Understanding and Managing Public Organizations

Chapter 7Formulating and Achieving Purpose

Power, Strategy and Decision Making

Power: Why is it important?

• People in organizations have varying degrees of power and authority.

• Power has implications for pursuit of goals and patterns of effectiveness.

• Understanding power is necessary to curb its abuses.

• The definition of abuses of power depends on the distribution of power among those who want to influence that distribution.

Power and Politics Inside Organizations

• External power and politics influence internal power and politics.

• Recently scholars of management have started looking at power inside of organizations.

– Early management theories depicted decision making as rational choices based on comparison of alternatives.

– Social scientists now recognize that power and politics are important factors in understanding decision outcomes.

Bases of Power in Organizations

• French and Raven (1960) provide the most common description of power.

• Power is divide into five different forms.1. Reward2. Coercive3. Legitimate4. Referent5. Expert

Power at Different Organizational Levels

• Power accrues to those by virtue of positions within the organization.

– People in formal positions often have power because they can influence the allocation of resources.

– Top managers can control decision premises – fundamental values or principals that guide decision making (Simon 1948).

– Middle managers can sometimes have influence over those above and below them. Location at hub of information – network centrality – often brings power.

– Lower level employees often have street level discretion.

Power Among Subunits

• Studies that analyze power among subunits find that a department or subunit has more power when there is greater dependency on it, when it has more control over financial resources and greater centrality to the important activities in the organization, and when there is less substitutability of services

Advice on Getting and Using Power

• Play an important role in areas of uncertainty or strategic contingencies facing an organization.

• Increase other departments’ dependence on you.• Provide resources from external sources.• Build coalitions and networks.• Influence the premise behind decisions.• Enhance the legitimacy and prestige of your position.• Be reasonably aggressive and assertive but quiet and

subtle about power.

Decision Making in Organizations

• Decision making and power are closely related.

• Decision making in public organizations tends to be complex, dynamic, and characterized by intervention and interruption.

• These conditions have led to demands for accountability, efficiency, and rationality.

Overview of Decision Making Models

• Rational decision making models• Rational decision making techniques in public

organizations • Rationality assumptions and the behaviors of public

managers and officials• The limits of rationality• Contingency perspectives on decision making • Incremental decision making processes• Mixed scanning • Logical incrementalism• Garbage can model

Rational decision making techniques

• Numerous examples can be found in the public sector.– Various systems of tracking files and bar-coding

• Workflow charts

• Mathematical models

• Zero-based budgeting techniques (Carter)

• Management by objectives (MBO)– GPRA requires agencies develop strategic plans and reports on

status of meeting objectives.

Limits of Rationality

• Can we be truly rational?– Constraints limit full rationality.

• Managers have cognitive limitations and can never fully know all possible future contingencies when making a decision.

• Literature refers to managers as intendedly rational or boundedly rational. Managers satisfice (Simon, 1948).

Contingency Perspectives on Decision Making

• Decision making varies along two dimensions: the degree to which decision makers agree on goals and the degree to which they understand means-ends or cause-effect relationships – have technical knowledge (Thompson, 1967).

Goal Agreement No Goal Agreement

Technical Knowledge Rational Procedures Apply

Lack of Technical Knowledge

Bargaining, political maneuvering, judgmental techniques

Incremental Decision Making

• Charles Lindblom (1950) The Science of Muddling Through is the classic statement.

– The responsiveness of decision makers to the requirement for political consensus and compromise necessarily leads to unclear goals that result in the restricting of the size of the changes [decision-makers] propose. In other words, instead of choosing an alternative that a rational decision-making process would predict, decision-makers choose to make less controversial, intermediary decisions to ensure some degree of success at achieving vague goals presented.

Mixed Scanning

• Etzioni (1967,1986)

• A compromise between the rational and incremental extremes

• Assumes “bounded rationality”

• Certain key issues are subjected to a detailed and deliberate process of decision-making, while others are allowed to tick over and evolve incrementally.

Logical Incrementalism

• Quinn found that strategic decisions emerged from an unfolding and incremental yet logical process.

• Long-range general priorities set the stage for limited, experimental incremental steps.

Garbage Can Model• The Garbage Can model developed by Michael Cohen, James March, and

Johan Olsen in reference to "ambiguous behaviors” – i.e. explanations/interpretations of behaviors which at least appear irrational.

• Greatly influenced by the realization that extreme cases of aggregate uncertainty in decision environments would trigger behavioral responses which, at least from a distance, appear "irrational" or at least not in compliance with the total/global rationality of "economic man" (e.g. "act first, think later“)

• "The theoretical breakthrough of the Garbage Can Model is that it disconnects problems, solutions and decision makers from each other, unlike traditional decision theory. Specific decisions do not follow an orderly process from problem to solution, but are outcomes of several relatively independent stream of events within the organization”

Four Streams Conceptualized in Garbage Can Model

1. Problems– Problems require attention. They are the result of performance gaps or the

inability to predict the future. Problems may originate inside or outside the organization. Traditionally it has been assumed that problems trigger decision processes; if they are sufficiently grave, this may happen. Usually, however, organization man goes through the garbage and looks for a suitable fix, called a solution.

2. Solutions– They have a life of their own. They are distinct from problems. Solutions are

answers (more or less actively) looking for a question. Participants may have ideas for solutions; they may be attracted to specific solutions and volunteer to play the advocate. Only trivial solutions do not require advocacy and preparations. Significant solutions must be prepared without knowledge of the problems they might have to solve.

Four Streams Conceptualized in Garbage Can Model

3. Choice opportunities– There are occasions when organizations are expected (or think they are

expected) to produce behavior that can be called a decision (or an initiative). Just like politicians cherish photo opportunities organization man needs occasional decision opportunities for reasons unrelated to the decision itself.

4. Participants– They come and go; participation varies between problems and solutions.

Participation may vary depending on the other time demands of participants (independent from the particular decision situation under study). Participants may have favorite problems or favorite solutions which they carry around with them.

Why Garbage Cans? • It was suggested that organizations tend to produce many solutions which are

discarded due to a lack of appropriate problems. However problems may eventually arise for which a search of the garbage might yield fitting solutions.

• Organizations operate on the basis of inconsistent and ill-defined preferences; their own processes are not understood by their members; they operate by trial and error; their boundaries are uncertain and changing; decision-makers for any particular choice change capriciously.

• To understand organizational processes, one can view choice opportunities as garbage cans into which various kinds of problems and solutions are dumped. The mix of garbage depends on the mix of labeled cans available, on what garbage is currently produced, and the speed with which garbage and garbage cans are removed.

Applications of Strategic Management in the Public Sector

• Numerous prescriptive frameworks– Example: A version of the Harvard Policy and Stakeholder model of

strategic planning involves

• Strategic Issue management• Stakeholder analysis• Environmental scanning • SWOT analysis• Strategic Management Group (SMG) oversees a structured group

process.• Group list views on stakeholders, opportunities, threats• There’s a procedure for synthesizing and analyzing views.

Environmental Scan

• A comprehensive Environmental Scan includes:– Forecasting trends

– Conducting internal and external scans

– Describing the current workforce

– Projecting workforce supply and demand

– Identifying current and needed competencies (knowledge, skills, abilities, and behaviors)

SWOT ANALYSIS

A Balanced Perspective:Strengths, Weaknesses, Opportunities, Threats

Internal External

Build on Strengths Exploit Opportunities

Resolve Weaknesses Avoid Threats

SWOT Analysis• Your Internal Strengths: Core competencies that provide the

basis for strategy

• Your Internal Weaknesses: Critical parts of your operation you must strengthen or hide from your competitors

• External Opportunities: Benefits that are likely to accrue from pursuing your vision and external opportunities

• External Threats: The pitfalls and the dangers, the variations and exceptions possible

Strategy

• Organizational leadership lead the development of strategies to achieve goals.

• When effective, the strategy-building process links environment, goals, values, structure, and those in pursuit of organizational performance and effectiveness.

• Strategists must work with internal power relations and decision making processes.

Miles and Snow (1978) Typology

• Argues that different company strategies arise from the way companies decide to address 3 fundamental problems:

1. Entrepreneurial: how a company should manage its market share2. Engineering (or operational): involves how a company should

implement its solution to the entrepreneurial problem3. Administrative problems: considers how a company should

structure itself to manage the implementation of the solutions to the first two problems

• Companies develop their adaptive strategies based on their perception of their environments.

Miles and Snow• Defenders react to stability and emphasize efficiency and

centralization.

• Analyzers operate in moderately changing contexts, allowing looser control of innovative efforts.

• Prospectors are found in contexts of growth; they seek opportunities and take risks employing decentralized organic strategies.

• Reactors appear in all contexts and simply drift without purpose.

Issues for Managers and Researchers

• Consensus about general features of public sector context but non consensus on how to deal with variations in it. – Scholars agree that public sector has, among other

things: goal ambiguity, vague mandates, more constraints, and a challenging political environment.

– How to effectively deal with these issues in decision making (best approach) is more elusive