Strategic Management in the Public Sector

Paul Joyce

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317579793
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

Strategic management is widely seen as essential to the public services, leading to better performance and better outcomes for the public. In fact, the private sector idea of strategic management has become so powerful in the public sector that politicians and policy makers have begun to talk about the importance of the modern state being strategic – and we may be witnessing the emergence of the Strategic State.

Strategic Management for the Public Sector draws on experience and research from a range of countries and provides a theoretical understanding of strategic management that is grounded in the public sector. Drawing on the latest theory and research this text provides a fresh look at foresight, analysis, strategic choice, implementation and evaluation. This book also offers original and detailed case studies based on up to date evidence from different public sector settings, helping the reader to build on their understanding of theories and concepts presented earlier in the book.

Strategic Management for the Public Sector has been written specially for managers and students taking postgraduate courses such as MBAs and MPAs. It will also appeal to individual managers and civil servants in the public sector looking for an accessible book to read as part of their own independent personal development.

Part 1 Introduction

Chapter 1 Introducing strategic planning and management

DOI: 10.4324/9781315740355-1

The objectives of this chapter are:

1. to put strategic planning and management in the public sector in a contemporary context;
2. to underline the evolving and dynamic nature of strategic management practice in the public sector; and
3. to stress that strategic management in the public sector is not, and cannot be, identical to that in the private sector, although it shares some key ideas at a very general or abstract level.

Introduction

Gus O’Donnell (2014), Cabinet Secretary in the UK for eight years, who worked for three different Prime Ministers, recently gave his view on what makes a great Prime Minister. He said:

… the key thing is having that strategic vision, thinking about what’s right for the country in the long term and just sticking to your guns on those things. That’s what makes a great Prime Minister.

We start this book, therefore, with this immediate connection between strategy and the top political job in a country, or at least one civil servant’s judgement that leading politicians need to have strategic vision (and the will and determination to pursue it).

In the last fifteen years, strategic planning and management have become widely accepted as ways of modernizing public policy-making and modernizing government. They have become very important for governments and public sector organizations all around the world. Those engaged in public management in whatever capacity, as politician or as professional civil servant or public manager, need to understand them and know how to use them.

This book looks at the theory and practice of strategic planning and management in the public sector. In reading this book you are invited to think critically about some of the assumptions we may too readily accept when thinking about strategic planning and management in the public sector. For example, it is sometimes assumed that decision-making tends to be very poor in the public sector and that things would be much better if politicians, civil servants and public managers simply copied private sector techniques such as strategic planning and management. In this book there is a different point of view. In this book it is argued that more attention needs to be given to understanding the nature and complexity of the government context, which makes simple copying unwise. Consequently, if there are lessons from private sector experience, we should be expecting politicians, civil servants and public managers to be selective in drawing lessons and to be ready to modify and experiment with the practice of strategic planning and management.

The public sector context has features that should be considered carefully when it comes to modifying strategic planning and management to ensure success and institutionalization. Two examples come to mind immediately. First, there is the special nature of the public sector because of the roles of politicians and the public in it. It can only be speculated here why there has been such a great tendency to ignore politicians and the public in so much of the discussion of strategic management in the public sector. It is possible that those who have written on this subject see the matter in terms of introducing a management technique to be used by the top managers irrespective of the sector involved. And so it is just assumed that we can read across from a private organization to a public organization and thus we are focusing on strategic thinking or leadership by an individual manager (e.g. the chief executive) or a management team (e.g. the senior management team). Actually, the private sector literature is very poor at researching and discussing how the executives of a company and the board of directors work on the development of corporate strategy and its implementation. The role of the public in the formulation of strategy is also neglected in the literature on private sector strategic management and there is (mostly) little consideration of the public other than as customers of products or services.

Politicians and the public do matter in the government sector and the wider public sector. A chief executive might head up a government agency but this does not mean he or she can just ignore the politicians. People who think you can copy the private sector in a simple way do not seem to realize that in some cases it is the ministers who may be the ones who formulate strategic plans rather than civil servants. The civil servants may then be mainly involved by being asked to deliver the ministers’ strategic plans, which was the case in the UK in respect of sector strategic plans in health, education, criminal justice and so on, in 2004. Of course, civil servants may be involved in the formulation of government strategies; in such cases, the politicians will matter when it comes to approving the strategic plans and giving them legitimacy, which we can illustrate by reference to the Europe 2020 strategy that was prepared by the European Commission but was signed off by the European Council in 2010 (European Commission, 2014).

The second example of how the public sector context appears to be very different concerns the continual and incessant use of the word ‘priorities’ in strategic planning and budgeting in the public sector by governments in all sorts of countries, including the UK, the US and the Russian Federation. There is something about the public sector context that makes the idea of priorities a much more important concept than in the private sector. While we may not fully understand why ‘priorities’ really matter to leaders in the public sector, a perusal of private sector writing on strategic management (for example, Ansoff, 1968; Porter, 1980; and Hamel and Prahalad, 1994) quickly shows the concept does not get highlighted for private sector practitioners.

The chapter will open with a consideration of strategic decision-making processes. We will examine ideas about the difference between strategic planning and management, and the benefits of strategic planning reported by managers in the public sector. There is a brief review of the private sector literature on strategic planning and management. The last part of the chapter looks at how strategic management has become a critical aspect of the reform of public governance.

Strategic planning and management: a decision-making process

A very clear definition of strategic planning as a decision-making process for the management of public organizations is provided by Berry and Wechsler (1995, p.159) in the context of a survey of state agencies in the US:

Strategic planning is defined as a systematic process for managing the organization and its future direction in relation to its environment and the demands of external stakeholders, including strategy formulation, analysis of strengths and weaknesses, identification of agency stakeholders, implementation of strategic actions, and issue management.

It is a relatively simple task to turn this type of definition into a diagram that sets out a process of strategic planning and management. These diagrams – called ‘decision flow diagrams’ by Ansoff (1968) – should not be confused with theoretical models of strategic management, which involve detailing cause-and-effect relationships in social science. The decision flow diagram is a suggested sequence for collecting data, analysing data and making decisions about goals, about the situation, about choices, about the allocation of resources. For example, a simple version of strategic planning in the public sector could be represented as shown in Figure 1.1.

Figure 1.1 Decision flow diagram for simple strategic planning in the public sector

Sometimes the decision flow diagram seems to occupy pride of place in a book or article, seemingly providing the essential conceptual framework for those wishing to master the practice of strategic management and even those wishing to research it as a phenomenon in the public sector. It looms so large in this way that it is worth making a number of points about it before we consider in more detail its private sector origins.

A decision flow diagram is useful

Leaders and managers can look at a decision flow diagram and feel they have quickly grasped the essential ideas of how to make disciplined strategic decisions. And it is there to be comprehended in just one page. What could be simpler and more convenient? All the chief elements of strategic decision-making can be taken in by simply looking at it. They can see how decisions may need to be sequenced and how some decisions should be influenced by others or dependent on others. They can use the diagram to check that nothing important has been overlooked. The wisdom of strategic planning seems to be encapsulated in one of these diagrams. They are, in fact, very valuable teaching aids.

It can be misunderstood and encourage us to see strategic management as simpler than it really is

Obviously there is more to becoming an expert practitioner than knowing and understanding a decision flow diagram in conceptual or definitional terms. Very experienced strategic practitioners can use a decision flow diagram to suggest ways to improve their understanding of, and abilities in, strategic decision-making. For example, they can use it to think of ways they might experiment in future with strategic decision-making, thereby creating new opportunities to learn from practice. A decision flow diagram is there to be used in a cycle of doing, reflecting and learning.

But when a flow diagram is backed up by a ‘template-style system of strategic planning’ there is a danger (but not an inevitability) of very poor-quality strategy emerging. Rumelt (2011) has spelt out the meaning and dangers of template-style strategic planning. He suggests the first thing to do when using template-style strategic planning is to write down a vision of the future for an organization and follow this up with a mission statement that is ‘a high-sounding politically correct statement of the purpose’ of the organization (Rumelt, 2011, p.67). The third step is to write a statement of non-controversial values for the organization. The fourth and final step he describes thus: ‘Fill in some aspirations/goals but call them strategies’ (ibid, p.68). He was, of course, mocking a lazy counterfeiting of proper strategic thinking and decision-making. He criticizes many of the documents that various organizations have produced, which he condemns as ‘pious statements of the obvious presented as if they were decisive insights’, and he dismisses the consultants who have found that the template-style strategy ‘frees them from the onerous work of analyzing the true challenges and opportunities’ (ibid, p.68). Of course, the problem is not the decision flow diagram or a strategic planning template, but the idea that strategy can be formulated and implemented with little effort and little risk (Heifetz and Linsky, 2002). If strategic planning is done reluctantly by managers, and is being done simply to comply with a requirement placed on them, template-style strategic planning may be the same as a ‘form filling exercise’ (Ansoff and McDonnell, 1990).

A decision flow diagram is not the same as theory

Strategic planning is an intervention in a situation, and if we are to understand the variability of results obtained by it in practice, we need to understand the theory (or theories) underlying the intervention; we also need to know the effects of circumstances and what else is happening in the situat...