Public Sector Strategy

Concepts, Cases and Tools

Mark Crowder, Mohammad Roohanifar, Trevor A. Brown

• Publisher: Routledge
• Year: 2022
• ISBN:
  9781000547207
• Edition: 1
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Public Sector Strategy explores how strategic decisions are developed and implemented in the public sector, and examines the psychology underpinning strategic decision-making.

Combining knowledge from traditional perspectives with contemporary insights on strategic management, this book considers how managers make their decisions and provides key concepts and practical tools to aid delivery of strategy within highly institutionalised settings. This book provides theoretical grounding, real-life global cases, and practical examples of strategic decisions in an international public-sector context by working through the underpinnings of strategy, the influencing factors of strategic decision-making, strategic implementation, and strategic tools in practice.

It should be a core textbook for advanced undergraduate and postgraduate students studying public sector strategy and strategic management more broadly. It will also be of benefit for public sector managers, consultants, and private sector organisations who wish to interact with the public sector.

Section 1 The public sector

Chapter 1 What is the “public sector”?

DOI: 10.4324/9780429344305-3

Learning outcomes

After reading this chapter you should be able to:

• understand the nature of the public sector
• understand the differences between the public and private sectors
• understand why management and strategy are different in the public and private sectors

Pre-chapter questions

• How would you define “the public sector”?
• How many organisations can you think of that are within the public sector?
• Can you think of any organisations that might be part–private sector and part public sector?

Key terms

• Public sector – the part of a country’s economy that is controlled by the State (OED, 2021)

1.1 Introduction

This chapter sets the scene for the rest of the book. In this chapter, we outline what the public sector is and show that it is fundamentally different from the private sector in many important ways. It exists for a different purpose; it operates differently; it is subject to different rules and regulations; and it is managed differently. Crucially, and key to this book, its strategy is fundamentally different from that of the private sector.

We begin by defining “the public sector” and, as we will see, this is not as easy as you might think. In broad terms, the public sector is responsible for undertaking tasks that are essential for society. So, government and local councils are public sector,. So far so good. But what about health care? Is this public sector or private sector? Is it both? The boundaries between public and private sector have become increasingly blurred over recent decades, and it is not as easy to differentiate them in broad terms as it once was.

The chapter next looks at the public sector around the world. Obviously, in a book of this length it is impossible to explore every country, and, therefore, we have restricted ourselves to looking briefly at six countries to give the reader a flavour of how the public sector functions across the globe. There is no single model of “the public sector” that is universally adopted, and there are wide differences in remit, size, structure, and complexity.

For similar reasons, the chapter cannot explore every different version of public sector organisations – such a chapter would be many hundreds of pages long. Instead, we present an illustrative example: UK local government. We do not suggest that this is how the whole of the public sector operates, even in the UK; rather we use it as an example to demonstrate that even in a single category, there is considerable complexity and variety.

1.2 Defining “the public sector”

The OED defines the public sector as “the part of a country’s economy which is controlled by the State” (OED, 2021). This is fine as far as it goes, but what does this actually mean? As we will see throughout this book, the public sector is responsible for undertaking tasks that are essential for society. Moreover, the nature and diversity of these tasks reflects differences in culture and expectations of the populations of the different countries. For instance, in some countries the large majority of health care providers, teachers, and emergency workers are directly employed by the government. In other countries, these and other types of professionals are employed by the private sector or non-profit organisations (OECD, 2019). These differences are compounded when considering federal and state responsibilities in some countries, and when one takes account of the prevailing political systems which mandate a larger or smaller role for the state. Similarly, the size of the public sector differs considerably from country to country. For instance, in Norway, the public sector represents more than 30% of total employment, whereas in Japan, this figure is fewer than 6%. The average across the OECD is 18% (OECD, 2019).

The public sector is therefore made up of a range of organisations with a wide remit of functions; but despite the diverse nature of these bodies, public sector organisations have a number of common characteristics and operate according to general rules and procedures. This can lead to excessive bureaucracy and “red tape” (Ryan et al., 2008). Some authors feel that this red tape makes the public sector inefficient (Bozeman, 1979). However, this view is by no means universally accepted, with other authors arguing that consistency of rules and obligations is determined by democratic imperatives, which result in legitimacy and accountability (Budd, 2007; Lynn, 2001).

Public organisations have the following characteristics (Weber, 1947):

• Labour is divided by skills and authority, and responsibility is defined by law and administrative regulation.
• Each job and office is independent of its occupant. The job is permanent; the individual temporary.
• Authority is increasingly centralised. At every stage of the organisation, there are superiors and subordinates arranged in a pyramidal hierarchy of powers.
• The organisation operates according to general rules. Individual employees act in accordance with the formal definitions and requirements of their jobs.
• For the sake of organisational continuity, written records are kept.

Although these characteristics were first developed well over half a century ago, they are still relevant (Flynn and Asquer, 2017). Given the nature of the public sector, it is unsurprising that there are significant differences between public and private sector management. For instance:

• The public sector is publicly funded. This means it must ensure both private and public value – i.e. that which is consumed by the public collectively (Moore, 1995).
• Whereas the private sector often focuses significantly, or even exclusively, on shareholders, public sector managers provide their services to a very diverse array of stakeholders (Alford, 2001).
• The public sector faces pressure from politicians to change direction and policies ( Joyce, 1999).
• Local government faces quasi-commercial pressures rather than true commercial pressures (Collier et al., 2001).
• Strategy is often instigated and enforced externally (Collier et al., 2001).
• Because if its public funding, it has formalised decision-making processes (Dobuzinskis, 1997).

These differences have led to a view that perhaps public sector management is somehow inferior and that the “proper” managers reside in the private sector. As Appleby and Clark (1997: 34) put it, “When you think management you hardly think public sector”. Somehow, management is less “real” and less “important” than within the private sector. However, the differences between the public and private sectors are rather permeable and change according to political influences (Flynn and Asquer, 2017). Indeed, these differences have blurred further in recent decades with the introduction of the new public management (discussed in Section 2, nevertheless, differences remain. Moreover, the budgets involved dwarf those of many private sector businesses, and the stakes can be at least as important – these can quite literally be life-and-death decisions. This is compounded by external pressures. For instance, in many countries, the capacity of governments to deliver value is under attack for reasons that relate to factors such as austerity measures, immigration, and dramatic fractures within nations (see, for example, Brexit, les gilets jaunes, and the Catalan separatist movement). Also, in emerging economies, there are growing expectations from the public sector that relate to the rise of a middle class and the call for better public services. Thus, it is important that we understand public sector management, and in particular, the strategic decisions that senior managers make.

The following sections briefly outline the nature and structure of the public sector in several countries. These countries have not been chosen for any particular reason other than to show the diversity and difference in approach in the public sector across the globe.

1.3 Public sector around the world

United States

Here’s a good quiz question: How many states does the USA have? If you said 50, you are wrong. The correct answer is 46. Massachusetts, Kentucky, Pennsylvania, and Virginia are commonwealths, not states. However, this is a technicality: there is little, if any, real difference. Indeed, the homepage of www.kentucky.gov refers to its area as both a state and a commonwealth, as does the home page of www.virginia.gov. The four commonwealths and the 46 states have an equal footing and have equal recognition in the constitution. For reasons of simplicity, all 50 areas will be referred to as states throughout the rest of this book.

Within the USA, more than 20 million people are employed in the public sector, which represents almost 15% of the working population (Brock, 2019). Member states are governed by the Federal Government including the President in the Executive Branch supported by a host of Government Departments, Congress and Senate representatives in the Legislation Branch, and the Court structure within the Judicial Branch (Kemp, 2002).

In ultimate control is the US President, although this control is not absolute, and it can be tempered by the Senate or Congress. There are currently 100 Senators (two per state) and...