and weaknesses.

* Identifying the strategic issues facing an organization.

* Formulating strategies to manage the issues.

* Establishing an effective organizational vision for the future.

The Glasson and Goode Study of the APS

A detailed study of corporate planning within 13 Commonwealth departments and statutory bodies was conducted by Glasson and Goode (1988:103). The researchers found that the general methodology used in the A P S had six main steps:

* Develop the mission statement.

* Determine goals and objectives.

* Develop strategies.

* Prepare detailed plans to implement strategies.

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Monitor performance.

* Repeat the second and third steps as necessary on the basis of the monitoring process.

As a result of their work, Glasson and Goode recommended a more comprehensive methodology for A P S planning. Their recommended model is shown in the last column of Figure 7.1 and is compared with several other models. As the comparison shows, the variations between prescription and practice can be quite significant.

B R Y S O N STONER VICTORIAN PUBLIC S E R V I C E

GLASSON & GOODE (Perceived)

GLASSON & GOODE (Recommended

Meta planning

Goal formation

Set objectives

Develop mission statement

Assess current performance

Identify organizational mandates

Identify current objectives & strategy

Assess environment

Determine goals & objectives

Analyze environment

Clarity organizational miss loo St rallies

Environmental analysis

Develop strategy

Develop strategies

Determine future performance

Assess external environment • opportunities & threats

Resource analysis

Develop operational plan

Prepare detailed plans to Implement strategies

Assess current strategic directions

Assess Internal environment -strengths & weaknesses

Identify strategies • opportunities & threats

Evaluate Monitor performance

Set strategic goals

Identity strategic Issues facing organization

Determine extent of change required

Repeat steps 2/3 on basis of results of results Sc monitoring

Set key strategies

Formulate strategies to manage Issues

Strategic decision making

Analyze resources

Establish effective organization T la ton

Strategy Implementation

for future

Measure & control of progress

Figure 7.1

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Current Planning Weaknesses

Glasson and Goode observed that senior managers had acknowledged the growing instability of the public sector environment. Corporate planning was seen as an orderly method of transition to good public management practices although associated planning processes were still being developed. In particular executives cited their confrontation with decreasing resources and increasing demands for services, more emphasis on results and performance, the impact of rapid technological change, a reassessment of Commonwealth/ State/ local government relationships and the examination of the applicability and value of privatization and deregulation for the public sector. The effectiveness of initial efforts in corporate planning had been found wanting in four main areas:

* Goals, objectives and strategies were not being translated into operational plans and actions. Some work level plans had been developed independently or implementation had been prevented by lack of resources. Staff education on corporate plan goals was generally poor.

* Planning did not focus strongly on performance. The emphasis was on monitoring inputs rather than on continuing performance or on outputs; and, performance indicators were lacking. MIS development was hampered by staff concentrating on basic financial management and reporting system design lacked sophisticated measurement ideas. Policy and H R M were proving to be difficult areas to assess because of the problems in producing qualitative performance indicators.

* Political constraints made effective implementation of long term plans difficult. Ministers tended to promote short term, expedient decision making and this was reflected in executive advice to the government. Ministers were not generally active participants in the corporate planning process.

Corporate planning effort lacked external and strategic focus. Some organizations saw corporate planning as a means to strengthen corporate management and improving MIS. Also, many agencies used their current operations as the planning basis and assumed that these

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activities would continue. This was unrealistic in the light of changing circumstances and trends.

The authors recommended that these problems could be overcome by an increased focus of key strategic issues, setting realistic goals and strategies and obtaining user commitment, relating planning to decisions and results and gaining longer term commitment to planning. In other words, strategic planning frameworks and processes in the A P S needed to be revamped.

The next chapter considers this issue in detail. Examples of planning in several departments and agencies in Australia and overseas will be discussed.

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CHAPTER 8

EXAMPLES AND ASSESSMENT OF APS PLANNING

The contribution offered by the Glasson and Goode (1988) study is significant and their observations and recommendations on planning procedures constitute landmarks for A P S managers. Notwithstanding, the organizations reviewed in that study were in a state of transition to FMIP and P M B practices and on the whole retained the Budget cycle as the foundation stone for planning. Indeed, the idea of adopting the 3-5 year corporate planning horizon suggested by Finance under FMIP guidelines appeared to, and in some areas still does, amaze departmental planners. In short, the A P S was and is still learning. This chapter examines some recent examples of strategic/ corporate planning in the public sector as the basis for a new benchmark for the A P S .

The premise is that there is no one ideal method and that flexibility and contingent appropriateness should prevail over rigid blueprints. While each agency will have particular planning requirements stemming from its size, leadership, structure, scope of operations, political sensitivity, service orientation, contact with the public and cultural norms there are some common processes that may be drawn from the following case studies and applied throughout the A P S . Indeed, a planning philosophy based on sound and workable processes will provide public sector managers with a valuable tool to confront and accommodate the whims of the environment. Certain precepts can be derived from an analysis of the approaches, procedures, timing and appreciation of the overall methodology involved in preparing corporate/ strategic plans for large government departments.

The following sections examine the processes and results of planning within the Department of Immigration, Local Government and Ethnic Affairs (DILGEA), Department of Industry, Technology and Commerce (DITAC) and other, smaller public agencies which have engaged recently in strategic planning. The strategic planning experiences of the Department of Social Security (DSS) will be covered in some detail. As will become evident, some of

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these organizations still suffer from the planning weaknesses identified by Glasson and Goode; however, others have exhibited innovative and effective techniques to determine their future.

The DILGEA Corporate Plan

DILGEA is a small to medium sized department with less than 3000 staff and expected 1991-92 Budget outlays of $355 million (Budget, 1991). However, it coordinates and manages an unusual variety of functions within Government. The department reviews programs covering migration, citizenship, students' and visitor entry, settlement and ethnic affairs and local government. Ignatius (1988) considered DILGEA to be in a position to take considerable advantage of longer range corporate planning because of the delayed effect of its decisions and the frequent uncertainty of its operating environment.

The DILGEA plan and its formulation processes were designed to meet several objectives (Harris, 1989). It was felt that departmental officers would be better able to relate their activities to those of the group and, if necessary, modify their output to provide a more integrated and effective product. Also, the community at large would obtain a greater understanding of the rationale for corporate operations from the objectives in the DILGEA plan. Finally, as a political instrument, the plan would enable the current minister to endorse departmental directions and ensure relative stability by reducing 'the volatility of changes in goals'.

Harris believes that an effective corporate plan must be detailed enough to inform staff at all levels about activities and the operating environment and have measurable goals which are set out systematically. Importantly, Harris points out (1989: 51) that:

To make it a practical document of some longevity, the plan could not

be cast at such a detailed level that changes to those detailed plans

render it obsolete.'

DILGEA planners observed four main principles as they prepared their first plan during 1987-88. Senior staff would provide the impetus for the process with broad guidelines on the plan's shape and the goals,,strategies and outcomes expected of the department. Staff input and comment was

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considered to be essential to the plan's development and consultation was to take place throughout the process. The consolidated version would need to be approved by the executive and the minister before being released. Finally, the plan was to form the foundation for annual working plans for departmental units.

Ignatius (1988) notes that the DILGEA planning process was based on a variation of the Glasson and Goode (1988) model and had three main phases: information gathering, communication and review. A task force of four staff, including an 'outsider', was given a clear mandate and visible support from the Secretary to supervise and coordinate the plan's development throughout the organization.

Initially, all departmental outputs were listed and grouped into goal sets. Information on strategic issues and the \\ke\y effects of internal and external environments were gleaned from interviews with S E S officers. Objectives were then drafted for each goal and circulated for program managers' comments and specification of strategies to meet the objectives. The collated information formed a draft corporate plan which was passed to all managers for comment. An S E S workshop was conducted by an external management consultant to discuss and refine the contents. Af\er executive and ministerial endorsement the plan was published and distributed to all staff.

During the first year of operation progress against the plan was monitored through regular reports to senior managers. A formal review of the framework was conducted after 12 months to adjust, rather than rewrite, the document in the light of practical experience and changed conditions.

Ignatius (1988) highlights a number of significant features and limitations stemming from the DILGEA planning process:

* The Secretary and working group had a clear idea of the role and purpose of the corporate plan.

* Only essential organizational issues were considered.

* Clear and simple designs were used to develop and communicate the

plan.

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* Planners attempted to quantify planned achievements where possible.

* A clear planning process was adopted for the plan's development.

* Staff contributions were encouraged and the plan was marketed to senior managers.

The plan was incremental in nature and only looked at the short term.

* There were no long range forecasts or analyses concerning departmental activities. Policy development was not included.

Comment

The planning process probably served as an end in itself for DILGEA. The department had only been formed into its consolidated version after the 1987 Machinery of Government amalgamations and a new Secretary had only just arrived. Assembling a corporate plan, despite its limited scope and objectives set primarily by senior management, would have reduced some of the internal turbulence created by the transition, established a new managerial order and cultural framework and provided the basis for future planning.

Although staff participation was a basic tenet, much of the content came from senior executives and program managers with comment from middle managers. However, a firm plan of action was formed and maintained throughout the compilation process. The short term and incremental nature of the plan are understandable in the circumstances but a more adventurous, non-quantitative focus may have provided a more global and strategic management approach and result.

The Department of Industry, Technology and Commerce (DITAC) Corporate Plan

The Industry, Technology and Commerce portfolio covers industry policy and development, customs, trade commissions, nuclear science and technology and the CSIRO. However, DITAC itself has around 1000 staff and planned Budget outlays for 1991 -92 of about $400 million (Budget, 1991).

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The original DITAC corporate plan covered Financial Year 1986-87. It resulted from a review of the department's structure commissioned by the newly-appointed Secretary. A mission and program objectives were formed and the plan was set against 'a medium to long term view about industry and technology policy directions' (Charles, 1987). The plan combined inputs from management and staff and contained a two-level hierarchy of plans: the first level examined environment, government policy direction, departmental role, management, and style; the second level provided departmental priorities and program objectives and performance indicators. Section level statements supported and elaborated key points in the main plan. Charles saw the planning process as widening staff perceptions of the department's business i n : ' developing a clearer corporate identity, giving a greater sense of involvement, increasing communications between all levels and breaking down compartmentalization'.

In 1989 DITAC adopted a management cycle which integrated planning and budgeting processes to 'inject more strategic direction into our planning, while making resource management more responsive to it' (DITAC, 1990:2). The cycle is a variation of the standard annual budget planning cycle used within the A P S but the DITAC model has six main stages:

* Firstly, reviewing three year strategic directions and identifying priorities for the coming year. This stage occurs in December.

* Secondly, about March, drafting strategic directions.

* Thirdly, reviewing Forward Estimates and Operational Work Plans.

* Fourthly, preparing new policy proposals.

* Fifthly, in July, preparing Operational Work Plans.

* Sixthly, finalizing Operational Work Plans and Strategic Directions. This final stage also produces Budget papers, Program Performance Statements and the revised Corporate Plan for the next financial year.

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Executives and staff provide information and comment at all planning stages. Part of the issues identification phase in 1989 was assisted by an Issues Seminar, aimed at the medium to long term, which set the agenda for a Planning Conference in November 1989. The conference determined issue priorities and contributed to the operational planning stage and program aggregation level.

The DITAC Corporate Plan outlines a clear policy framework, mission and organizational characteristics. It scans the external environment in some detail and identifies basic themes and broader issues for the department. Although the corporate plan is based on the budget cycle and its 'strategies' are confined to program priorities for the coming year, it would only be small step to widen the field of view and extend the time horizon to indulge in longer term planning of a more strategic nature.

Australian Institute of Sport (AIS)

The AIS produced a Strategic Plan covering the three years 1988-1990. The aim was to examine the Institute's progress and define its future directions by translating the objectives of its enabling Act into strategic goals (AIS, 1988).

In many ways the AIS Plan is a vehicle for self-preservation and expansion. It was prepared in the context of national reductions in outlays, a levelling out of financial and staffing resources and calls for revenue targets. In this climate, and notwithstanding the statutory imperative to develop a strategic plan, the AIS noted that 'it became obvious that long-term planning and determination of priorities required detailed consideration* (AIS, 1988:8).

As a prelude to planning, the AIS formed three review sub-committees to examine sports, sports science/medicine and management. These groups comprised Board members, senior management, external consultants and representatives from the Commonwealth Department of Sports, Recreation and Tourism. They were given working guidelines and priorities relating to sporting performance and achievement, continuing restraint on resource allocations, improving efficiency and productivity, increasing revenue, complementing the activities of other sporting bodies and the impact of appropriate use of technology on AIS programs. The committees met with other organizations and also received written and oral submissions. The

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recommendations from each working unit were considered by the Executive Board and formed the basis of the final Strategic Plan.

The AIS Plan lists the Institute's history and achievements, an organizational philosophy and a competitive set of strategic goals for each major functional area. Financial plans and management are detailed with specific targets for reduced funding by the Government and increased alternative revenue for the next three years. The Plan examines its external and internal environments and elaborates its strengths and weaknesses. It reflects a highly pragmatic approach and while it emphasizes the quantitative nature of its sports and administrative programs it also incorporates many qualitative issues emerging from its founding philosophy. It contains a very realistic and overtly attainable set goals within its program structure and associated targets.

The committee structure appears to have been used very constructively in gathering information for the Plan within carefully selected terms of reference. Overall, the impression is that the AIS plan is comprehensive and achievable.

Community Services of Victoria (CSV)

C S V is a medium sized State Government department of about 8000 staff and had program expenditures for welfare programs in 1989-90 of $760m (CSV, 1990). The organization was restructured radically in 1989 under a new Director-General to institute' a healthier mix of program/policy and regional/ operational responsibilities' (CSV, 1990:5). Corporate planning was used to facilitate and reinforce new organizational structures and communications by providing corporate rationale and direction.

The planning process involved a two-day retreat for senior and middle level managers to review weaknesses in C S V programs, services and corporate operations. This led to a 'unifying vision' for the department and an interesting comparison and characterization of CSV 's role in private sector terminology. Direct service workers and their supervisors were seen as producers and central office branches were the packagers or wholesalers. Client contact as the retail element was less easily identified. The conclusions of the seminar were published and disseminated throughout the organization. Corporate directions were refined and areas requiring detailed work were identified. Staff were invited to lead or assist project teams in examining existing practices

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critically and proposing alternatives. The corporate plan was revised and incorporated many of the initiatives suggested by staff.

The C S V approach combined top-down and bottom-up processes. Executives reviewed current organization performance and established an objective framework. New directions were set and contributions from staff provided a range of key strategies to improve operational practices. The planning process assisted the organization to adjust to major cultural and operational disruptions and involved staff as stakeholders in identifying and implementing new arrangements.

The Department of Social Security (DSS) Experience

D S S is a major Commonwealth department with nearly 20000 staff and an extensive national network of more than 300 offices. It is responsible for managing about one third of total Budget outlays with income support program payments to over four million Australians amounting to more than $30 billion (Budget, 1991). The department is under continual pressure to improve management and accountability in a highly visible and politically sensitive welfare environment. DSS has six Program Management Groups (PMG) to oversee the portfolio programs as well as setting and monitoring performance indicators.

Operations

The Department is organized along geographical and functional lines. The Department of Finance's guidelines are that program structure development should reflect the corporate plan and be driven from the top, while development of an organizational structure should start with client service staff after corporate goals and strategies have been established (Holmes, 1989). Noting the wide range of programs and payment types it is difficult to see DSS changing to a program alignment. Each regional service outlet does however divide its activities into three main sections (families, pensions and benefits) for administrative convenience.

The D S S structure comprises a National Administration in Canberra, 20 Area Offices and over 230 regionally-based Offices. National Administration interrelates with Government and is responsible for policy, determination of

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overall program and performance standards, major system changes, resource issues and overall management of the organization. The Area Offices provide support and management services to Regional and other network offices. The functions of an Area Office include controlling and monitoring policy administration, overpayment recovery, specialist client and social work services, outreach programs, training, personnel, finance of budgets, property and services, and change management. Regions are responsible for the delivery of services to clients, managing service delivery outlets and developing client service plans. Regions comprise Regional Offices, smaller D S S Offices (two or three staff at a shop-front location or similar sized units) and visiting outreach services. D S S Regional Offices are the main source of information and services for clients and vary in size from about 30 to over 100 staff.

DSS Strategic Planning Processes - Preparations

The department began formal corporate planning in 1985 and published its first Strategic Plan in 1990. In November 1989 the Secretary and the Executive decided to proceed with a strategic plan for D S S to be completed and launched by October 1990. The Corporate Management Committee (the peak management group) had reviewed the progress of departmental corporate planning and determined that a longer term perspective would benefit management planning and operations. The Deputy Secretary was appointed as plan coordinator to reflect a high level, visible managerial commitment to the project and also to provide a degree of authority for controlling the process. A project officer was also assigned, reporting directly to the Secretary and Deputy Secretary. It was decided at the outset that external advisory or consultants would not be employed to assist in the development of the plan. However, other departments and client groups were to be consulted once a full draft had been prepared.

The wording and intent of the existing organizational charter - 'to deliver social security entitlements with fairness, courtesy and efficiency' - had been formulated after extensive debate in 1989 and was considered by the Executive to be an accurate and valid statement of mission for strategic planning purposes. Similarly, the department's corporate aims relating to client service, staff support, quality, innovation and accountability had been derived from the charter and represented a sound planning base.

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Indeed, Bowdler (1991) notes that the endorsed charter and aims enabled planners to concentrate on other key areas of the strategic planning process such as:

* identifying and analyzing external influences and the critical issues which were likely to affect the Department over the next 10 years;

* developing a vision for the future and determining where the Department wanted to be at the end of the planning period;

* providing active involvement, support and guidance from senior management but with consultation at all levels;

* allocating a small planning team to keep the process on schedule;

* seeing the Strategic Plan as the pinnacle of a planning hierarchy followed by corporate and program and business plans - each level being progressively more detailed and action oriented; and

* ensuring tangible commitments were made to progress and regular monitoring - the discipline of checking progress against the original plan would be critical to the success and status of the entire planning process.

A preliminary planning meeting of divisional heads, at First Assistant Secretary level, was chaired by the Deputy Secretary in December 1989 to discuss the intention, scope and concept of the plan and to offer suggestions for its framework and preparation. Models of strategic planning and various methodologies were presented to the meeting including copies of corporate and strategic plans of equivalent public welfare departments in the United Kingdom, United States, Canada and New Zealand.

While there were obvious political, program and administrative factors influencing each country's planning processes, D S S examined and extracted some useful ideas which were suitable for its own situation. The New Zealand and UK models were basically detailed corporate plans based on budget

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projections and reflecting medium term goals. However the Canadian and US approaches were longer term and more visionary.

Canada. The Incomes Security Programs (ISP) Branch of Health and Welfare Canada produced their Strategic Plan for the period 1989-93. It included comprehensive environmental scanning and was developed through a series of workshops involving nearly 200 managers to identify issues and means for addressing them. The issues were given a priority and amalgamated into seven main groups: level and quality of service, systems development, managing organizational change, internal communications, increasing workload / decreasing resources, changing legislation and social policy and human resource management. Individual issues and ISP responses were detailed in the Plan which is to be reviewed annually and revised as required (ISP, 1989).

United States. The Social Security Administration's (SSA) '2000 A Strategic Plan' (1988) employed a highly innovative development process. Senior staff conducted a futures session and were provided with forecasts of the possible future. Next, the same staff met to 'develop images of desirable characteristics of the Agency in the Year 2000' and to discuss how current functions might be performed in the future. This futures images approach was extended to staff in the 10 S S A regions. The Agency formed an Office of Strategic Planning to compile and collate alternative scenarios for S S A programs, service delivery, technology and organization in 2000. Options menus were constructed and meetings were held with external groups to discuss ideas and themes that had arisen. Eventually, the SSA Commissioner and Executive selected a draft preferred scenario which formed the basis for the Strategic Plan.

The guiding principles behind the S S A planning process were commitments to existing beneficiaries and to S S A staff. Moreover, the process sought 'broad avenues for development so that it would be flexible enough to accommodate unexpected circumstances'. And, the process was, effectively, a precursor to strategic management in that its other major objective (SSA, 1988: 7) was to:

'identify a desirable future for SSA and seek to build it. This is in contrast to the traditional planning model which seeks to solve identified problems through the analysis of alternative solutions. The final

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strategic plan should be a guide for future opportunities, not a blueprint for solving the real or imagined difficulties of the past.'

OSS Planning

After reviewing these international methodologies and their products the planning group agreed on a basic three part planning structure for DSS. Relevant senior officers were tasked to provide information for the each section of the background part of the plan. Part A was to be compiled in National Administration and comprise an Introduction (history, achievements, departmental aims and planning assumptions), Current and Planned Activities (for the next three years), Policy Framework, Technological Change, Client Service, and Organization and Staff. Part B was envisaged as essentially a crystal ball exercise with management and staff working together to create an idealized version of the DSS organization in the year 2000. Part C would contain action plans and timeframes extracted from the many recommendations obtained during Part B or otherwise gleaned during the collation process.

Part A responses were collected and a draft paper was discussed by the executive planning group in early March 1990. After some revision the draft document was distributed for information to all Canberra-based divisions and to all States and Areas by internal electronic mail. A decision had been made early in the planning to conduct the entire compilation of a strategic plan within the organization. Moreover, it was determined that internal consultation would be aimed, initially, at the Area Manager level (AS08) and above, with the expectation that those senior and experienced managers would discuss the issues in meetings with their own Regional Managers who in turn could seek the advice of their own staff.

As a follow-up to Part A, a broad outline of subject areas to be included in Part B was compiled and despatched to all principal contributors. The five main headings were service delivery, D S S offices, DSS organization, external liaison and personnel and training. Further categories within these groups for examination were offered in the form of sub-headings, statements and questions as shown in Annex A.

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A Part B workshop for Area Managers, and some State and National Office managers, was held in late March 1990. A short briefing by the Deputy Secretary on the background and aims of the planning exercise was followed by syndicate brainstorming sessions and group presentations to provoke and sensitize managers for subsequent discussions with their local staff. The participants were offered the same five subject groupings that had been distributed earlier in an effort to guide and indeed limit discussion to essential issues. Notwithstanding, the managers were being asked to envisage DSS in the year 2000.

These same guidelines were used subsequently by Managers throughout D S S in discussing and formulating preferred directions for the organization. Detailed and comprehensive submissions were received by the Deputy Secretary, ranging from the very conservative to the radical. Ideas were edited and grouped and the structure of the plan was modified to accommodate shifts in emphasis. A revised draft combining Parts A and B with some suggested elements for Part C was discussed by the monitoring group in early May 1990.

After further work, a draft document was circulated within the department, to Secretaries of allied departments and agencies, and to community and welfare groups, trade unions and legal bodies. The Minister's office was kept informed of the progress of the plan's development at regular intervals as was the Corporate Management Committee.

Comments and suggested amendments obtained from this distribution were incorporated and final editing and format decisions were undertaken by the Secretary and Deputy Secretary in September 1990. Complementary documentation was prepared in the form of a summary booklet, D S S Directions, to be distributed to each member of D S S ; a Manager's Guide containing background information and hints regarding implementation of the plan; and, an introductory video outlining the main points of the plan for each office and directorate. The plan was approved and launched formally by the Secretary in October 1990.

An overall schedule to monitor and revise the strategic plan and other major planning documents in the department was also prepared. Under this program the Strategic Plan is to be reviewed annually before each Budget with a major review and report issued every three years. The D S S Directions booklet is to

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be updated and reissued annually to provide staff with an idea of progress achieved over the previous year and to set priorities for the coming year. A copy of the review schedule for 1990-94 is at Annex B.

The DSS Strategic Plan • Content

The D S S Strategic Plan covers the period 1990-2000 and provides both a qualitative and quantitative basis for long term planning and a framework for developing and implementing shorter term schedules. More detailed corporate or Program plans (annual financial, administrative and staffing requirements based on Budget allocations) and Evaluation plans are prepared from the Strategic Plan taking into account requirements imposed by outside agencies eg E E O , Audit etc. Each management level is required to compile operational plans detailing unit roles, targets, standards and work schedules based on information in the Program Plans. The D S S planning hierarchy is shown in Figure 8.1

C H A R T E R &

A I M S

S T R A T E G I C P L A N fc

E v a l u • t l o n

p l a n a i P r o g r a m

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* E E O

N a t l o n a I P l a n a

A u d i t C o r p o r a t*

R • v i a w A o o • a * A

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R a p o r t l n g U

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Figure 8.1

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During the development process D S S planners noted that there were some well-established social and demographic trends to which the department must respond and that there were also many areas within the Department over which there was effective control, for example, the service delivery network and its functions, the choice and use of information technology, and specific management objectives and directions. The D S S Strategic Plan focuses mainly on these controllable factors and incorporates staff visions and expectations for the future to provide, as stated in the Plan's Introduction (DSS, 1990:5):

* an 'umbrella' or strategic basis for long-term, corporate planning and management; and

* a framework from which actions and schedules can be developed and implemented.

The Plan is intended to guide DSS managers and staff and indicate general DSS directions to the community and other Departments. It sets out generic rather than specific goals and overall priorities for the timing, funding and implementation of these goals are to be determined by the Executive as part of their normal management role. Operational managers are expected to be innovative in their application of the Plan's guidelines to their particular situation but not to suspend good judgment or common sense.

The Program and National Plans derived from the Strategic Plan reflect shorter term objectives, goals and priorities, which in turn are conditioned by local requirements at National, State, Area and Regional levels. The Plan (DSS, 1990: 7) notes that 'Departmental performance and progress, as measured against the shorter term plans, will be used to compare achievements against the longer term objectives of the Strategic Plan as part of the normal review process'. The first major review of the Strategic Plan will be conducted in 1993.

The DSS Strategic Plan - Format

The structure of the Plan reflects the processes used in its preparation. Current Operations examines the Department's portfolio, corporate aims,

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management practices, client service arrangements, organization and staff. The Changing Environment reviews Australia's changing demography, trends in major client groups, the likely policy framework, client expectations and technological opportunities. Into a New Century looks to the future and incorporates ideas from managers and staff about their expectations and preferences for the Department by the turn of the century. Blueprint for Action contains a summary of the major proposals, initiatives and intentions for implementation.

The New Century and Blueprint chapters highlight the need for improvements in service delivery and in staffing practices. There is also a warning that to achieve a higher quality service will necessitate more highly skilled officers. Concomitantly, there will be a need for enhanced information technology and improved office structures. These visions are a mixture of quantitative and qualitative factors.

The Strategic Plan acknowledges that detailed priorities, options and implementation schedules belong in shorter term DSS plans. However a rule of thumb for implementation is expressed as short term (1-2 years) and medium/long term (3-10 years). Finally, the Plan stresses flexibility and while exhorting D S S managers and planners to incorporate strategic elements in their business and operational plans they should note also that 'circumstances may require deferring shorter term objectives or bringing forward some longer term objectives' (DSS, 1990:36).

Lessons from DSS Strategic Planning

Bowdler (1991) has placed the D S S planning process into perspective and extracted several lessons which may assist other Government managers:

* While no major setbacks may occur in implementing the plan, the main problems will emerge in procedures and in striking balances between priorities.

* Strategic planners must expect tensions created by the process of analyzing and forecasting environmental conditions and setting overall directions for the organization.

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* The further ahead planners look, the more difficult it becomes to be precise or definite about plans; vagueness in this context is acceptable provided the executive remains flexible and prepared to adjust plans as trends become clearer.

* There is no substitute for 'timely policy development, flexible management and enhanced technology'.

* Careful and continuous monitoring of the organization's operations is essential for reviewing the objectives and timetable of the plan. This process will also identify new opportunities and enable strategic decision making for influencing organizational change rather than simply reacting to events. Monitoring systems must provide managers with rapid and accurate and easily comprehended information.

Technology is a major factor in the planning equation but it should support rather than lead an organization.

* Planning and its products must be accompanied by marketing ideas and directions to staff. This will consolidate a sense of ownership and commitment to changes generated by the plan.

Planning will be most effective if it emphasizes better quality processes, more positive attitudes and organizational outcomes. Planning can contribute directly to the health of the institution and to the quality of its operations.

Comparison of Processes

There are common threads running through the various processes for corporate strategic planning in all these public agencies. As would be expected they present variations on a common theme of identifying a set of organizational problems, projecting the organization and its operations into the future and determining what needs to be done, how and when, to ensure the continuing survival and well-being of the entity.

In all cases the head of the organization instigated the strategic planning process. Either a new CEO/Secretary had been appointed and was appraising

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his new charge or the existing executive had realized that a longer term view was required. Generally, the C E O provided encouragement, support and endorsement for each stage of the plan's development and acted as its process champion (cf Bryson and Roering, 1988). The organizational head added weight and legitimacy to the idea that the organization could be better prepared to meet its objectives and the challenges of the future; and, that managers and staff would be able to perform better and be more cohesive in their approach to goal achievement if they were more aware of the organization's mission and its objectives.

Agency leaders accepted that short term planning, a preoccupation with annual budgeting and the ability to react quickly were no longer sufficient for modern public organizations: there was also a need to be more proactive. Organizations had been affected and sensitized by the turbulence of both internal and external environments created by the assimilation of FMIP and PMB and continuing political, resource and public pressures. However, the problems associated with inflexible programs were well known and plans were designed to retain the flexibility to accommodate changing circumstances. In the main this was achieved by not planning too far ahead. Most planners, with certain notable exceptions, chose a medium rather than long term perspective and reflected their conservative approach by limiting program aims to the near term - usually the coming financial year.

If not at the outset, plan coordinators and participants came to recognize the importance of qualitative as well as quantitative elements and the need in the future of balancing management's attitude and orientation in meeting both task objectives and the special requirements of human resources. This was confirmed by the high levels of contribution from staff and their continuing involvement during the review stages of planning. Moreover, agencies accepted the reality of a hierarchy of planning with each level having different scope, focus, timetables and degree of detail. This helped to place the planning process in perspective.

Finally, all of the organizations accepted that fundamental changes were unlikely to be realised by imposing sudden and wideranging radical reforms upon their networks. Such action would have created unnecessary disruption and may have negated gains from previous changes to cultural thinking, conditions and behaviour. Rather, Bryson's (1988:14) change management

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approach of a 'series of small wins organized around a general sense of strategic direction' was preferred and adopted as being both pragmatic and sustainable. This equates to resetting the contextual component of the environmental filters of the organization, its sub-groups and its individuals.

A Revised Benchmark

The planning model recommended by Glasson and Goode (1988) can be used profitably as the basis to compare the planning experiences of other agencies. A revised benchmark can then be derived for strategic planning in public organizations and hence throughout the A P S . An analysis of the order of equivalent, or near equivalent, planning steps of practicioners or organizations against the Glasson and Goode sequence is shown in Annex C. Some activities do not match exactly but can be combined into the same equivalent step: alternatively, some steps can appear occur in more than one of the basic stages.

The majority of planners began with an assessment of current organizational performance although several sought to define targets for future performance as a planning foundation or baseline. Organizations then conducted an environmental scan and Strengths, Weaknesses, Advocates and Adversaries analysis. Most considered the likely impact of the environment on operations over the next three to five years; but, S S A and D S S took a longer view of 10 years and chose the year 2000 as a reference point in the future. Bryson's model enables planners to select a planning period which is most appropriate for their circumstances and aspirations.

The next most popular stage in the planning sequence was assessing and/or setting strategic directions and goals. This entailed constructing an idealized organization of the future tempered by controllable environmental factors. Managers normally provided staff with an outline of the major areas for discussion or a planning framework based on the preferred scenario that had emerged from the environmental scanning process. Workshops or similar meetings were conducted to allow staff to question and discuss basic planning assumptions and to suggest innovations for the future. After collating and filtering this information, key strategic issues and priorities were able to be determined. Ways and means of achieving these goals were spelled out,

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sometimes in great detail, and a timetable for implementation was generally established.

Finally, the array of selected strategies was implemented through a defined planning hierarchy which usually corresponded with existing communications networks and organizational structures. Procedures for reviewing the plan were included within the normal implementation, monitoring and control systems of the organization.

The strategic planning processes of D S S , S S A and Bryson are considered to be the most forward looking and complete. In particular, each of these models specified early in the process that planners needed to clarify organizational mission and objectives. Moreover, shortly thereafter an organizational vision and associated goals needed to be stipulated. These activities are considered to be essential steps and should be stated clearly.

There are obvious advantages in selecting and combining the most effective processes from the different models. The following sequence draws on recent successful planning experiences and should provide Australian public organizations with a working model of the strategic planning process. The suggested order is:

* Assess current performance and directions

* Assess environments: - external: advocates and adversaries - internal: strengths and weaknesses

* Clarify organizational mission and objectives

* Identify strategic issues

* Establish organization vision and associated goals

Identify strategies to achieve goals and allocate priorities for action

* Implement strategies through the planning hierarchy

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* Measure and control progress.

At the moment, no one agency within the A P S performs this particular sequence of strategic planning. However, it represents a logical development of existing corporate practices and an evolutionary step towards public sector strategic management.

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CHAPTER 9

CONCLUSION

The growth of public management in the A P S has forced executives and middle level managers to think and plan strategically. While FMIP reforms concentrated principally on financial imperatives and budget processes, they also encouraged planners to extend their corporate planning horizons and to include more of the qualitative issues of strategically-related H R M in their considerations.

The transition from basic financial planning to A P S corporate planning is still underway and represents a major step in the evolution to strategic management. Environmental filters throughout the A P S have adjusted to varying degrees of staff acceptance of the new regimen but at least new standards of organizational performance have been established. The advance to the strategic planning phase (Phase Three) of the evolutionary model should be less disruptive as most of the groundwork has already been prepared and implemented. However, the cultural norms of organizations require time to adjust and the pressures of daily operations generally take precedence over long term planning requirements. It is a slow process to develop new organizational values, responsibilities, capabilities and systems to link operational with strategic decision making.

Notwithstanding, if an organization adopts a contingency approach to decision making its executives will be better placed to recognize the most appropriate time to introduce strategic planning. A hierarchy of plans can mirror the hierarchy of decision making so that strategic issues are defined and incorporated at the proper level and do not interfere significantly with operational programs. The articulation of a corporate framework with specified long term ambitions and goals can be translated into concrete, shorter term objectives in the operational levels of the organization. Indeed, strategic planners will need to detach themselves from short term distractions and

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indulge in proactive, jointed incremental thinking and continuous environmental scanning.

Recent experience in public sector planning points to the acceptance of decision making as the predominant A P S paradigm. Organizations are finding that devolved operators require more rather than less guidance on planned and emergent strategy and that 'letting the managers manage' without a relevant strategic frame of reference is untenable. In this context, strategic planning is the forerunner of strategic management and gives the organization a means to address issues that are fundamental to its existence and operations.

If public organizations are to mature they will need to progress 'beyond managerialism' and reduce those elements of uncertainty in the environment under their control: this bounding of uncertainty will also increase the probability of long term stability and longevity. The recommended FMIP planning base of 3-5 years is too short for strategic planning: it constrains innovative thinking and limits the ability of managers and staff to mould the cultural shape of their organization. Planning efficiency and effectiveness can be enhanced by embracing a strategic planning ethos proffered by Teece (1990) in the dynamics capabilities model of strategic management. Radical as well as incremental change can be achieved by careful handling and anticipation by strategic thinkers in developing the future potential of the organization and its members. Priorities can be established more easily and organizational performance can be compared against well-prepared and recognized goals.

Strategic planning methods vary depending on organizational context and commitment but there are several basic steps that public organizations can take in compiling and issuing long term guidance. The process model recommended in this paper gives a simple sequence based on experience that examines current operations and directions, evaluates the likely impact of internal and external environments and forces organizations to clarify their basic mission and objectives. Once the longer term issues are extracted, planners can establish their preferences for the future and set their goals. In turn, managers and planners can elaborate various strategies and assign priorities to achieve those goals. The organization implements the strategies through the planning hierarchy with each level providing progressively greater

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detail and setting objectives for the short term. Finally, a feedback control and reporting system allows managers and staff at all levels to monitor progress and adjust shorter term priorities as required. This sequence is proposed as a new benchmark for strategic planning in the A P S .

Bowdler (1991) notes that the success of any strategic planning process can be measured by the degree of strategic change it generates and the implementation of that change in the organization. However, the more prosaic issues raised by Glasson and Goode (1987) relating to current planning weaknesses in the A P S are apposite. Strategic plans will remain rhetoric unless they are translated into well-publicized operational plans and actions and given adequate resources. General performance indicators for the organization should provide a basis for monitoring both resource and HRM-based activities. And, politicians should be included in the planning process to gain their commitment and kept informed of long term aims of the organization on a regular basis.

Strategic planning in Commonwealth government departments is in its infancy but it offers great promise and a sound foundation for the introduction of strategic management. However, 'results-oriented' management must acknowledge ultimately that such outcomes will be monitored and evaluated by parliamentarians and assessed by the community in terms of productivity and service. Arguably, these notions are not yet fully integrated within the culture of public sector organizations. The move from corporate to strategic planning would Improve that understanding and facilitate its incorporation. Proceeding beyond managerialism presents challenges to the A P S which are more than mere technocratic - it encompasses an enhancement of the democratic process itself.

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ADDENDUM

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ANNEX A

DSS STRATEGIC PLANNING - PART B

DISCUSSION TOPICS FOR MANAGERS: DSS IN 2000

Service Delivery

* What is the business of D S S - current and potential? * Program futures: DSS and other departments; joint programs * Client Services: active policies, interventionist approach, streaming

Group issues: ATSI, migrants, disabled, women, youth

* Service standards * Remote area issues * Hotline and 008 services * Legislation, reviews and appeals, policy

The DSS Office

* Office siting: regional boundaries of DSS and C E S , shopping /business centres

* Office layout: ergonomics for staff and clients, security Office structure: joint offices (CES, CSA , Childcare) Agency arrangements with DEET & D C S H , staffing

* A D P facilities: hardware and software * A D P applications: claims processing, WP, spreadsheet.data.voice, mail * Operating hours: staff rosters, hotline operations

Telecommuting: working from home, hours, equipment, work type * Video conferencing: area/regional, office and home networks

Organization

National, area and regional model: suitability, effectiveness, efficiency

* Corporate planning and management FMIP issues: program structure, resource allocation, reporting, support

* Management systems: strategic, operational and information flow

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External Liaison

Relations with DVA, A T O / C S , D E E T / C E S , D C S H , DILGEA, SSAT/AAT, D P P , A F P , A -Gs , DAS, DoF, DIR, C O M C A R E , A US T POST, T E L E C O M , Privacy Commissioner, Banks, suppliers

* Community and welfare groups * 'shared offices' * consolidated services

Personnel and Training

* Contracts, performance pay, appraisal schemes * staff mobility * exchange postings to industry, other departments and overseas * basic and advanced operations and management training * age structure, recruiting and appointment, retention and part time work

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Monitoring and Revising DSS Plans

ANNEX B

Date Directions Strategic

Nov90 New Issue

Mar91

May91

May92

Jun92

Sep92 New Issue

May93

Sep93

MayS4 review

Jun94

Sep94 New Issue

New issue

review

review

Major review

issue review report

Program

New issue

IT EEO

review

review

New Issue

review

review

New issue

New Issue

report to PSC

New Issue

report to PSC

new Issue

New Issue

Access & Equity

New issue

review

New Issue

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ANNEXC

Comparison of Planning Sequences

G L A S S O N * GOODE (Recommended)

1 Assess current performance

2 Analyze environment

3 Determine future perfuriuaiice

4 Assess current strategic direction

5 Set strategic goals

6 Set key strategies

7 Analyze resources

8 Implement, monitor & control

VIC PUBLIC SERVICE STONZR DILGEA DITAC

3 4 $

6

7

4

8 4 9

AIS CSV BRYSON

1 1

3 2 4 4 5

3 4 6

8

7

SSA

1

DSS

1

6

6

7 4 8

Clarify organization mission: 4 objectives

5 Establish organization Tisloa 4 associated goals

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The Model in Operation

The contingency model demonstrates the imputed, convoluted nature of organizational decision making and the many 'meta-policy' combinations and permutations available to managers interested in aligning the class of problem with its contingent solution technique. The following table shows the imputed and appropriate decision making processes that would be expected to prevail given the matching conditions of structure, technology and resources.

Perceived(lntemal) Decision

Environment Structure Technology Resources Process

Stable bureaucratic basic budget routine

placid- colleglal optimized assigned jolnted-

clustered Incremental

disturbed- representative specialized contingent disjointed-

reactive incremental

organization anomic dedicated ad hoc directed

turbulence Incremental

Superimposing all levels beyond the environmental filter creates contingent guidelines and pathways for resolving issues of relevance to the organization. However, while Figure 3.2, for convenience, shows the variables and their impact on decision making in a vertical and co-incident sequence this may be misleading. In practice the handling and flow of issues are more likely to occur in parallel with each component dealing with issues simultaneously rather than sequentially - see Figure 3.3.

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FILTER

P E R C E I V E D E N V I R O N M E N T

S T R U C T U R E T E C H N O L O G Y R E S O U R C E 8

J DECIS ION P R O C E S S

Figure 3.3

In particular, political issues, human concerns and vested interests of organizational sub-systems will impede any perfect alignment indicated by the model. For a start, the filter(s) may so reduce the degree of turbulence that a highly unstable environment may be transformed into a disturbed-reactive or even placid-clustered situation. Because filters exist at all organizational levels the differences in perception and culture at various levels can generate 'environmental torsion' leading to considerable stress (Foster, 1991). In the case of the individual, however, Foster believes that organizational inertia, in most cases, will override that of the individual, resulting in the individual expressing 'perceptions in the form of advice or decisions that will conform to organizational expectations' (Foster, 1991:15). Sub-groups, however, may form highly influential political forces within the organization which may disagree with and work actively against traditional organizational thinking.

For example, an external decision (environment) generated by an extra-organizational authority, such as Parliament or the Courts, may be interpreted (filtered) by executive management as requiring extensive reorganization. In model terms a disturbed-reactive environment would be considered to require disjointed incremental decision making. However, internal groups (such as

45

staff associations) may firstly perceive a greater degree of external turbulence and secondly, they may disagree as to the extent of change determined by management - that is different perceptions of the same external environment and filtering of first order decisions.

These differences may lead to industrial unrest such as occurred following the implementation of the Second Tier Wage Agreement in some regional areas of Commonwealth departments. Figure 3.4 shows how filtering affects information flow and interpretation of a single message from the external environment within an organization. Note that an individual may have the original message and two pieces of processed information to consider.

E X T E R N A L ENVIRONMENT — r

FILTER

OROANIZA1 ION

DECISION/ / MAKING t—rJ

FILTER

SUB-GROUP

aiinnj DECISION MAKING zv

FILTER

INDIVIDUAL

a

DECISIOJ4 ' / MAKING! /

Figure 3.4

Another major practical consideration for the organization is whether the external environment is providing signals about policy issues or administrative issues. Policy formulation and review is generally considered at different levels and by specialized areas which have explicitly defined information paths -ministers, ministerial advisers, public executives, policy specialists and advisers. The senior administrative elements monitoring the operation,

46

management and general implementation of policy contain issues more directly associated with structure, technology and resources of the organization. The two are usually combined as part of budgetary planning but can be quite separate at other times. This may create very different internal perceptions about the turbulence or otherwise of these domains and again lead to tension within or between organizations.

The operational aspects of the organizational design system shown in Figure 3.4 will be examined in subsequent chapters. Next, the design of a formal planning process will be considered followed by its direct application to such techniques being developed within the Australian Public Service. Finally, the gradual, planned, meta-policy path toward Strategic Management will be explored and considered in the light of individual departmental strategies, past and present.

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CHAPTER 4

THE ENVIRONMENT AND ORGANIZATIONAL PLANNING

A contingency model for decision making is useful to public managers only if the strategic framework of their organization is in alignment with their environment; that is, the agency has a grand design or strategic plan.

An organization needs to determine its standing in relation to other players in its many environments and this may be formalized for Commonwealth departments by the Administrative Arrangements Order. Once it has established this niche, or public market share, and its reputation and role have been recognized by its peers it can contribute to the continuing debate within its particular sphere of government. It will accept or reject environmental information through its filtering mechanisms and modify its culture accordingly. However, the traffic is not all one way. Organizations not only attempt to match or achieve a strategic fit with their environment, they also try to influence and modify the environment to their own purpose.

Because its technology is subject to obsolescence and its resources and structure are liable to constant review and change, an organization must attempt to gauge the mood, trends and future impact of the environment so that it can formulate contingency plans for its own survival. After its continued existence is assured, or at least not threatened for a particular period, the organization can plan for growth, role enhancement and political stability.

Unfortunately, the environment is not a linear traveller and the further the organization looks ahead to try and anticipate environmental effects the more blurred its foresight will become. In the short term it is reasonable to extrapolate from previous and current events and trends, if not to forecast the future then at least to extend the present. For example, an annual budget cycle provides a positive framework and rational basis from which to predict likely resource allocations for the following year and perhaps out to three years in the case of Commonwealth forward estimates. Resource planning may also

48

provide the foundation for a detailed corporate plan which identifies short term aims, objectives and programs with realistic program indicators and targets. The traditional drawback here is that available means may dictate achievable ends thereby overruling previous organizational priorities. Moreover, once planners extend their reach beyond the reasonably well-known into the completely unknown, the value and substance of quantitative planning fades rapidly.

What then can strategic planners do to overcome the lack of knowledge about the future environment? Does the organization revert to managing the present and pay lip service with vague generalities about future directions and desirable achievements? In the main, the answers appear to lie within the internal environment of the organization. Organizational culture and structure depend to a great degree on organizational strategies and in the absence of relevant information the organization will tend to retain or covet the status quo or only modify it slightly through incremental processes. Cultural forces are extremely strong and respond more to qualitative than quantitative forecasting and more to positive than negative predictions. Obviously day-to-day operations require hard data and the reactive routine of standard operating procedures. While longer term vision will still need to refer to this quantitative assessment it will also highlight the notion of qualitative improvement.

If the organization aspires to radical improvement in achieving its objectives and can articulate them after comprehensive consultation with its internal and externals publics then it will establish a viable reference framework which can legitimate a planning hierarchy. Any subsequent timetable can be reviewed at regular intervals to assess the progress towards its visionary objectives. Moreover, while strategic management is about adapting to change, Mintzberg (1987: 72) points out that both continuous and revolutionary change, in periods of stability and turbulence respectively, may be required because of environmental shifts and that flexibility rather than planning doggedness is required:

Whether through quantum revolutions or cycles of convergence and divergence, however, organizations need to separate in time the basic forces for change and stability, reconciling them by attending to each in turn.'

49

So, while an organization tries to reduce the uncertainty of the future by minimizing complexity (Brewer and deLeon, 1983) and mixing quantitative and qualitative forecasting and goal setting, it will never be completely sure of its planning outcomes until nearer the actual time or event. For this reason, the planning process is more a transition from Simon's notion of bounded rationality of an organization's current surroundings towards a bounded uncertainty of its future. In terms of strategic choice this movement is similar to Etzioni's (1969) mixed scanning technique of broad survey, and the identification by rational process, of relevant, major issues; whether incremental problem solving is then applied to each issue will depend on the priorities afforded to the decision making and the planning processes pertaining at the time. Thus strategic planning becomes a combination of extrapolation of current, quantitative programs and innovative, qualitative prediction. The starting point for this process is environmental scanning.

Environmental scanning

An organization defines its own areas of involvement in specific terms and identifies relevant policy considerations and trends within its activities through environmental scanning. Preston and Post (1975:107) described scanning as: the selective and systematic gathering, synthesis and analysis of information'. The analysis of the information will determine specific opportunities for, and warn of threats to, the organization (Whittaker, 1978).

Scanning can be informal or formal. The very existence of a social setting which produces an information base and sources of routine data and stimuli means that informal scanning is inevitable; however, the information obtained can be distorted and contradictory. Formal scanning aims to reduce selective perception and incompleteness of information and to establish a base for synthesis and evaluation overtime (Whittaker, 1978).

Aguilar (1967) identifies four modes of scanning:

* Undirected viewing of general, easily available information with no prior setting of search areas or sifting for relevance to the organization.

* Conditional viewing involves some previous selection of areas of interest and relevance but conducted on a routine basis. '

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* Informal search identifies particular areas of interest of concern to the organization but no resources are allocated formally to acquire the information.

* Formal search directs deliberate and programmed effort towards information gathering on specific topics of interest to the organization.

The decision whether to conduct a formal search or rely on informal methods will depend, according to Aguilar, on the issue involved (impact of existing objectives and strategies, urgency and potential seriousness of the problem), the information rules (adequacy of existing information, ease of acquiring additional information) and capacity rules (availability of resources and skills for scanning).

A public organization will need to scan those environments which have the potential to affect its policy and administrative operations. In this way managers can develop strategies to enhance organization-environment congruence and establish internal structures and processes to implement those strategies (Kast and Rosenzweig, 1985). Moreover, the scanning process is the key to effective strategic planning and should examine both internal and external environments.

Internal Environment. Bryson (1988:124) cites three main areas for scanning the internal environment - resources (inputs), present strategy (process) and performance (outputs). The objective is to identify strengths, competences and weaknesses which 'help or hinder accomplishment of the organization's mission and fulfilment of its mandates'. The first two categories are reasonably easily satisfied in public organizations by monitoring budget allocations and expenditures and management control reports. The output and outcome levels are more difficult to determine as program performance indicators and MIS reporting are still being introduced. The FMIP is designed to alleviate these shortcomings.

External Environment. The external environment is scanned to identify opportunities and threats, or in the case of public organizations, advocates and adversaries, the organization may face (Montanari: 1989). Bryson (1988:122) nominates three categories that need to be monitored: forces and trends;

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clients, customers or payers; and, actual or potential competitors or collaborators. Forces and trends involve assessing likely political, economic , social and technological (PESTs) impact. Stakeholders' views, values and expectations of service also need to be obtained.

Data Gathering. Information and data can be gathered using a variety of methods from which forecasts and scenarios may be formed. Some of these methods for reducing uncertainty such as contextual mapping and developmental constructs have been covered previously . Others include extrapolation and trend analysis which extend historical data into the future; contingency plans may anticipate a major event or disaster; and, decision analysis examines a range of alternatives at each likely decision point. Delphi polls collect expert opinions and involve panel discussions of the responses. Futures searches postulate desired or preferred futures and work backwards towards a set of goals designed to achieve that outcome (Galloway, 1990). Future searches are particularly interesting in that they:

'invite the use of intuition, the subjective as well as the objective approach and qualitative as well as quantitative data. It also invites the hard-nosed, no-nonsense professionals who manipulate data or mathematical models in an effort to discover something about the future' (Bell, 1983:53).

Information and Decision Making. Collings (1968) studied the most commonly used sources of information in US companies and how the information was incorporated into the decision making process. He found that the more sources, mainly from outside the company, that were used made the manager's scanning practices more effective. Oral sources were preferred and relied upon more than written sources, particularly by senior executives. Larger firms made greater use of inside sources but undertook a proportionately larger scan of the environment.

The following sections indicate some of the factors to be considered when scanning the external environments - PESTs - of government departments.

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Political Environment

In preparing any strategic plan for their operations, public organizations will need to analyze the political context of public policy formulation and implementation (Montanari and Bracker, 1984). Although a department must consider the requirements of its clients and various constituencies, the primary influence over its operations is exercised by the political executive. However, as Davis et al (1988:81) observe:

'Government decision making tends to be fragmented, ad hoc and sequential, while careful plans require long term commitment to objectives, understandings about what resources will be available, and agreement on priorities and timetables. A Government strategy requires clear, unambiguous objectives and a firm unrelenting policy.'

In Australia there is the possibility of a change of federal government every three years. This raises several questions about political master/ administrative servant relationships and efficient administration versus political neutrality. Just how well prepared should departments be for a possible reversal of current policies? Should, for example, policy specialists in a department be entirely single-minded in their loyalty to the present political executive and devote their complete energies to promoting and defending their programs? Obviously, they should have a reasonable knowledge of the Opposition's ideological platform and policy alternatives for particular portfolios; but, should they prepare contingency plans for implementing specific programs and an assessment of the cultural and fiscal impact of proposed changes? To what extent does the department have any residual responsibility and accountability to its existing clients as measured against its fealty to its potential or new political controllers?

The political arena is fickle and election cycle uncertainty will continue to constrain the planning horizon of departments. Administratively, political changes can be costly and disruptive to policies, management practices, organizational structures, resources, staff and clients. Change may come abruptly with almost immediate impact or be phased in gradually. Either way, the budget cycle and legislative program will be interrupted and possibly radically different policies will need to be justified. While readjustment and reorganization are operational hazards for public servants, there is a certain

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irony and cultural schizophrenia in having to rationalize ideas that may have been denigrated previously in suggested responses prepared by the same officials for the Minister in answering Parliamentary questions.

In short, the political environment and its potential impact on departmental policies and operations is very difficult if not impossible to measure. Some trends can be discerned however and there may be some continuity and stability if a government is returned to office. Notwithstanding, the political environment is never placid and can be highly turbulent.

Economic Environment

The national economic environment interacts closely with its political counterpart and will affect fiscal, monetary and wages policies of the government; this in turn will determine priorities and budget allocations for the implementation of public policy. Economic turbulence affects market and social factors such as labour markets, social welfare, business investment and industrial productivity; in turn, this bears upon departmental clients and constituencies.

Economic growth or decline will directly affect organizational resources and, consequently, any longer term plans for internal development of staff and structures - that is, administrative funding and support will vary in proportion to economic factors such as client bases and program priority. Departmental planning will need to remain flexible to offset these fluctuations. Moreover, the department will have to monitor closely the costs and quality of its product as well as meeting statutory requirements associated with its delivery.

Social Environment

Demographic changes are important indicators for public service organizations; these include: population increase, ageing, dependency ratios, ethnic mix, marriage and divorce rates, family stability, employment participation rates, education and literacy levels, invalidity and retirement rates. Another relevant trend is the movement in advanced countries from an industrial to an information-based economy and its impact on the society as a whole. All of these factors will require a longer term response from the public sector.

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The social and cultural attitudes and values of staff and clients must be monitored constantly. Expectations of direct service accountability to the public and for program effectiveness and efficiency to Parliament mean that departments must continually match their operations accordingly. Surveys can reveal the level of client satisfaction and planners can extract attitudinal trends. The review of administrative decisions, appeals and ministerial representations will also show weaknesses and shortfalls in operations.

The views of lobby and interest groups associated with a department's portfolio should also be noted given that alternative policy advice is part of the public policy process. The influence of these groups is important considering the government's need to obtain consensus, the complexity of modern legislation, the ability to sway voting patterns and the impact of elites (Bowden, 1985). Similarly, social pressures and changing cultures will affect the internal environment of the organization. The goal congruence of staff and organizations is the substance of HRM and requires the integration of strategic staffing, rewards and incentives, staff development and working conditions into organizational strategic planning.

Technological environment

It is essential for organizations to monitor technological advances and relate them to their operational and support functions as far into the future as possible. Technology is the major sunk cost for public departments but, unlike the political and economic environments, the technological scene is generally more predictable. Notwithstanding, the rate of change in such areas as decision support facilities, management information, storage systems, communications and ergonomics can be daunting at times.

Agencies guard their existing technological base jealously and need to be convinced that quantum improvements in efficiency would result from the introduction of advanced technology. Another reaction by cautious managers is to defer acquisition of systems on the basis that development is incomplete and that the agency should wait for the final, fully proven version. This 'dawnism' - something better is always over the horizon - can work against organizational objectives and attract criticism from central agencies. There is also a general reluctance to learn new skills accompanying technology,

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especially when it is imposed upon staff without adequate introduction or training.

Although the technological sphere may be more easily discernible, the choice of what to replace, what to acquire and when becomes a major strategic decision or series of decisions for the organization. Computing, data management and information systems are examples where significant growth potential must be specified during the acquisition process. Moreover, technology needs to be seen as the tool or means rather than a process which determines and limits departmental operations. A simple computerizing of manual methods may not improve efficiency or effectiveness and there are other significant costs to be counted in the form of supporting infrastructure and continuing support.

Reprise

The last three chapters have examined the concept of organizational environments and the various interactions with organizational entities and their sub-groups through environmental filtering. A model of contingency decision making for public bodies was derived from the filtering notion. Finally, the idea of strategic framework planning has considered the process of environmental scanning as it applies to APS departments. The next chapter investigates APS paradigms.

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CHAPTER 5

APS PARADIGMS

Introduction

Having reviewed the part played by environmental filtering in moving from basic financial planning to corporate planning in Gluck's model, this chapter examines the operating ethos and paradigms of the APS and reviews the operation of the FMIP as the foundation of strategic planning. In particular, it considers some of the conflicts and challenges of balancing results-oriented management with a parallel, although perhaps less than equal, emphasis on human resource management in the APS.

Strategic Management Paradigms

In the private sector, strategic management is considered to be a set of managerial strategies and actions that determines the long-run performance of the corporation and involves strategy formulation, implementation, evaluation and control (Wheelen and Hunger, 1989). It concentrates on seeking and considering the opportunities and threats of its environment weighed against the organization's strengths and weaknesses. This externally referenced approach forces the business to focus on using its assets efficiently and formulating general guidelines designed to meet effectively its mission and objectives.

Teece et al (1990) suggest that there are four main strategic management paradigms evident or emerging in the business sector. A competitive strategy based on Porter's writings involves offensive or defensive action to create a defensible position against competitive forces. A second approach stresses entry deterrence and strategy interactions - industrial outcomes are a function of the effectiveness by which firms keep rivals off balance through strategic investments, pricing, signalling and controlling information. Thirdly, a resource-based strategy emphasizes firm-specific capabilities and isolating mechanisms

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to determine and measure performance. The new, fourth option proposed by Teece and others is a dynamics capabilities approach which builds on the resource-based model. Its main emphasis is on the exploitation of existing, and development of new, capabilities; and, it seeks to replace the theories of enterprise as a nexus of contracts or production functions with notions of learning, path dependencies, complementary assets, complementary technologies and transaction costs.

These paradigms and that provided by Gluck's (1980) evolutionary model of strategic management (see Figure 2.4) can be combined. A diagram of the juxtaposition is shown at Figure 5.1 and indicates planning characteristics at each stage. Elements of the first three paradigms as defined by Teece can be observed in Phases One and Two.

Phase One (Basic Financial Planning) reflects a resource-based, inputs stratagem which has tight operational control mechanisms and internal monitoring of organizational inputs and performance. This concentration on annual budgeting and reactive decision making was evident in the APS before FMIP. Competitive strategies and entry deterrence were, and perhaps still are, evident in the bureaucratic politics of departmental politics of survival and functional expansion (Caiden, 1971).

Phase Two (Corporate Planning) arrived more formally with FMIP and introduced position audits and environmental scanning. However, the FMIP emphasis is still on resource-based strategies but more qualitative issues arise from a greater appreciation of human resources and external factors. A longer term view (3-5 years) forces managers to consider more options, although annual budget disciplines tend to restrict planning horizons despite the extrapolations offered by forward estimates. Devolution alters traditional responsibility/control/accountability arrangements and operational outputs are monitored closely by MIS. Those elements of Phase One that have not been superseded by new or different processes/ procedures become 'routinized' components of Phase Two.

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Planning Effectiveness I

'Strategy by accident 'Short term 'Operations 'Control 'Annual Budget 'Input* (oeua

Basic Financial Planning

PHASE 1

'Constrained strategy 'Environmental scan -

qualitative emphasis 'Longer term (3 years) 'Operations MI8 'Control / accountability 'More externa] focus 'Devolved operations 'Outputs / results 'Extended budget

Corporate Planning

PHASE 2

'Planned & emergent strategy

'Environmental scan -qualitative ^quantitative

Term 5 years plus 'Operations : MIS &

Business IS 'Planning hierarchy •strategic, corporate operational

'Capital budget > recurrent

Strategic Planning

PHASE 3

'Learning 'Path dependencies 'Complementary

assets 'Complementary

technologies Transaction costs 'Strategic HRM

Strategic Management

PHASE 4

Evolution of strategic management

Figure 5.1

Phase Three (Strategic Planning) builds on corporate planning perspectives but extends planning beyond the five year barrier. More qualitative assessments are considered in organizational planning. A planning hierarchy enables broad strategy to be progressively more detailed at the corporate level for program budgets and at the operational level to specify workplace objectives. MIS are enhanced to satisfy demands for a wider range of information needs at different management levels. Overall, the strategic

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planning approach is highly proactive and represents a major transformation for any organization.

Phase Four (Strategic Management) consolidates strategic planning and, as with earlier stages of the Gluck model, it subsumes or replaces methods of previous phases. Gluck describes this advanced level of operations as 'creating the future' and in this context it is compatible with Teece's concept of dynamic capabilities for maximizing planning effectiveness. However, elements of the Teece paradigm need further explanation.

Teece sees learning as a fundamental requirement for both the individual and the organization. Learning assists with the understanding of complex problems and creates a set of successful solutions or routines which reflect corporate knowledge. These routines can be 'static' (replications) to meet simple, repetitive problems or 'dynamic' (exploratory) to counter more complex or unusual problems. In both cases 'routines contribute to a firm's distinctive competences and capabilities' (Teece, 1990: 20).

Next, the notion of path dependencies acknowledges that organizational history and culture are powerful influences on system performance. The internal environment is constantly changing through the learning process of trial, feedback and evaluation. Confusion will result if too many parameters (resources, technology and structure) are changed simultaneously. Complementary assets refer to capabilities and assets acquired as part of previous growth. Path dependencies and complementary assets can constrain strategic choice as new processes may replace or devalue these factors. Similarly, technological opportunities may be gained if the organization is willing to experiment and innovate to enhance its business in a highly competitive environment. Finally, an evaluation of transaction costs will determine whether new capabilities are required and if investment to acquire them is to be internal or external. The stability and competitiveness of the operational environment will influence decisions either to build on existing skills or to develop new competencies.

Strategic Management in the Public Sector

Translating the dynamics capabilities form of strategic management for use in the APS is a considerable challenge. However, an objective statement of

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strategic management, as it might apply to the public sector, has been proposed by Hax and Majluf (1984: 72) who see the ultimate objective of strategic management as:

'the development of corporate values, managerial capabilities, organizational responsibilities, and administrative systems which link strategic and operational decision making, at ail hierarchical levels, and across all business and functional authority'

A strategic management style should enable organizations to anticipate and cope with turbulent and competitive environments by coordinated decision making (Montanari and Bracker, 1986; McGuire, 1989). The evolution to strategic management by way of strategic planning provides a sounding board and a set of guidelines against which shorter term resource commitments can be justified (Lyons, 1983). Strategic planning is a prerequisite of strategic management and furnishes an all-embracing view of the role and operations of an organization. Managers look outward to a rapidly changing environment and inward to business resources and skills and monitor their interaction (Joubert, 1988). Strategic planning also renders an essential context of background knowledge for decision making with its clear statement of the organization's mission, values and mandate, and analyses of the organization's resources and the external environment within which the organization operates (Howard, 1990).

Effective managers must concern themselves primarily with the management of change and strategic vision is considered to be an appropriate management tool for this task. Developing strategic vision involves scanning the forces of change and taking time to understand and embrace them, creating a vision of what the organization should be in the face of changes that have been identified, sharing that vision through good communications with all affected staff, and marshalling the work ethic to achieve the vision (Brassier, 1985).

Notwithstanding, the strategic management approach does have drawbacks which may be magnified when considered in a public sector operational context. Galloway (1990:21) has highlighted several shortcomings:

All strategic plans prepared under the strategic planning aegis require frequent review to maintain their relevance in a changing environment.

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* Frequently, strategic planning is not integrated into management systems with the result that the manager fails to manage through the plan which becomes nothing more than window dressing.

* It is extremely difficult to keep abreast of a complex environment that is undergoing rapid change.

* Strategic planning is not a cure for a sudden crisis although it can be utilized to minimize the effects of future problems.

* The introduction of a strategic management approach may represent a major organizational change program - a tendency to move too wide too quickly can be a major pitfall.

* If too much formality is injected into the system it may restrain creativity and reduce flexibility.

Similarly, McGuire (1989) sees problems in combining strategic management precepts and public management. She notes the difficulties of defining government objectives which are often conflicting and change frequently. Also, problems may arise because public management would require formally autonomous but functionally interdependent organizations to be coordinated. Finally, any management prescriptions need to consider the overriding requirements of public accountability.

But, using the base established by 'managerialist' reforms in the APS, strategic management presaged by strategic planning appears to be a logical and beneficial extension of that ethos. Moreover, it may redress the current imbalance of short versus long term planning and replace the emphasis on short term expediency with a more balanced view of public sector alternatives. Indeed, it would enable the APS to take advantage of the major benefits of strategic management as listed by Galloway (1990:20):

* Management is proactive rather than reactive.

* Clear objectives and a sense of mission for organizations are established through strategic planning.

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* A long term technology base can be developed that is appropriate to an organization's future direction.

* Internal and external communications can be improved by highlighting the types of information needed as well as the information sources.

* The level of corporate discussion can be extended beyond immediate budget pressures and organizational constraints so that emphasis can be given to an organization's long term effectiveness.

* A rational framework can be established for the allocation of resources and an orderly system for the re-allocation of resources from current to new programs.

Planners and managers can provide a widely validated basis for making long range decisions and evaluating performance.

* The processes offer an organization-wide framework for decision making that avoids ad hoc decisions on matters of long term consequence.

These advantages may offer some APS managers valuable means to accomplish their divers ends. However, as shown earlier, cultural and operational changes do not happen quickly or without disruption. The environmental filters of the organization, its sub-groups and its individuals will hamper change and seek to retain the existing norms and procedures. But what are these paradigms of the APS?

APS Paradigms

Commonwealth government departments, staffed by members of the APS, are open-system type organizations which are fast emerging, as predicted by Simon (1973), as bodies that exhibit decision making processes as their central activity. However, the traces of at least three other paradigms are also readily apparent and exist alongside the decision making paradigm as influences in organizational design: the paternalistic/political, the accountability/authority and workplace paradigms (Huber and McDaniel, 1986).

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Huber and McDaniel observe that the paternalistic/political system emerged from a tribal leader's endowment of resources on the basis of family or political allegiances. The organization aims to maximize the leader's position through careful allocation of power-enhancing resources (authority and subordinates) to favoured individuals. While nepotism and patronage are no longer practised, formally or legally, the paternalistic/political perspective can be seen at each stratum of APS leadership where occupants are served by carefully selected, loyal, like-minded supporters who share common values and ideals. This 'cloning' situation is a form of succession planning and prevails despite the notions of career service and the strictures of the merit principle. The impact of contract employment and performance pay may even reinforce these practices although the scale of operation may be affected.

The accountability/authority paradigm provides the basis for classical organization and management theory and Weber's bureaucratic form. Its concept relies on specifying who is accountable for meeting particular responsibilities and allocating authority commensurate with achieving those responsibilities. Here the organization's effectiveness lies in maximizing the probability that the responsibilities will be fulfilled. This paradigm is axiomatic in traditional, hierarchical bureaucracies such as the APS which rely on officers meeting assigned roles and functions. It is noteworthy that tasks and task management have grown under devolution but that new practices are not always accompanied by sufficient resources - 'sufficient' of course is in the eye of the beholder.

The workflow paradigm emerged from work practices developed during the industrial revolution and elaborated by F.W.Taylor as scientific management. The focus is on creating structures and administrative processes that match production processes or operations of the organization. The criterion for system effectiveness is maximizing either production systems or production/structural systems together. In Commonwealth departments, the workflow ethic has been institutionalized and any modifications occur as continuous, incremental changes to organizational structures with occasional radical restructuring or rationalization. This can also occur as part of a political reform program leading to re-allocation of portfolio responsibilities, amalgamation or disbanding of organizations altogether under machinery of government adjustments. Internally, the workflow paradigm focuses on

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revising structures and administrative processes to match political and client demands for efficient service delivery or other outputs.

The decision-making paradigm centres on the primacy of structures and processes that facilitate organizational decision-making. The overall aim is to maximize the quality of decisions. The authors recommend that organizational designers should establish or 'selectively nurture, the characteristics of the decision processes that are especially suitable for the particular decision task and setting' (Huber and McDaniel, 1986:576). In other words, create a climate and understanding of contingency decision making. However, while most applications of the paradigm are meant for the operational level, it is especially applicable at the strategic management level where decision making is clearly a central activity. A central activity is one 'whose successful execution is critical for effective accomplishment of the organization's goals and strategies' (Huber and McDaniel, 1986: 575).

Meta-Pollcy: Combining the Paradigms in the APS

These management paradigms relate to internal process and procedures and co-exist with the externally focussed strategic management paradigms described by Teece (1990).

Assigning levels of importance to each management paradigm within each stage of Gluck's evolutionary process leading to a strategic management framework offered by Teece is a complicated but not difficult task. Factors to be considered include the history of the organization's development, the learning rates of discrete bodies, political/bureaucratic balances, workforce attitudes, task/staff management emphases, the different circumstances of individual organizations and the influence of cultural factors on internal environments.

In general terms many agencies within the APS have progressed to Phase Two of Gluck's model where there is more emphasis on decision making through extended planning practices. Strategic decision making would tend to dominate Phases Three and Four; however, the other frameworks will continue to co-exist and operate in some residual form. Contemporary paternalistic practices would assume less importance in these later stages. Workflow ideals become less important in Phase Two but increase slightly in Phase Three

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before stabilizing in Phase Four. Accountability dominates Phase Two under FMIP and PMB but is reduced in proportion in the later stages. A suggested representation of relative paradigm shares and collocation is indicated in figure 5.2.

Ascribing an historical dimension to the various frameworks described by Teece enables a similar proportioning of the co-existing strategic management paradigms to be accomplished. Rgure 5.2 shows the imputed, relative decline in resource-based priorities and other traditional practices in favour of greater strategic and dynamic capabilites for the organization. As with the internal processes, the meta-policy paradigms will include the residues of previously dominant or significant practices which will still exert some influence over organizational thinking and operations.

Basic Financial Corporate Strategic Strategic Planning Planning Planning Management

100 90 80

& 70 a : 60

50 40 30 20 l l i i i

Phaae 1 Phaao 2 Phase 3 Phata 4

• Dynamlo oapabltlaa • Rasouroe baaed (D Entry deterrence E3 Competitive

Strategic Management Paradigms by Phase

• ••III I

80 i

60

I I 6®

iiiimiiiiiiilllilllllllli llllllll 111 Phaaa 1 P h a s a 2 P h a s e 3 P h a s e 4

• D e c i s i o n making • Workflow • Account /author i ty ED Paternal /pol i t ical

APS Management Paradigms by Phase

Figure 5.2

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As political and cultural frameworks in organizations are in a constant state of flux and tension they are likely to be changed significantly by the overlay of operational strategic management and the greater emphasis on strategic decision making. Given that the APS should, axiomatically, aspire to the highest form of effectiveness, its managers will need to combine the decision making paradigm and strategic planning elements of the dynamics capabilities paradigm to progress to Stage Three of Gluck's model. But how will an organization know when it can make the transition?

The barrier between each phase is controlled by the array of environmental filters separating external and internal environments and those internally operating at organization, sub- group and individual level (see Figure 5.1). The filters precede and shape the organization's decision making processes which are also modified by its structure, technology and resources. The contingency model for decision making applies to all stages of Gluck's stages model; however, it can also act as a diagnostic and heuristic tool for managers. It can indicate those meta-policy conditions which would suit organizational changes in management direction or emphasis. In other words, a trend analysis of future path congruence might show that there is the need for continuous matching of sequential quadrants and a minimum of cross-coupling between levels, (see Figure 3.2)

Assuming that an 'average' APS department has assimilated FMIP (Phase Two), the strategic decision making and dynamics capabilities proportions of its operating paradigms will have increased markedly. As corporate planning practices become more routine the organization can direct its attention beyond its previously narrow planning horizons and adopt more forward looking decision processes. Once the organization's planning processes at the strategic level are aligned consistently to a placid-clustered environment / optimized technology/ assigned resources/jointed incremental decision making path (see Figure 3.2) then the organization should be ready to adopt strategic planning (Phase Three). The contextual element of the filter will then be adjusted accordingly to establish a suitable cultural atmosphere for senior managers and the remainder of the organization to accept and promote proactive change.

The springboard for the APS to advance into Phase Three will be the sound, resource-based framework provided by FMIP and PMB.

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FMIP and Program Budgeting

The Australian managerial or public management ethos described earlier has also gained political capital and ascendency in the United Kingdom with the Financial Management Initiative, and in New Zealand. It began in the USA in the early 1980s. In Canada, the Increased Ministerial Authority and Accountability (IMAA) program is similar to Australia's FMIP, although it is more formal with memoranda of agreement between the Treasury and departments, and aims to provide operating flexibility and more demanding accountability for results (DoF, 1988).

The Hawke Government indicated its clear intention to improve the quality and outcomes of decision making in ministerial policy reform papers of 1983 and 1984. The Budget Reform (Minister, 1984) paper stated particular aims of:

* developing better means of identifying and setting budgetary priorities to ensure that the best overall result is achieved in terms of meeting the Government's objectives with the resources they use;

* focusing attention more clearly on the goals and objectives of particular programs in relation to the resources they use;

* developing and applying to the management of Commonwealth programs specific techniques aimed at improved performance and more efficient resource use; and

* setting up machinery to ensure that effectiveness and efficiency of programs are reviewed regularly and that the results of such reviews are taken into account in the ongoing evaluation of budgetary priorities.

As a consequence there are five main elements of the FMIP (Holmes, 1989). A corporate management approach decides goals and priorities as a guide to resource allocation to programs and communicates these decisions to staff. Program management specifies results for each program, sub-program, component and sub-component and appoints responsible managers to run these elements. Organization design allocates program and function responsibility, devolving authority as far as practicable down the organizational line and ensuring managers have appropriate flexibility for their task.

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Management information systems are designed to provide managers with timely and relevant information program performance. Finally, evaluation processes ensure that programs are still necessary and meeting desired outcomes. A diagram showing the corporate/ management cycle and the various interactions is shown at Figure 5.3.

A recent report on FMIP by Parliament (Hansard, 1990) describe the program as a major change from previous APS concentration on 'management by regulation, rules and budgetary inputs and, often, management by crisis'. FMIP is often illustrated in phrases such as 'letting the managers manage', 'the new managerialism* and 'managing for results' which reflect reforms designed to give managers greater scope and flexibility in managing program resources. The review noted that:

'In pursuit of this philosophy of making public sector management more effective, the FMIP has been directed at three things; first, streamlining the Budget process and simplifying and updating the body of rules regulating public financial management; second, improving the system by which departments and agencies make decisions, manage, and evaluate achievements; and third, enhancing public accountability and scrutiny.' (Hansard, 1990:2255)

The Parliamentary review concluded that the concept has been accepted in the working sense but that complete integration of practices and cultural change were some way off. Considering the previous discussion on environmental filtering and the complexity of the cultural component this is observation is quite understandable.

Keating (1990) sees the objectives of the FMIP as developing and encouraging better resource management and practices. The chosen method to implement this ideal within the APS has been to create an operating environment whereby officials can obtain better value for public money. Concomitantly, an improved information base would improve ministerial decision making where such discretion is provided.

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EXECUTIVE Identifies/clarifies needs & objectives

PPS, Budget documents evaluation documents

Minister-Secretary

lannlng objectives & strategies

Information Budgeting & operational planning

Reporting & Evaluation

PUBLIC SERVICE MANAGEMENT

Response

Implementation & monitoring

Needs

SCRUTINY PROCESS

Parliament, Parliamentary committees, Ministerial, Auditor-General, Ombudsman, AAT, lobby groups.

Service

CLIENTS

CORPORATE/ PROGRAM MANAGEMENT CYCLE (Portfolio Program Estimates 1991 -92)

Figure 5.3

Integrated financial and human resource budgeting is a precursor to this governmental decision making framework with a rationale, according to Howard (1988), based on ensuring that:

consideration of all new programs is based on full details of staffing and salary, administrative, operational and capital costs;

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* those resources will be applied efficiently and effectively to achieve program objectives, necessitating program delivery arrangements to be detailed before the final implementation decision;

there is a close involvement by individual Ministers in deploying resources to the portfolio; and

* Ministers require that there are no extensions to existing programs or that new programs are introduced unless financial and staffing implications are fully addressed.

Program Management and Budgeting (PMB) is the other key ingredient in reforming the administrative side of practices and policy implementation. PMB requires 'clear statements of the objectives of activities, program structures organized around those objectives, performance information to assess programs and a formal system to review the efficiency and effectiveness of programs' (Keating, 1990: 9). The program structure is the basis for allocating and managing resources in government organizations. Under this arrangement, program managers are supplied with resources from the central office of the department and are expected to meet program performance indicators, both qualitative and quantitative. Managers therefore become accountable for program performance which in turn reflects on their personal performance for appraisal purposes.

Devolution

Devolution is that function of the organizational design (OD) element of FMIP that' relates to the distribution and delegation of power and authority' and aims to give individual managers more scope to achieve program outcomes while 'retaining cohesion, consistency and a corporate focus' (HoR, 1990: 60). Devolution, or decentralization of management (as opposed to decentralization of function), is a common private sector prescription to improve effectiveness and efficiency by releasing managers from excessive controls and allowing them to use their initiative . However, the balance between centralized control and localized autonomy is problematic:

'Some central direction and control is always present, otherwise organizations simply fragment and disintegrate. Some local discretion is

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always present, otherwise nothing gets done. The problem is how to combine them is a way that contributes to greater efficiency and effectiveness'(Metcalf and Richards, 1987: 79).

The Commonwealth reform context for devolution has been to pass controls and practices from the central agencies ('letting the managers manage') and establishing incentives for managers to use cash limited resources and processes to meet both organizational and government objectives ('making the managers manage'). By these means, devolution is purported to result in more responsive and effective services, better allocation of and efficiency in using administrative resources, and increased productivity through staff sharing in corporate objectives (HoR, 1990).

Line managers, under devolution, are responsible to program managers for detailed implementation and day-to-day operations. It is essential that these operatives have a very clear understanding, not only of program requirements, but also of their agency's objectives and priorities. Agencies have been encouraged to:

develop a top-down approach with a clearly defined corporate strategy and management system as part of a process of informing managers as to what is expected of them. Such a top-down approach to strategy should, however, be supported by work plans for the various levels of management which identify specific targets that the detailed responsibility cells are expected to meet' (Keating, 1987:7).

APS Management and Leadership under Managerialism

As observed earlier in discussing APS paradigms, government departments retain many of the characteristics of traditional, rational model organizations: the encouragement of individual specialization, single skill formation and work coordination and control by superiors. Indeed, many classic management practices remain. Taylor's managers were exhorted to be forward-looking, authoritarian and to enforce an organization's rules, standards and procedures to ensure high productivity. Fayol saw authority, discipline and a formal Weberian chain of command as necessary to preserve the unity of command. Barnard relied on the executive to maintain the organization through cooperative effort and the leader had to be loyal, flexible and possess

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specialized abilities. In time the human relationists regarded leadership as a democratic and employee-centred concept resulting in high morale, reduced staff turnover and increased productivity. However, as Perrow (1986) notes, extensive research has not corroborated the leadership-productivity nexus or it has identified so many qualifiers that any confident advice to managers is difficult.

Conventional wisdom is that leaders have a significant and possibly critical impact on organizational performance despite the views of 'contextualists' who emphasize the constraints that are placed upon leaders by situational factors. A recent study of a number of large retail firms in the UK supported the 'individualist' line and concluded that the proportion of variance unexplained by contextual variables can be attributed to differences made by leaders (Thomas, 1988). This difference can be observed readily to some degree at all management levels in public sector organizations but the impact of senior management is probably the most significant.

The complexity inherent in a large Commonwealth department derives from the combination of psychological, sociological and strategic perspectives of its inhabitants. Miller, Droge and Toulouse (1988) included the Chief Executive Officer's (CEO) need for achievement as a variable in a model designed to investigate strategic process and content as mediators between organizational context and structure. They found that the CEO had a positive and direct effect on the intended rationality (interactive and analytical strategy making) and on the centralization of authority, with the CEO employing discussion and consultation rather than democratic interaction. There were also flow-on effects to structural integration and formulation and on product (or policy) innovation. Hence, while the study was related to relatively small organizations it is reasonable to expect that the personalities and drive of Secretaries and Senior Executive Service officers will have a similar, important bearing on APS organizations and their activities.

The reference document for APS secretaries and senior executives (Codd, 1990) stresses the. importance of efficient and effective management. It also repeats the axiom about people being a department's most important resource, and that consequently, enhancing a sense of staff commitment and job satisfaction staff are among the most important management objectives. Devolution of authority, flatter structures and multiskilling (all sanctioned by

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FMIP) are offered as the requisite tools to increase commitment and satisfaction.

Secretaries are also advised to take a close personal interest in human resource development strategy and practices, Occupational Health and Safety (OH&S) plans and performance, Equal Employment Opportunity (EEO) and Industrial Democracy (ID) plans and practices as these are also vital in encouraging commitment and improving performance. Codd (1990:56) also suggests that Secretaries should be:

'concerned about individuals with special problems, and be accessible to them and, to the extent possible, visible to all staff. Regular visits to working areas of the department, including to regions or outposts, can be valuable.'

Despite this guidance and encouragement, Yeatman is somewhat incredulous and thinks that under managerialism, people management skills will be more rhetoric than actual delivery (Yeatman, 1990a).

It could be argued that in the current APS environment the coincidence of managerialism and HRM (see the next chapter), and the resulting uncertainty, may have caused a split between management and leadership. However, leadership (the visionary and mission setting aspects of executive action) and management (the apparatuses and tools for achieving organizational purposes) must be combined to ensure that an organization is effective (Krantz and Gilmore, 1990). This leader/manager dichotomy, similar in many ways to the ubiquitous policy/implementation split, has highlighted the need for a new set of competencies for managers. Content-based skills will need to be complemented with interpersonal skills and more emphasis placed on communicating visions, directions and organizational purpose to staff.

In the wake of similar public sector reforms in Canada, Manion (1988:242) sees a cadre of public servant managers with a very clear set of values as essential to manage something as a complex and rapidly changing as a federal government. Managers should be devoted to the service; comprehend the nature of government and the critical differences from private enterprise; have an accepted philosophy of management; be capable of taking initiative, setting priorities, making decisions and showing leadership within their own spheres;

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and, are given freedom and resources to get the job done and receive recognition for their accomplishments. These attributes and processes would be well sufted to APS managers. They are also criteria observed by public entrepreneurs.

Public Entrepreneurlallsm

Public entrepreneurs pursue organizational survival as a primary means of introducing and extending their own policy agenda. They also pursue active change in the external environment, usually by first modifying the internal environment of their own organization.

Because of the plethora of political issues and the limited time and expertise of legislators, Lewis (1984:6) believes that despite pluralism 'the balance of responsibility for initiating policy has long since shifted to professionalized bureaucrats'. Moreover, innovative bureaucrats can be assertive and emphasize new policies to achieve existing objectives better or to prompt strategic change of direction (Metcalf and Richards, 1987). The innovator is a change agent who like the Prospector (Miles and Snow, 1978) is constantly seeking new areas of opportunity by scanning a wide range of environmental conditions, trends and events.

Public entrepreneurs go one step further by mobilizing resources to capitalize on opportunities and creating or elaborating public organizations to alter significantly the existing patterns of public resource allocations (Lewis, 1984; Collis, 1987). They form symbiotic relationships with politicians enabling their preferred options to be implemented in return for surrendering public credit (Lewis, 1984; Polsby, 1984). As an organizational player (Allison, 1971) the entrepreneur must understand the rules, politics, parochial perceptions, stakes and deadlines of the game. Power plays will involve negotiating advantages, 'skilful mobilization of substantive justifications' and clever marketing techniques. The aim will be to avoid a problem solving approach and push the bargaining elements to his or her own advantage.

The entrepreneur recognizes that organizations aim to reduce confusion and uncertainty by reducing complex issues to the simplest, most comprehensible and relevant form for decision makers (La Porte, 1975). By acting as a resident expert the official can simultaneously enlighten other players and

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direct them towards preferred options by judicious management of information and data. Careful and frequent use of the media can publicize favourable issues and denigrate the opposition. An entrepreneur can also marshal support to frustrate an opponent by non-decision making which prevents the problem from being fully reviewed or by creating a pseudoagenda, giving the appearance of formal action but actually giving the issue no substantive attention (Olsen and Nilson, 1982).

While the 'intrapreneur' and the entrepreneur would both be competent planners and experts in their own fields, have gained a certain localized autonomy and created an apolitical shield, the entrepreneur would also use the appropriate issue to make the 'leap' for personal aggrandizement (Lewis, 1984). In short, an entrepreneur needs to be politically aware and capable of extensive psychological game-playing to achieve zero sum gains.

Much of the manoeuvring in formulating annual Budget proposals is the result of entrepreneurial behaviour. However, the strategic management of APS human resources is assuming greater importance, if only through greater strategic attention. Policy entrepreneurs will require a different range of skills, knowledge and abilities to deal effectively with this problem area. The scope of the HRM problem as it confronts the APS is considered in the next chapter.

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CHAPTER 6

HUMAN RESOURCE MANAGEMENT IN THE APS

Public management seeks to improve public sector performance by reforming patterns, structures and procedures. However, the productivity imperative can not be separated from those who do the work and their associated work practices, rewards and incentives. It may seem obvious to state that successful Human Resource Management (HRM) is essential to maintain high productivity of product or service, however the task/staff balance in an organization has been, and always will be, problematic. Nevertheless, modern public managers freely acknowledge the importance of people in an organization and accept Ford's (1989:5) observation of the private sector that:

Today's goal is dynamic comparative advantage and, in the successful enterprises, people are seen as providing the advantage.'

This concept and its application in the Australian workforce is reflected in the Structural Efficiency Principle (SEP) which is designed 'to improve the efficiency of industry and provide workers with access to more varied, fulfilling and better paid jobs' (ACAC, 1988:3). The primary aim of SEP is to enhance national productivity and it is an integral component of the Labor Government's microeconomic reform program. In practice, structural efficiency provides the basis for negotiated increases in wages or improvements in conditions in exchange for radical reforms to award structures and working arrangements.

The HRM elements of SEP could be considered to be the logical outgrowth of Organizational Development. On the other hand, it may be seen as an appeasing move to soften and counterbalance an economically rationalist drive for greater productivity. A cynic might even suggest that, considering the stuttering nature and impact of previous industrial relations agreements, SEP architects were only paying lip service to a minimum cost or cost-neutral idea that would not seriously impede the objective of performance enhancement.

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In the APS, SEP is the latest in a series of macro-level personnel and structural reforms intended to improve public service performance and effectiveness. These reforms, combined with the introduction of FMIP, have created an unsettled environment for public servants. Performance and accountability are the watchwords of public management reformers while the implementation of complementary personnel policies, under SEP guidelines, is seen to be critical in meeting the objectives of the new order. The task will fall to senior APS managers to include an extensive range of human resource programs in their strategic planning framework.

The Evolving Nature of Work

In the public sector the consensus is that work will continue to be affected by new technology, information availability, changes in organizational structures, more; emphasis of skills formation and managerial approaches to human resource management (Schuler, 1988; Canadian Treasury, 1989; PSC, 1989; Ford, 1989). The continuing introduction of advanced technology to improve productivity by working 'smarter rather than harder' will require comprehensive retraining programs and a faster rate of change in work procedures. Management information systems will require workers skilled in analysis and evaluation. Information specialists may reduce the numbers of supervisory and support staff leading to flatter organizations with fewer levels of management (Drucker, 1988). Basic workplace literacy and numeracy will need to improve and existing skills may need to be upgraded. Group working skills such as problem-solving and effective communications will become more important. Ford (1989), in particular and in great contrast to his historical namesake, advocates the need for a multifunctional and multiskilled workforce.

The drive for financial and program management improvement in the Australian public sector has challenged traditional staff skills, knowledge, preferences and personnel practices. Some agencies have had to adopt measures to increase flexibility in staffing, match staff numbers to required work, introduce new systems to monitor and manage personnel, and accept unaccustomed responsibility accompanying the devolution of personnel management (Smith, 1989:86). Introducing some of these changes has already shown that resource managers require considerable patience, tact and interpersonal expertise when negotiating with staff and unions. However, the

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overall concept of HRM as a more comprehensive approach to people management within an organization is still being developed.

Concepts of Human Resource Management

HRM has been described as 'one of the most controversial signifiers in managerial debate in the 1980s' (Storey,1989:4). It is generally characterized as a strategic management function rather than as an embellishment of the traditional administration of rules and procedures of personnel management.

Armstrong (1990) sees HRM as a strategic approach to acquiring, motivating, developing and managing the organization's human resources. It should be devoted to shaping an appropriate corporate culture and introducing programs which reflect the core values of the enterprise and ensure its success. Blunt (1986:12) considers that HRM should concentrate on both short and long term analysis, prevention and solution of human resource problems; at the macro level, HRM needs to design and influence the organizational setting to 'maximize the fit between the needs and values of employees, management styles, desired organizational objectives and external constraints'. Hackman (1978) also highlights the conundrum of either fitting the person to the job or vice versa. The Public Service Commission (PSC, 1989:15) defines HRM somewhat circularly as focussing 'on the people of that organization as a resource'.

On the other hand, Torrington (1990) has questioned the assertion that HRM is a radical departure from conventional personnel management. He believes that strategic management of human resources is a reinvention of human asset accounting, which was condemned previously as a dehumanizing process, and which has been re-presented as a version of human capital theory. Torrington does not regard HRM as a revolution, but as an extension to, or further dimension of, an already multi-faceted function. It should embellish personnel enterprise and authority by highlighting training and realigning management priorities to concentrate less on supervising and motivation and more on 'getting the contract right'. Similarly, Fowler (1987) argues that, substantively, there is little new in HRM pronouncements that employees perform better when they are treated as responsible adults. He contends that these and similar notions have been the basis of good personnel practices for decades.

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In an attempt to determine the differences, Legge (1989) compared the normative models of HRM and personnel management and extracted three general, but important, differences. Firstly, personnel management appears to be an activity 'performed on subordinates by managers' while HRM stresses the development of employees and the efficacy of the management team. Secondly, although both concepts highlight the role of line management, personnel management focuses on managers as the instrument to implement 'passively integrated* personnel policies, while HRM regards line management as business managers who are responsible for coordinating and directing, proactively, all unit resources in pursuit of bottom-line results. Thirdly, in stark contrast to its predecessor, HRM models emphasize the management of the organization's culture as a central activity for senior management, that is, using personnel policies to reinforce or change organizational values to be consistent with preferred business strategy. Legge concludes that, theoretically at least, HRM is the more central, strategic management means for achieving business goals while expressing senior management's preferred organizational values.

Following this analysis, Legge sees the implementation of HRM as problematic at two levels. Firstly, the integration or fit of HRM policies for the external or business strategy will be at odds with those internal employment policies directed at employee commitment, flexibility and quality. There will be a contradiction in the contingent approach necessary for the external fit and the more prescriptive approach designed to achieve internal consistency. Secondly, on a political level, both HRM and personnel management employ labour as a major means to further the dominant interest groups in a capitalist society and HRM may subvert those interests (Legge, 1989).

The dilemma identified by Legge is that HRM is aiming to be both generic (strategic) and value-laden (human investment opportunity). Storey (1989) describes these as hard and soft versions of HRM: the former emphasizes quantitative, rational and economic aspects; the latter emphasizes human relations teachings of communications, motivation and leadership.

The response to these and associated problems will present significant challenges to HR managers who, according to Schuler (1986), will need to concentrate on the three strategic HRM pillars of productivity, quality of work life and legal compliance. Guest (1990) proposes that improved output can be

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obtained from a combination of HRM policies which are linked to HRM goals to produce strategic integration, high commitment, high quality and flexibility among employees.

Sutcliffe and Sappey (1990) also note the difficulties involved in applying HRM policies and practices and have distinguished three broad approaches on a continuum of employee management in organizations. The administrative tasks (recruitment, selection, training, pay administration and the like) are essential in organizations and represent the simple, unsophisticated and practice-driven end of the HRM spectrum. Secondly, there is a range of manipulative schemes and policies based on organizational behaviour techniques and applications. Job motivation through job redesign and evaluation is directed at both individual and groups and requires the allocation of resources and commitment by managers to implement these policies. The final, most formal and sophisticated, set of HRM policies is directed to achieving strategic organizational goals. The strategic approach demands the highest level of resources and can be characterized as individualistic or collective depending on management's motives and agenda for change.

The strategic emphasis is also a key feature of the 'dominant American paradigm' of HRM as examined by Boxall and Dowling (1990). Along with 'investment' treatment of staff (as opposed to the accountancy-driven, cost-control mentality') the integration of HRM with general management and an enterprise-level focus, managers will need to adopt a strategic approach which is contextually sensitive to the organization. The notion of congruency as applied in contingency approaches to strategic management advocates that human resource strategy and functions should be consistent with, and integrated within, the organization's strategic plan. In this way, the interests of stakeholders and environmental factors, including union objectives where appropriate, would be taken into account.

Guest (1987: 532) considers that the general proposition of integrated HRM is highly qualified:

'...if human resources can be integrated into strategic plans, if human resource policies cohere, if line managers have internalized the importance of human resources and this is reflected in their behaviour and if employees identify with the company, then the company's

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strategic plans are likely to be successfully Implemented. There will be greater willingness to accept change and fewer delays and barriers caused by conflicting understandings and priorities.'

Other HRM goals relate to employee commitment, flexible and responsive organizations and workers, recruitment and retention of high quality staff and competent management.

In summary, HRM is a discipline that represents an integrated management function which focuses on the organization as the unit of analysis, emphasizes worker potential and promotes direct, cooperative management-employee relationships (Boxall et al, 1990). The strategic management of public employees and its various factors and influences as seen by McGregor (1988) is shown in Figure 6.1.

Position Requirements

S T R A T E G I C PLANNING & R E S O U R C E CONSTRAINTS

1 T H E PUBLIC WORK FORCE

Strategic Human resource management:

Balance Work Force

requirements &avallabllfty

human capital stocks and flows

Manage Human Resource Cycle

recruit, select & place

appraisal

rewards

development

PRODUCTIVITY

Personnel Availability

Figure 6.1

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Accepting that HRM is a strategic and global means of influencing organizational operations and output, how have HRM ideas been incorporated within the APS?

Australian Public Service SEP Agreement

The 1987 Second Tier Wage Agreement (STWA) replaced the complicated system of more than 100 separate job classifications with a simplified, integrated eight level Administrative Service Officer group. As a forerunner to SEP, jobs were also to be redesigned to emphasize multiskilling, flexibility and staff mobility as part of the Office Structures Implementation (OSI) program (DIR. 1989a).

In late 1989, the Australian Industrial Relations Commission (AIRC) endorsed the Structural Efficiency Agreement between the Government, the ACTU and APS unions as a basis for a more flexible approach to work organization. The proposed changes were intended to develop a modern public sector which would maintain secure employment and provide high levels of job satisfaction and equitable access to career structures. They would serve to establish a highly skilled and adaptable workforce with increased access to modern technology and deliver quality services to the public efficiently and effectively (AIRC, 1989). The principal objectives of the Agreement were to develop classification structures to improve operational efficiency and establish skill-related career paths. Staff should have more efficient and flexible working arrangements, and any impediments to flexibility and multiskilling were to be eliminated (DIR. 1989).

The Agreement emphasized the flexible use of human resources and developing staff to their full potential through a series of initiatives including a senior specialist group to parallel the SES, new entry level arrangements, a scheme to group job families and a trial for promotion to level, and the introduction of performance appraisal and performance related pay (AIRC, 1989).

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HRM and SEP In practice In the APS

HRM in government departments and agencies is still institutionally immature. The length of the transitional stage from specialized personnel management to HRM will depend on the size of the workforce, commitment of management and the effectiveness and influence of Public Sector Union (PSU) efforts within each organization. Senior managers still see the need for dedicated personnel functions and centralized directorates. Devolution under FMIP has resulted in delegations for some of the more detailed personnel activities (eg recruiting) to operational units, leaving the policy review and overall monitoring functions at central offices. There seems to be some resistance even to the use of the term 'human resource' from some quarters in the APS on the grounds that it is impersonal, devalues people in the workplace and implies that workers should be treated as production units or costs rather than as individuals worthy of investment.

HRM is considered to reside with higher APS managers who are responsible for strategic staffing perspectives as they relate to organizational visions and corporate planning. In other words, divisional heads, individually and collectively, have overall carriage of personnel matters within the organization. Global staffing arrangements and operations are monitored continuously to determine whether the department is meeting its targets and to propose corrective action when performance standards and targets are not being met.

The introduction of SEP consolidated and extended the previous STWA/OSI reforms in the APS. It also built upon changes to work practices arising from initiatives such as FMIP, PMB and Industrial Democracy. However, not all the changes to working arrangements or procedures have been welcomed and the change managers have been kept busy explaining the reasons and advantages of the many reforms. For example, groups such as senior typists and stenographer-secretaries resented the notion of multi-skilling as they regarded their particular specializations, and sometimes privileged positions, as the logical rewards of their training and experience. Others were sceptical of improved career prospects due to the obvious lack of established retraining or staff development programs.

Moreover, it should be noted that the SEP approach to improve productivity through people has been an essential and longstanding practice in the armed

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services. While public servants have traditionally rejected the military approach as less than democratic they seem not to have noticed that SEP mirrors most of the existing HRM practices in the Australian Defence Force. For example, Schuler's (1986) list of desirable HR activities applies equally to uniformed and civilian elements of the public sector and the difference is only one of degree. There are obviously common issues in recruitment and selection, on-the-job training, salary administration, safety programs, employee records and benefits, labour relations, job analysis, performance appraisal, career development, training programs, communication, HR planning, validation studies and training evaluation. Such novel initiatives as structured management training, promotion to level and staff mobility have been features of Service life for centuries.

Nevertheless, Baker's (1989) idea for integrated HRM within a public service organizational and corporate framework is laudable and should be expanded to fit the tenets of strategic management. If SEP were able to be implemented fully into the Australian labour market including the public service it would cause revolutionary changes to workplace attitudes and practices. However, not even deep recession and high unemployment are likely to force complete compliance to radical reform; indeed it may even entrench current practices. Employer and union attitudes and values are, perhaps, too ingrained to allow other than incremental change under turbulent environmental conditions despite the best intentions of all parties. Cultural change over an extended period will be necessary, as covered earlier in environmental filtering. In other words the objective of productivity enhancement will not be achieved overnight.

Strategic HRM

HRM is not (yet) a common acronym or executive title in the APS and in practice its activities are generally scattered throughout an organization. However, the growing use of corporate and strategic planning should focus more attention on HRM requirements and the need to state specific intentions and goals for personnel management. A strategic vision enables HRM policies to be incorporated into an operational framework and APS managers may then adopt a prescriptive or contingency approach to HRM (see Figure 5.1).

Public sector planning for HR requirements will be conditioned by political constraints, the impact of government policies and priorities, the need for high

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demand specialists and the effects of legislative change. Therefore, all managers must be trained to identify the HR implications of strategic and operational plans. In turn, HR managers will need to translate strategic staffing into realistic plans to achieve corporate goals by suitable allocation of resources to line managers (McQueen, 1984). Paradoxically, at the same time HRM processes themselves will need to be streamlined to reduce costs. In the APS, cost-efficiency will affect such HRM policies and activities as recruitment, advancement, mobility, discipline, inefficiency, redeployment and retrenchment, and the Code of Official Conduct (PSC, 1990).

Finally, the prospect of increased productivity and its benefits presaged by SEP are intuitively good and socially acceptable. There are some outstanding questions, however, which may need to be addressed in the shorter rather than longer term, relating to the degree and balance of SEP/HRM in the managerialist environment of the APS. For example, how much extra productivity will SEP achieve? At what level (national, state or local) and against what performance indicators and standards will progress be measured? Is award restructuring the final means for productivity enhancement or is it only the beginning of another wave of organization behaviour-led economic recovery? And, how much competitive advantage is enough, especially in the public sector?

Summary

In the APS, a captive and sometime victim of recent administrative and structural reforms, SEP is seen and generally accepted as a continuation and consolidation of STWA/OSI. Actual implementation of general and agency-specific issues is subject to detailed union negotiations and the devolved nature of APS personnel management since 1987 means that overall implementation may be uneven. However, these reforms provide a solid foundation for the melding of organizational planning and HRM to create a contingent, strategic management framework within the APS.

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