Public Sector Strategy Design

Theory and Practice for Government and Nonprofit Organizations

David E. McNabb, Chung-Shing Lee

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000193862
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Public Affairs & Administration
• Index: Politics & International Relations

Within the public sector, strategies are not designed to influence markets, but instead to guide operations within a complex environment of multilateral power, influence, bargaining, and voting. In this book, authors David McNabb and Chung-Shingh Lee examine five frameworks public sector organization managers have followed when designing public sector strategies. Its purpose is to serve as a guide for managers and administrators of large and small public organizations and agencies. This book is the product of a combined more than sixty years of researching, teaching and leading organizational seminars on the theory and practice of management applications in industrial, commercial, nonprofit and public sector organizations. The book consists of four parts: Strategic Management and Strategy Fundamentals; Frameworks for Designing Strategies; Examples of Public Sector Strategies; and Implementing Strategic Management. Throughout, the focus is on the widespread value of strategic management and adopting the strategy appropriate for the organization. Including chapters on game theory, competitive forces, resources-based view, dynamic capabilities, and network governance, the authors demonstrate ways that real managers of public sector and civil society organizations have put strategic management to work in their organizations. This book will be of interest to both practicing and aspiring public servants.

PART I

Strategic Management and Strategy Fundamentals

1
INTRODUCTION

The first chapter introduces the core concepts inherent in strategic management and strategic planning (Figure 1.1). Its purpose is to serve as a guide for managers and administrators of large and small industrial, commercial, civil society and public organizations and agencies. This book is the product of a combined more than 60 years of researching, teaching and leading organizational seminars on the theory and practice of management applications in industrial, commercial, nonprofit and public sector organizations. It is rooted in this history and our interpretations of recent thinking on strategic management theory and application.

The public sector includes all government organizations that provide services to a variety of publics without reference to a profit motive. This does not mean that public services are given away. Rather, most services provided by public organizations come with a cost. A more detailed definition compiled by contributions of many researchers might be: The public sector includes organizations owned and operated by some level of government that exists for providing a service for its citizens and is usually funded raised through taxes, fees for service, or by financial transfers from other levels of government.

In a paper in the Academy of Management Journal, Ellen Chaffee (1985) explained that researchers and managers in general have been using the term strategy for more than 20 years. Chaffee added that while there was general agreement on the definition of what the term referred to (its “anchoring concept”), at the time, no general agreement on a more definitive definition of the term existed. Citing Donald Hambrick (1983), Chaffee named two reasons for the lack of agreement on a definition: (1) strategy is multidimensional, and (2) strategy must be situational and, therefore, will vary from industry to industry and from organization to organization.

It was recognized as early as the 1960s that public sector, nonprofit and civil society organizations, like their for-profit cousins, must regularly plan and devise and revise strategies for carrying out the missions for which they were formed (Chandler 1962; Miles, Snow, Meyer and Coleman 1978; Nutt and Backoff 1991; Hough 2011). Chandler chronicled the evolution of organizations’ attention to strategy in his many books and papers on business history. Alfred Chandler had defined strategy as “the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals” (Chandler 1962, 13). Box 1.1 includes a definition of strategy from Chandler’s 1962 Strategy and Structure. The section includes what organizations must do to remain sustainable and was modified to apply to public sector organizations.

Despite the early lack of agreement on a definition of strategy, an extensive search of the literature suggests that general agreement has been reached on what the term strategy implies. An example of that agreement was offered by Aldea, Iacob, Hillegersberg, Quartel and Franken in 2018. They explained that strategies are simply the action plans that managers use to guide their activities, and that strategies can help shape the way the organization employs its assets and capabilities. Managers base strategies from the conclusions they gain from their analysis of the environment in which they operate. The strategy selected “must identify, protect, acquire, and sustain critical capabilities, in order to provide mitigation against future uncertainties” (Aldea et al. 2018, 86).

BOX 1.1 DEFINITION OF STRATEGY AND THE EFFECTS OF CHANGE IN THE OPERATIONAL ENVIRONMENT

This definition of strategy included in the introduction to Chandler’s Strategy and Structure (1962), repeated here, has been briefly modified to reflect our focus on public sector organizations.

Strategy can be defined as the determination of the basic long-term goals and objectives of an [organization], and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. Decisions to expand the volume of activities, to set up distant [branch operations] and offices, to move into new [social or political] functions or become diversified along many lines of [public value] functions involve the defining of new basic goals. New courses of action must be devised and resources allocated and reallocated in order to achieve these goals and to maintain and expand the [organization’s] activities in the new areas in response to shifting [public or political] demands, changing sources of supply, fluctuating [fiscal] conditions, new technological developments, and the [changes occurring in society]. As the adoption of a new strategy may add new types of personnel and facilities and alter the [operational] horizons of [personnel] responsible for the [organization], it can have a profound effect on the form of its organization.

Source: Alfred Chandler (1962)

Designing strategies for government and nonprofit organizations is made difficult by the multidimensional aspect of strategies and use across many activities of many different organizations. A strategy for a government or nonprofit organization relies on understanding the limited choices available and the resulting restricted economic, legal and politically influenced action options. With the strategic management approach, strategies are not designed to influence markets, but instead for guiding operations within a complex environment of “multilateral power, influence, bargaining, voting and exchange relationships and the norm” (Wechsler and Backoff 1986, 321). Box 1.1 describes the forces that help guide public sector strategies.

UCLA Professor Richard Rumelt (2011) addressed the question of a meaning of strategy by describing what it is not. He emphasized that it was not about what management wanted to happen, charismatic leadership, vision or planning. Rather, it is about an organization’s coherent action that is supported by thorough understanding and intelligent decision-making:

A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge. If the challenge is not defined, it is difficult or impossible to assess the quality of the strategy … if you fail to identify and analyze the obstacles, you do not have a strategy. Instead, you have a stretch goal or a budget or a list of things you wish would happen.

(Rumelt 2011, 42–3)

A further contribution was his defining the distinction between a bad strategy and what is a good strategy. Four characteristics characterize a bad strategy:

1. Failure to define specific challenges. These challenges must be explicitly defined if a plan for overcoming them and obstacles are to be removed can be put into effect. Neither a “stretched goal,” a budget, nor a wish list is a strategy.

2. Mistaking goals for a strategy. Goals are not strategies. For example, an aggressive goal of improving relationships with stakeholders by 10% is not a strategy; it is a goal. The manager’s task is to create the environment that will make achieving the goal possible.

3. Bad strategic objectives. Objectives that are wishes or that cannot be measured or are simple restatements of the problem provide no guidance. Adding the phrase “long term” does not make them an objective. Nor should the objectives be just a laundry list of a committee’s wishful “blue sky” idea that no one knows how to accomplish:

Good strategy, in contrast, works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes. It also builds a bridge between the critical challenge at the heart of the strategy and action—between desire and immediate objectives that lie within grasp. Thus, the objectives that a good strategy sets stand a good chance of being accomplished, given existing resources and competencies.

(Rumelt 2011, 53)

4. Fluff. Fluff describes objectives that have no real meaning; they are just restatements of the obvious. They are simple statements and provide no strategic guidance.

To counter the list of what makes a bad strategy, Rumelt listed just three things (Wauters 2017):

1. A diagnosis: an explanation of the nature of the challenge; simplifying the often-overwhelming complexity of the problem; identifying the critical aspects of the situation.

2. A guiding policy: an approach that meaningfully copes with and overcomes the barriers identified in the analysis.

3. Coherent actions: clear and logical actions that are coordinated with relevant others to ensure accomplishment of the guiding strategy.

Structure of the Book

The rest of this chapter begins with brief introductions to public sector strategic management concepts and the guiding principles of strategy formation. These introductory chapters are followed by descriptions of the chief frameworks for implementing public sector strategies. These are game theory, the competitive forces, resource-based view, and dynamic capabilities frameworks. The next section includes five chapters with examples of strategies based on the frameworks. The last two chapters are refreshers on strategic management and strategic planning concepts.

Many previous authors have helped to build what is our interpretation of the latest stage in these theories. As in all research, current research builds on what others have earlier contributed toward or disagreed with in the theory or theories under examination. We recognize their contributions and give full credit for their work. The final text is also an extension of some of our earlier research, elements of which are cited throughout the text. However, the final product represents our interpretations and extensions of the latest on innovation in general and particularly on the theory of strategic innovation. We take full responsibility for our assertions and conclusions.

The book consists of four parts: Strategic Management and Strategy Fundamentals; Frameworks for Designing Strategies; Public Sector Strategies; and Implementing Strategic Management. Throughout, the focus is on the need to recognize the widespread value of strategic management and adopting the strategy appropriate for the internal and external operating environments of the organization. The goal should be to design strategies with the highest probability of success and sustainability.

BOX 1.2 THE PUBLIC SECTOR STRATEGIC MANAGEMENT AND STRATEGY SHAPING TASK

“The strategic management task for the general-purpose government agency … involves not only the development of strategies for implementing policy and for the internal and external management of the agency, but also for the establishment of organizational purpose and character [its mission, vision and values]. The available strategies and forms of action are restricted … by various factors including constitutional arrangements, legislative and judicial mandates, jurisdictional boundaries, resource constraints, political climate … and client and constitutional interests. In this context, strategic choice and action taking by individual agencies is highly dependent on external influences and environmental forces. Since the primary goal of strategic management in public organizations is to provide direction [with specific strategies] for the organization … strategic management involves the joining together of external demands, constraints, and mandates with agency-specific goals, objectives, and operational procedures.”

Source: Wechsler and Backoff (1986, 321–2)

After a review of the core concepts of strategic management, we include a chapter on how strategic management has come to be adopted by all levels of government and civil society organizations. The second section includes a chapter each on the five basic frameworks extant in strategic management: game theory, competitive forces, resource-based view, dynamic capabilities, and network governance. We include chapters that describe some of the ways that the managers of public sector and civil society organization are benefiting from strategic management.

Chapter 1: Introduction

The first chapter introduces the core concepts inherent in strategic management and strategic planning (Figure 1.1). Its purpose is to serve as a guide for managers and administrators of large and small industrial, commercial, civil society and public organizations and agencies. This book is the product of a combined more than 60 years of researching, teaching and leading organizational seminars on the theory and practice of management applications in industrial, commercial, nonprofit and public sector organizations. It is rooted in this history and our interpretations of recent thinking on strategic management theory and application.

FIGURE 1.1 Strategic management in public sector organizat...