This document discusses factors that contribute to effective public organizations and trends in public management reform. It outlines propositions for what makes public agencies effective, such as responsive autonomy, a clear mission, effective leadership, and motivated employees. It also summarizes approaches to reform like Total Quality Management, Reinventing Government, and the National Performance Review. Finally, it discusses conditions necessary for successful privatization and contracting out of public services.

1. Understanding and Managing
Public Organizations
Chapter 14
Advancing Effective Management in
the Public Sector

2. The Performance of Public Organizations
• Criticism of government is widespread but not universal.
• Some popular management texts, such as Peters and
Waterman’s In Search of Excellence (1982), brought
management issues to light and stimulated thought about
what it takes to be effective.
• Many books mount the case for the value and record of
government.
– One example in this tradition: Goodsell (2003) pointed to myths
and fallacies about public organizations and provided evidence
that they do not always fit the stereotypes.

3. Profiles of Corporate Excellence
• Peters and Waterman found eight themes that they argued were
responsible for the success of select corporations.
– A bias for action—avoid analyzing decisions to death
– Close to the customer—have concern for quality, earning from the
people served by the business
– Autonomy and entrepreneurship—foster innovation and nurturing
“champions”
– Productivity through people—treat rank-and-file employees as a
source of quality
– Hands-on, value-driven—follow a management philosophy that guides
everyday practice; management showing its commitment
– Stick to the knitting—stay with the business that you know
– Simple form, lean staff—work with minimal staff and relatively simple
structures
– Simultaneous loose-tight properties—balance the need for direction
and control with flexibility and initiative

4. Research on Effective Public Organizations
• Gold’s (1982) study of ten successful organizations (five
private and five public)
– Learning: They support learning , risk taking, work
measurement.
– A focused mission: They emphasize clarifying and
communicating mission.
– A nurturing community: They provide a supportive culture.
– Enabling leadership: They facilitate learning, communication,
flexibility, developing a vision.

5. Propositions About Effective Public Organizations
Public agencies are more likely to perform effectively when there are high
levels of the following conditions:
Effective relations with oversight authorities (legislative, executive, judicial)
Authorities are:
• Attentive
• Demanding
• Supportive
• Able to delegate
Effective relations with other stakeholders
• Favorable public opinion and general public support
• Multiple, influential constituent and client groups that can be mobilized
• Effective relations with partners and suppliers
– Effective management of contracting and contractors
– Effective utilization of technology and other resources
– Effective negotiation of networks

6. Propositions About Effective Public Organizations
Public agencies are more likely to perform effectively when
there are high levels of the following conditions:
• Responsive autonomy in relation to political oversight and
influence
• Mission valence (the attractiveness of the mission)
• Difficult but feasible
• Reasonably clear and understandable
• Worthy, worthwhile, and legitimate
• Interesting and exciting
• Important and influential
• Distinctive
• Strong organizational culture, linked to mission

7. Propositions About Effective Public Organizations
Public agencies are more likely to perform effectively when there are high
levels of the following conditions:
• Effective leadership
 Stability of leadership
 Multiplicity of leadership–a cadre of leaders, teams of leaders at
multiple levels
 Leadership commitment to mission
 Effective goal-setting in relation to task and mission accomplishment
 Effective coping with political and administrative constraints
• Effective task design
 Intrinsically motivating tasks (interest, growth, responsibility, service,
and mission accomplishment)
 Extrinsic rewards for task accomplishment (pay, benefits, promotions,
working conditions)
• Effective development of human resources
 Effective recruitment, selection, placement, training, and development
 Values and preferences among recruits and members that support task
and mission motivation

8. Propositions About Effective Public Organizations
Public agencies are more likely to perform effectively when there are high
levels of the following conditions:
High levels of professionalism among members
• High levels of special knowledge and skills related to task and
mission accomplishment
• Commitment to task and mission accomplishment
• High levels of public service professionalism
High levels of motivation among members
• High levels of public service motivation among members
• High levels of mission motivation among members
• High levels of task motivation among members

9. Trends and Developments in the Pursuit of
Effective Public Management
• Total Quality Management (TQM)
• Reinventing Government Movement (REGO)
• National Performance Review (NPR)
• President’s Management Agenda

10. TQM
• TQM raises challenging alternatives for management.
• It has clearly influenced the objectives of current government reform efforts, such as focusing on the
customers, the use of teams, and continuous improvement.
• In his approach to TQM, Deming (1986) emphasized teamwork, continuous improvement of the
production system, creating trust and the climate of innovation, and eliminating numerical production
quotas.
• Measures of quality should be used at all phases of production.
• The quality measures should be based on the customer’s view. Performance evaluation must be
based on group and organizational performance, rather than individual, so that people will have the
incentive to support one another.
• The basic principles of TQM emphasize that successful total quality efforts depend heavily on
commitment and strategic implementation.
• Failed TQM efforts often display insufficient leadership, weak culture, weak management of the
change process, poor provisions for motivation and teamwork.
• However, it proposes a management philosophy quite opposed to the one that has prevailed in many
government reforms.

11. REGO
• See Osborne and Gaebler’s book Reinventing Government (1992).
• They called for more entrepreneurial activities to supplant the old-fashioned,
centralized, bureaucratic model of government. However, to support their call
for a more entrepreneurial approach in government, they cited many
government practices they had observed around the country that were already
quite effective.
• Their proposals had a major impact, including the establishment of the Clinton
administration’s National Performance Review.
• The REGO trend heavily influenced a broad array of developments. Yet the
REGO ideas have been controversial. Some examples were unsuccessful.
Some critics have raised concerns about thinking of citizens as “customers” of
public organizations.
• Challenging new ideas require effective implementation, and in government
that means public management, even in cases when government seeks to
devolve its services to the private sector.

12. REGO
• Osborne and Gaebler (1992)—Reinventing Government
– Catalytic government: leverage government authority and
resources by using private and nonprofit resources and
energies—government should steer rather than row
– Community-owned government: empower local communities and
groups
– Competitive government
– Mission-driven government
– Results-oriented government
– Customer-driven government
– Enterprising government
– Anticipatory government
– Decentralized government
– Market-oriented government

13. Osborne and Gaebler’s Strategies for Reinventing Government
Catalytic Government
“Leverage” government authority and resources by using private- and nonprofit-sector resources
and energies, through such strategies as privatization of public services and public-private
partnerships. Government should “steer” rather than “row,” by emphasizing directions and
priorities but letting private and nonprofit organizations deliver services and carry out projects.
Community-Owned Government
Empower local communities and groups. Allow more local control through such strategies as
community policing and resident control of public housing.
Competitive Government
Introduce more competition between government and private organizations, within government,
and between private organizations through such strategies as competitive contracting, private
competition with public services, and school choice and voucher programs.
Mission-Driven Government
Focus government programs on their missions rather than on bureaucratic rules and procedures,
through such strategies as flexible budgeting procedures (such as expenditure control budgets)
and more flexible personnel rules and procedures (such as broader, more flexible pay categories).

14. Osborne and Gaebler’s Strategies for Reinventing Government
Customer-Driven Government
Give customers of public programs and services more influence over them. Pay more attention to
customers through procedures such as customer surveys, toll-free numbers, TQM programs, and
complaint tracking. Give customers more choice through voucher systems and competition among
service providers.
Enterprising Government
Find ways to earn money through user fees, profitable uses of government resources and programs,
and innovative cost-saving and privatization projects.
Anticipatory Government
Prevent problems before they occur rather than curing them after they do, through strategic planning,
futures commissions, long-range budgeting, interdepartmental planning and budgeting, and
innovative prevention programs in environmental protection, crime, fire, and other service areas.
Decentralized Government
Decentralize government activities through such approaches as relaxing rules and hierarchical
controls, participatory management, innovative management, employee development, and labor
management partnerships.
Market-Oriented Government
Use economic market mechanisms to achieve public policy goals and deliver public services, through
such techniques as pollution taxes, deposit fees on bottles, user fees, tax credits, and vouchers.
Results-Oriented Government
Place more emphasis on outcomes rather than inputs, through greater investment in performance
measures, including using them in budgeting and evaluation systems.
Source: Adapted from Osborne and Gaebler, 1992.

15. NPR
• REGO influenced President Clinton’s National Performance Review.
• Four main features
1. Cutting red tape (use biennial budgeting, decentralize personnel
policy, streamline procurement, eliminate unneeded regulations,
empower state and local governments)
2. Customer-driven influence (use market dynamics)
3. Empowering employees (decentralize decisions making, use results
orientation, provide better training)
4. Greater efficiency (eliminate unnecessary programs, generate more
income and collect more debt, utilize existing technologies)
• The first report argued that the federal government needed a drastic
overhaul to improve its operations, but the structures and systems
were the problems, not the employees.
• The reforms would decentralize and relax personnel and
procurement regulations, for example.

16. President’s Management Agendas
• Reform put forward by George W. Bush in 2001.
• This agenda included five government-wide management reforms of
priority
1. Strategic management of human capital
2. Competitive sourcing
3. Improved financial performance
4. Expanded electronic government
5. Budget and performance integration
• Implementation involved an agency scorecard on compliance with
standards for success.
• That scorecard contains several core criteria for each of the five
reforms, with a rating of “green” given if an agency meets all of the
criteria for a reform, and a rating of “yellow” for partial success. For
each reform there are also several negative situations listed, called
Conditions. If any one of these conditions exists, then the agency
automatically receives a rating of “red” on that initiative.

17. Human Capital Movement
• OMB Comptroller David Walker and others became
advocates for a focus on “human capital.” Some of the
cornerstones:
• Leadership and commitment to a human capital focus
• Strategic human capital planning, that is, alignment with the
overall mission
• Acquiring, developing, and maintaining talent
• Results-oriented organizational talent

18. Governance
• Governance is a term meant to describe the enhanced and changed
nature of government.
• According to Lynn, Heinrich, and Hill (2000), governance is a regime
of laws administrative rules, and judicial rulings and practices that
constrain, prescribe, and enable government activity, in which such
activity is broadly defined as “the production and delivery of publically
supported goods and services.”
• The central question of research in their work is “How can public
sector regimes, agencies, and programs be organized and managed
to achieve public purposes?”
• They propose a general model that focuses on the main
relationships of governance to isolate elements of effectiveness.
= f (E,C,T,S,M)
• Outputs and outcomes are a function of environmental factors, client
characteristics, treatments (such as organizational missions),
structures, and managerial roles.

19. Privatization and Contracting Out
• This is another strategy for reform and reaction to the
tightening of public budgets.
• Often overlooked is the fact that privatization increases
the imperative for effective management.

20. Managing Privatization
• Privatization takes many forms.
– Granting a franchise to private operators
– Providing vouchers to service recipients to purchase services
from private providers
– Using volunteers
– Providing subsidies
– Initiating self-help or co-production programs in which citizens
perform services for their own benefit or share in providing them
– Selling off or shedding activities to private operators

21. Conditions for Successful Privatization and Contracting Out
1. Environment
Bidders. There must be a set of competitive bids for the contract. Bidders need to be
experienced in the service area, have a good record, and be qualified on such criteria as
having the capacity to operate in the geographic area where the service is needed and in the
manner required by the size and scope of the required operation.
Political Environment. The environment should be free of of inappropriate political pressure for
privatization, especially pressure to select a particular provider.
Resource Support. Authorities should be willing to provide resources to support the provisions
for privatization listed in the sections that follow.
Legal and institutional environment. The privatization initiative must conform to federal and
state government mandates. Examples: federal statutes may require payment of prevailing
wages; state laws may limit contracts to the present fiscal year. Liability issues should be
reviewed.
2. Goals and Values
The privatization initiative should support the agency’s mission and its primary goals and
values. Governments should usually avoid contracting out certain core functions, such as those
involving public safety and security, deadly force, and the handling of public funds.
The goals and values of the privatized activity should be clear.
3. Leadership, Strategy, and Culture
Agency leaders should be carefully involved with privatization policies and activities, including
their coordination with agency strategies and culture.

22. Conditions for Successful Privatization and Contracting Out
4. Structure
Specialization and responsibility. Responsibility for privatization and contracting out should be
clearly defined. Qualified personnel need to be hired, trained, and otherwise set in place to
supervise and run the process. Examples: agencies need expertise in contracting processes, in
legal issues related to contracting out (or vouchers, franchising, or other modes), and in
accounting and financial issues, such as cost accounting and comparisons of the cost of in-
house service provision versus contracting out—all coordinated with expertise in the policy or
service area involved. Responsibilities for contract development and monitoring need clear
definition.
Departmentalization or subunits. Agencies should have effective organizational structures for
contracting out, with effective locations of offices and units with expertise and responsibility.
Example: small agencies may have a central contracting office as well as contracting officers in
an administrative services unit; larger agencies may have contracting and privatization units in
larger subunits. Departments may place subunits in charge of monitoring contracts.
Agencies may need to maintain the capacity to take over the activity if the contractor goes
bankrupt or the contracting process otherwise encounters problems. The responsible units need
to be clearly designated and provided with appropriate resources (for example, to maintain the
necessary equipment and personnel).
Hierarchy and centralization. Accountability, reporting, and authority relationships should be
effectively designed, with clear arrangements for reporting and review of contracts and
contracting-out processes and for involvement and awareness of appropriate managers and
executives.
Rules and regulations. Appropriate rules and procedures should be in place for the provisions
mentioned previously (reporting, review, taking back the contracted activity) and subsequently
(precontracting procedures, monitoring).

23. Conditions for Successful Privatization and Contracting Out
5. Process
Power relationships. Authority and power relationships related to issues of contracting out
should be clarified. Authority and accountability relationships with the contractor, and the
responsibilities of the contractor, should be clear and carefully reviewed and specified. (For
example, details such as the responsibility for maintaining equipment and machinery should be
clarified. Required approvals, such as agency authority to approve the contractor’s decision to
raise user fees, should be clear. Quality control and review procedures should be clarified).
Incentives for effective performance and sanctions for poor performance should be clear and
effective.
Decision-making processes. Precontracting and contract selection and supervision processes
should be well developed. Precontracting processes should involve careful specification of
needs and requirements and of the pros and cons of contracting out, including cost
comparisons. Meetings and communications with potential bidders about RFP details and
goals should be carefully planned. Processes for monitoring and evaluation, and for related
evaluative decisions and actions (sanctions and incentives), should be clear and well
developed.
Communications. As suggested above, communications with potential bidders and contractors
and among responsible agency personnel should be well planned, with responsibilities and
procedures well clarified.

24. Conditions for Successful Privatization and Contracting Out
Change and innovation. The role of contracting out and privatization in relation to change and
innovation should be carefully developed, to make use of the advantages of these strategies
for gaining access to new flexibility, technologies, personnel, and other opportunities.
People. The effects on agency personnel should be assessed. Often new contracting out
initiatives should not go forward if there is sharp employee resistance, without effective plans
for responding to the resistance.
Effective plans for existing employees should include provisions for supportive discharge of
those employees as necessary (that is, effective management of downsizing). Contractors can
sometimes offer existing employees attractive alternatives, and contracts can sometimes
include provisions that the contractor will hire some existing employees. Analysis of the costs of
contracting out should include consideration of the costs to the jurisdiction of layoffs or reduced
employment.
6. Performance and Effectiveness
Privatization initiatives should have performance measures associated with them that are
monitored and used in evaluation, with incentives and sanctions attached, as feasible.
These measures should include public sector performance criteria, such as equity,
representativeness, responsiveness, and community and social goals (see Goals and Values
earlier).