The Role of Government

What is the public sector?

The locus versus focus debate, i.e. where an organisation is (who owns it) or what an organisation does….

What does the public sector do?

Suggestions …. ?

According to the system of natural liberty, the sovereign has only three duties to attend to …

i.the duty of protecting the society from the violence and invasion of other independent societies;ii.the duty of protecting, as far as possible, every member of society from the injustice or oppression of every other member of it; andiii.the duty of erecting and maintaining certain public works and certain public institutions, which it can never before the interest of any individual, or small number of individuals to erect and maintain, because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.

The functions of government

The provision of public goods that are either:

• non-rival, i.e. its consumption by one person does not prevent someone else from consuming it as well;

or

• non-excludable, i.e. it is very difficult or costly to exclude the consumption of the good by others.

The functions of government[www.pc.gov.au]

Enabling higher levels, higher quality and/or more equitable consumption of services that governments consider to have particular merit or that generatebeneficial spillover effects for the community.

The functions of government[www.pc.gov.au]

• Direct delivery by government owned agencies.

• The purchase of services from external (community and private sector) providers.

• Funding external providers through grants

• Subsidising users (through vouchers or cash payments) to purchase services from external providers.

• Imposing community service obligations on public and private providers.

• providing incentives to users and/or providers, such as reducing tax obligations in particular circumstances (known as ‘tax expenditures’).

How are government services delivered?

What is ‘management’?

How would you define ‘management’ ?

What is ‘management’?

Management may be defined as the process by which a co-operative group directs actions towards common goals.

The functions that are usually associated with management are organising, staffing, planning, controlling and directing. In carrying out these functions the manager must make decisions and communicate with others, for the essence of management is getting things done through other people.

(Haynes & Massie, 1969)

What is ‘management’?

Management is the art of bringing ends and means together – the art of purposeful action.

Essentially it is a process that usually contains three elements:

i.the selection of a goal,

ii.the initiation of planned actions to reach it, and

iii.continuous review of the effectiveness of the actions and the value of the goal.

What is ‘management’?

Management does not deal with human and material resources alone, it also deals with problems of morals, ethics and ideals – because ends are determined by values (that is preferences) and because means must be morally acceptable.

(American Institute of Management, 1959)

Functions of Management (Allison, 1982)

Strategy

1.Establishing objectives and priorities for the organisation (on the basis of forecasts of the external environment and the organisation’s capacities)

2.Devising operational plans to achieve these objectives.

Functions of Management (Allison, 1982)

Managing Internal Components

3.Organising and staffing – organising involves establishing the structure and procedures for coordinating activity and taking action; staffing tries to fit the right person in the key jobs

4.Directing personnel and the personnel management system – recruits, selects, socialises, trains, rewards, punishes and exits the organisation’s human capital

5.Controlling performance – via various management information systems that assist management in making decisions and in measuring progress toward objectives.

Functions of Management (Allison, 1982)

Managing External Constituencies

6.Dealing with ‘external’ units of the organisation subject to some common authority.

7.Dealing with independent organisations – including interest groups and private enterprises that can affect the organisation’s ability to achieve its objectives.

8.Dealing with the press and public – whose actions, approval, or acuqiescence is required.

Public vs. Private Sector Management

Is there something called ‘management’ which is a generic, purely instrumental activity, embodying a set of principles that can be applied to public enterprises (organisations) as well as private enterprises?

"We are, by international comparison, bloated and inefficient."

In many quarters there is an underlying assumption that publicly managed organisations are managed less effectively and efficiently than private sector organisations.

The privatisation of public sector agencies, or contracting service provision to private sector organisations, will, therefore, solve the problem of a “bloated and inefficient” public sector.

Inherent within this assumption is an acknowledgement that management in the public sector differs from management in the private sector

Is there a difference between public and private sector management practices?

• Simply as a result of public ownership?Public ownership may encompass:

– state-owned commercial enterprises– entities established by government with a

separate legal entity to carry out a specific function (i.e. advisory, regulatory, purchasing and/or service provision)

– departments of central government– offices of parliament– local government– local government trading enterprises

Is there a difference between public and private sector management practices?

• because of the absence or existence of economic markets for the outputs of an organisation?

• because agencies that gain funding from government with no ‘bottom line’ indicator of performance have less incentives for cost-cutting and efficiency?

• because of the political context in which governance occurs and resources are allocated?

• as a function of the degree of authority over the financial resources and activities of the organisation?

Public Sector – Private Paradigms

Public sector reforms in countries such as New Zealand, and the underlying logic that remains, were in no small part based on perceived lessons from the private sector fuelled by;•the growth of a popular management literature;•the employment of managers from the private sector; and•benefits from early privatisation and corporatisation benefits.

However, these models do not always fit.

Public Sector – distinguishing characteristics

i. broader objectives,

ii. a more complex environment,

iii. more diverse resources,

iv. different productive capabilities,

v. different goods and services, and

vi. different accountability mechanisms.

Broader Objectives

The provision of funding and resources to public sector agencies is based on a broader set of criteria such as:

• equity,• impartiality, • participation,• the explicit redistribution of wealth.

Broader Objectives

However, the mechanisms used to achieve these objectives are often more clearly prescribed

A more complex environment

The relationship between customers who pay for public services, providers who deliver public services, clients who co-produce and directly consume public services, and citizens who indirectly fund and benefit from public services is far more complex than the relationships between customers, providers and consumers of private services.

(McGuire, 1997, p.112)

A more complex environment

Every alternative deployment of public resources to one group of the public will have a different impact on other elements of the public.

Different groups may have different, but equally valid, objectives and views of what characterises good performance.

More diverse resources

Public power and the coercive power of the state

More constrained resources – “the art of the imperfect”

Different productive capabilities

“If management in general is about getting things done through other people, public management is getting things done through other organisations”.

(Metcalf, 1993, p.296)

Cooperation

Coercion

Consultation

Coordination

Collaboration

Self-Determination

Citizen Power

Low political riskHigh political risk

Government Power

PURCHASE PROVIDE

High political riskLow management risk High management risk

Different goods and services

Goods and services which are less easily defined in advance and subsequently monitored

Goods and services for which there is an element of ‘market failure’.

Public expectations and scrutiny of public sector organisations has become far more intense than that of consumers, regulators and the financial press of private sector organisations.

Detail ex ante and ex post information required.

A risk averse environment

Different goods and services

Different accountability mechanisms

A focus on economy and efficiency rather than effectiveness?

“unhealthy competition” or “new flexibility”?

At the beginning of 2011 the British government announced that hospitals will be able to compete on price.

What are the potential impacts of that decision?

‘One new flexibility being introduced in 2011-12 is the opportunity for providers to offer services to commissioners at less than the published mandatory tariff price, where both commissioner and provider agree.’  

‘Commissioners will want to be sure that there is no detrimental impact on quality, choice or competition as a result of any such agreement.’

“unhealthy competition” or “new flexibility”?

In a whole series of ways the practices of accounting are increasingly being used to infiltrate and change, rather than merely record, the activities of the State.

A new economic visibility is being forged to emphasise what was previously ignored and to challenge what was previously taken for granted. Economic calculations are now being seen as a way of reforming the management of the State but also of influencing the priorities which are given in policy determination and decision making.

Accounting is quite explicitly becoming implicated in the construction of different views of the problematic, the desirable and the possible.

(Hopwood, 1984)

The role of the accountant

Summary

We have considered:

•what do we understand by ‘management’

•what distinguishes the public from the private sector

•the extent to which management in the public sector is different from management in a private sector context.