Johanson portrays an image of strategic management as government activity in which public administration plays an important role. Strategic planning and evaluation, administrative reform and government regulation are the most important tool of government in advancing it’s strategic goals. The new public management is not the only option for government reform. The regulation is not only government responsibility. Economy and civil society offer possibilities of self-regulation. Johanson expounds the strategy formation as planning oriented activity. Public and private organisations share many common themes in their strategic planning efforts. There are also marked differences between private enterprises and public agencies. There are number of caveats for strategic design within public agencies such as the enforced strategy, strategy as an entity and double-bind strategies.

1. Strategy formation and policy making
in government –strategic design

2. I am Jan-Erik Johanson
I will walk you through the ideas of public strategic
management.
You can reach me at Jan-Erik.Johanson@tuni.fi
Welcome to the
show!
2

3. The friendly floatees
◉ Some 28 800
plastic ducks fell
overboard from a
container ship in
1991

4. What is the lesson?
◉ Prepare for the unexpected
◉ Be ready to use the unanticipated for your benefit
◉ Prefabricated plans cannot take into account for the
unforeseeable

5. Strategy formation and policy making in government.
Palgrave (Johanson 2019)
This book describes the options offered by strategic management in
guiding public organizations. The book is based on the idea that
planning is only one option in orienting public organizations and applies
resource-based and network studies. The book also addresses the
strategic distinction between politics and administration, and illustrates
the connection between goal setting and performance of public
organizations.
Ebook: 978-3-030-03439-9
DOI:10.1007/978-3-030-03439-9
Hardcover ISBN:978-3-030-03438-2

6. 6

7. Strategy formation as common sense
Strategic design
Future oriented, planning based
Internal strategic scanning
Inward-oriented, resource-based
Strategic governance
Directed to external environment,
Network-based

8. Case. What is the aim? Who is the happiest?
(Case 3.4) (United Nations happiness report 2018)
◉ Three ways to happiness:
◉ The pleasure principle. Immediate gratification of desires,
◉ Eudemonic: the possibility to follow one’s own virtues and to use them
for the benefit of others.
◉ The principle of engagement: the sentiment of ’flow’ makes you forget
time and place.
◉ Happiest countries: Switzerland, Norway, Denmark, Finland. Small
democratic countries with variety of public services
◉ The contagion of happiness: Immigrants achieve happiness levels of the
host countries, but retain a footprint of the country of the origin
◉ Threats to happiness in industrialized countries: Obesity, substance
abuse, depression
I am an anarchist
Don't know what I want
But I know how to get it

9. Society and it’s parts
◉ Antiholistic notion of society: the economy, polity and civil society
(Polanyi 1944).
◉ Three parts are subsets of society.
○ The economy is concerned with the production and distribution of goods;
○ polity deals with democratic governance;
○ within civil society, kin relationships and religious organisations are
concerned with particular norms and obligations in the reproduction of
society
◉ A view based on social meanings would illustrate the polity, the
economy and civil society as overlapping areas (Lange et al. 2015).

10. Parts of the society
Economy
Coordinated market economies (CME)
Liberal market economies (LME)
And
Mixed market economies (MME)
Polity
Patronage
Managerial
Corporatist
Autonomous
Civil society
Bonding
bridging

11. Parts of the
society
• Economy: strategic coordination (CME) vs.
reliance on market exchange (LME), and
impure forms, e.g. MME.
• Polity: Closed vs. open bureaucracies,
separation between political and
bureaucratic careers
• Civil society: Intra-group relationships
(Bonding), inter-group relationships
(Bridging)
Patronage
Corporatist
Managerial
Autonomous
Bonding
Bridging
Coordinated market
economy (CME)
Liberal market
economy (LME)
…
Mixed market
Economy
(MME)
Polity
Economy Civil society

12. Economy
The economy is concerned
with the production and
distribution of goods
Market-based economies are
different in strategy- relevant
ways
There are qualitatively
different types of market
economies

13. Economy
The macro economic view in strategic management
Alfred Chandler (1990) Scale and scope:The
dynamics of industrial capitalism
◉ Integrated management hierarchy as a root for
growth ”managerial capitalism”
◉ USA market competition and fordist mass
production
◉ GERMANY fordist mass production and
management hierarchy, but more cooperation
among rivals ”co-operative managerial
capitalism”
◉ UK The integration of ownership and control
”Personal capitalism”
Michael Porter (1990) Competitive advantage
of nations
◉ Nations are succesful in the same industries for
long periods of time
◉ The success is based on the development of
institutional competences, technology and skils
”intangible capital”
◉ International trade only emphasises the
differences in initial productive orientations
◉ The nature of financial markets explains
technological change (stock based/bank based)

14. Later macro-economic view. Varieties of capitalism view
(see Jackson & Deeg 2006 for a review)
◉ Firm-centric analysis: to develop,
produce and distribute goods and
services profitably, a firm must
effectively coordinate with a range of
actors e.g. investors, employees,
unions, the state, suppliers, buyers.
◉ LME: securing markets (distant state),
◉ CME: protecting of collective goods
(enabling state),
◉ MME: public regulation and
coordination (encompassing state)
◉ There are two ideal-typical forms of capitalism
– Liberal market economies (LME)
– Coordinated market economies (CME)
Both of these forms of capitalism include a set of
‘complementary’ institutions that form the basis of a
country’s economic competitiveness and lead to good
economic outcomes
◉ And third impure form Mixed market economy
(MME) which combines aspects of LME and
CME
○ Fragmentation of organisations, politicization of
interest groups and strong production and
regulation aspect of the state, welfare model is
not clear

15. Polity
◉ Polity is the space for politics and public
administration
◉ polity deals with democratic governance, but a
view from public administration does not
assume democracy -> governance suffices?
◉ Strategic state that works as a catalyst to guide
social learning while allowing the economy and
society to occupy their own terrains as
independently as possible (Paquet 1996)
◉ Difference in countries’ government spending,
29 % of GDP in Ireland, 57 % in Finland in 2015.
The prime representatives of LME and CME
economies lie somewhere between these
extremes, at 38 percent in the USA and 44
percent in Germany (OECD 2017)

16. Poli-concepts
◉ Trying without separation of poli-concepts
“One could say that Politik constitutes the
realisation of Politik in the sense of policy, with
the help of Politik in the sense of politics on the
basis of Politik in the sense of polity”
…concepts like administration, planning, and
public affairs are primarily related to the concept
policy. But when political thinking involves
concepts like power, authority, conflict and
participation one would seem to dealing with
stronger politics orientation (Heidenheimer 1986).
Polity: Community, city-state, nation
state, empire
Politics: power struggle among actors
within polity
Policy: planned formation of social
domains e.g. industrial policy, health
policy, education policy

17. Strategy is often
considered opportunistic
in politics literature
(König & Wenzelburger 2014)
‘Throwing good money after bad’ (increasing resources after
losses to avoid suffering),
‘Pass the buck’ (place responsibility for a decision on someone
else),
‘Jump on the bandwagon’ (deflect blame by supporting a
popular alternative),
‘Circle the wagons’ (diffuse blame by spreading it to as many
policymakers as possible),
‘Find a scapegoat’ (look for someone else to blame),
‘Stop me before I kill again’ (e.g., put a collective cap on
spending to prevent spending increases in individual ministries
or offices),
‘Blame the predecessor’ (See to that prior rulers get some of the
responsibility) (Weaver 1986).
BLAME AVOIDANCE AND
CREDIT-SEEKING

18. Demarcation between politics
and administration in research
(Aberbach et al 1981)
1. The dichotomy between politics and
administration, late 19th Century, Wilson)
2. Interests/facts (Beginning of the 20th
Century, Simon)
3. Energy/Balance (1960s)
4. Hybridisation (1980s onwards)

19. Types of bureaucracy
(Dahlström & Lapuente 2017)
Distinction between bureaucrat’s and politician’s careers is
the key source of government success in terms of efficiency,
lack of corruption and reform capacity.
Patronage: open recruitment, integration of political and
bureaucratic careers
Corporatist: closed recruitment, integration of political and
bureaucratic careers
Managerial: open recruitment, separated career paths for
politicians and bureaucrats
Autonomous: closed recruitment, separated career paths for
politicians and bureaucrats

20. Concequences
(Dahlström & Lapuente 2017)
◉ Not a problem between open and closed bureaucracy, but with the
mixture of political and administrative careers. If mixed, no one is able
to ’speak truth to power’
◉ Not a problem of bureaucracy, but of overly restrictive bureaucratic
rules
◉ Professionalism is important, but professionals need not be insiders
◉ The key is to combine flexibility with professionalism
◉ Bureaucrats can be recruited and promoted similar to private
employees and be rewarded according to professional criteria

21. Civil society
◉ Kin relationships and religious organisations are concerned with particular norms and
obligations in the reproduction of society (Polanyi 1944)
◉ Citizen and voluntary activity accounts some 4.5 per cent of the GDP (Salamon 2016)
◉ Social services, education and healthcare more than half of the production
◉ Government funding (32%), service charges (43%) and philantropic giving (25%)
◉ USA: Decrease of government spending in the 1980s onwards, commercial activity to
fund primary voluntary goals
◉ Europe: Increase of unemployment in the 1980s onwards, government funding and
emphasis on decreasing the unemployment

22. Micro aspects of social capital (Woolcock 1998)
“Bonding” The quality of connections within
community
Bad Good
“Bridging” the quality of
connections to other communities
Good Anomie Social opportunities
Bad “Amoral
individualism”
“Amoral familialism”
Bridging and bonding social capital

23. Why social capital is important in governance?
(a) Reduction of transaction costs: Through trust and
norms of reciprocity transactions could be reduced.
Collective norms help to come to a common
understanding.
(b) Facilitation of the dissemination of knowledge and
innovations: The spread of knowledge could be easier
inside a community but also in a society where
individuals are widely linked together.
(c) Promotion of cooperative and / or socially-minded
behaviour: The application of social capital ideas could
soften the self-interest and produce norms that
support collective action.
(d) Benefits for individuals and social spill-over: Well-
connected individuals are more likely to be ‘hired,
housed, healthy and happy’ it can also have social
spill-over effects to society i.e. for the health and
welfare system.
(e) Less capital intensive interventions: The integration
of social capital could, lead to a more efficient
allocation of the budget. The state could provide
frameworks and an enabling environment for social
capital to flourish
.

24. Internal strategic
scanning
Strategic governance
Strategic design
Programming
Combining Sharing
Three strategy modes for public policy (Figure 4.1)
Looking ahead.
How is going to be?
Looking in.
How are we doing?
Looking out.
How to deal with
our partners?
Opportunities and threatsStrenghts and weaknesses

25. Macro Strategy modes
Strategic design:
Strategic planning and
evaluation
Physical, macroeconomic,
development, , socio-environmental,
operational system (Archibugi 2008)
Internal strategic
scanning: Administrative
reform
Self-referential actions
e.g. NPA, NPM, PVM, NPS, NPG
Strategic governance:
Regulation in governance
Government: stick, carrot and sermon
Economy/civil society: Self-regulation,
co-regulation

26. Physical planning (International guidelines on urban and territorial planning, UN 2015)
Levels
◉ Supranational (e.g climate
change)
◉ National
◉ City-region or metropolitan
◉ City and municipality
◉ Neigbourhood
Features
◉ Enforceable legal framework
◉ Sound & Flexible urban design
◉ Affordable & effective financial
planning

27. Macroeconomic planning
◉ Central planning of national resources in former
socialist countries and centralized planning ideas in
the west (e.g. PBPS systems)
◉ Control and forecasting of national resources for war
effort and recovery from the II world war (system of
national accounts)
◉ Legislation enforcing the formulation of strategies and
performance evaluation (e,g. GPRA)
27

28. Development planning
World bank and IMF founded at the Bretton Woods conference in 1944
◉ The World Bank Group works
with developing countries to
◉ reduce poverty and increase
prosperity.
◉ Provide financing, policy advice,
technical assistance to
governments
◉ strengthening the private sector in
developing countries.
◉ International Monetary Fund
◉ serves to stabilize the international
monetary system and acts as a
◉ monitor of the world’s currencies.
◉ keeps track of the economy globally and in
member countries,
◉ lends to countries with balance of payments
difficulties,
◉ gives practical help to members.
◉ Countries must first join the IMF to be
eligible to join the World Bank Group.

29. Socio-environmental planning
◉ Education, health and
social policy areas,
environmental
protection
◉ Bottom-up flavour in
encouraging
community action
Operational system planning
◉ Management
techniques aimed at
directing and evaluating
government
programmes and public
expenditure
29

30. Case: one child policy in China (Case 3.3)
◉ Designing the size of the population.
◉ Fear of population growth and its strain on the
economy
Has lead to
◉ Overpresentation of men in the population
◉ Growth in the proportion of the elderly
◉ Strain on the pension system
◉ Stress on the social care

31. Case: International space station (Case 3.2)
◉ One of the largest and most complicated technological
projects in the human history
◉ International cooperation in the production of the
modules
◉ Independent management of the parts of the station
◉ Limited transportation capacity after the retirement of
the space shuttle fleet in 2011
◉ The aims: scientific research,
◉ Technology development
◉ Industrial applications
◉ And all this despite the possibility of dual application
(civil/military)

32. Putting macro
strategies in context
The relationships between government and
economy can be distant (LME) or enabling
(CME)
The relationship between polity and civil society
can be supportive or contradictory
Strategy modes define the means by which
these relationships are handled
In macro level strategic design implies planning
and evaluation
Strategic scanning implies administrative reform
and
Strategic governance implies regulation
32
Integrated careers
Separated careers
Bonding
Bridging
Coordinated market economy (CME)
Liberal market economy (LME)
Polity
Economy Civil society
Distant
Enabling
Supportive
Contradictory
Strategic design
Internal strategic scanning
Strategic governance

33. Choice of regulation by scale of action (Table 3.2)
Constitutional Collective
Locus:
System
Designing
institutions
Policy
management
Locus:
Organisation
Designing
network
structures
Network
management
◉ Think of the differences
between
○ following a rule,
○ defining a rule for action,
○ making a rule to define all
other rules
Adapted from Hill & Hupe 2002, p. 183 Hill & Hupe 2006, p. 562, based on Ostrom.

34. Microstrategies in public agencies
Strategic design

35. The lieutenant of a small Hungarian unit in the Alps sent a reconnaissance
unit into the icy wilderness. It snowed for two days, and the unit did not
return. The lieutenant feared that he had sent his own people to death,
but on the third day the unit came back. How had they made their way?
They said, “we considered ourselves lost and waited for the end. Then one of
us found a map in his pocket. That calmed us down. We lasted the
snowstorm, and with the map we discovered our bearings.”
The lieutenant had a good look at the map. He discovered that it was not a
map of the Alps, but a map of the Pyrenees (Weick 1995, 54)
35

36. Micro Strategy modes
Strategic design
Design for politicians,
organisational processes,
performance regimes
Internal strategic
scanning:
Resources, knowledge and
capabilities
Strategic
governance
Mediator, business partner
and antitrust agent

37. Internal strategic
scanning
Strategic governance
Strategic design
Programming
Combining Sharing
Three strategy modes for public management (Figure 4.1)
Looking ahead.
How is going to be?
Looking in.
How are we doing?
Looking out.
How to deal with
our partners?
Opportunities and threatsStrenghts and weaknesses

38. Strategy triangle elaborated (Table 4.1)
Strategic design Internal strategic
scanning
Strategic governance
The role of strategy Expanding and
organizing duties
(programming)
Novel ways of matching
resources to fulfil duties
(combining)
Sharing duties with external
partners (relating)
Assumption about
the environment
Disturbed-reactive Turbulent fields Turbulent fields, network
order
Primary type of
capital
Financial Human Social
The role of the
public manager
Structural:
Primus inter pares
Craft:
Hatchet man
Institution:
Ambassador
The position of the
professions
Planning aid Matching partner Boundary object
Managerial control Budget Division of labour Contract
Main challenges Unanticipated
situations
Rigid resources,
misinterpretation of
resources
Contracting costs,
Overwhelming external
stakeholders

39. Strategic design in public agencies
Politics, processes, performance

40. Internal strategic
scanning
Strategic governance
Strategic design
Programming
Combining Sharing
Strategic design mode (Johanson 2009, Johanson & Vakkuri 2017)
Looking in.
How are we doing?
Looking out.
How to deal with
our partners?
Opportunities and threatsStrenghts and weaknesses
Looking ahead.
How is going to be?
Politics as markets
Organisational
processes
Performance regimes

41. The focus of strategic planning research (Table 5.1) (Wolf & Floyd 2017)
Proximate outcomes Distant outcomes
Internal focus Quality of strategic decision-
making, integration and
coordination, shared
understanding and
commitment, strategic
thinking, planned emergence
Organisational performance,
strategic change and renewal,
realised strategy,
organisational learning,
dynamic capability
External focus Strategy communication,
legitimation
Adaptation, strategic legitimacy

42. Public and private strategic management research (Wolf
& Floyd 2017)
◉ Decrease of strategic planning studies within business firms
◉ Private emphasis on the performance, very little work done in the public sector
◉ Inconclusive evidence for the strategy - performance link
◉ Some indication that in mega-turbulent environments comprehensive long-term planning
pays off in business environment
◉ Past private emphasis on the industry, no equivalent of industry within public sector
◉ Common emphasis on the focus of the features of the environment
◉ Not much emphasis on the strategic inter-organisational networks in business or in
government

43. Politics as markets (See Nutt & Backoff 1992)
Public administration Corporate governance
Environmental
markets
Oversight bodies behave like markets Purchasing behaviour defines markets
Relationships
among key
actors
Collaboration among organisations
offering a given service
Competition among organisations
offering a given service
Source of
finance
Financed through budgets (free
services)
Financed through fees and charges
Political
influence
Buffering to deal with attempts to
influence
Political influence handled as
exceptions
Organisational
processes and
goals
Shifting, complex and difficult to
specify
Clear and agreed upon
Limits on
authority
Implementation contingent on
stakeholders outside of
management’s control
Implementation done by
management, who have the power to
act
Performance
regime and
performance
expectations
Vague and in constant flux Clear and fixed for long periods of
time

44. Organizational processes
Influence of politics
◉ Planning of resources and
bargaining with the goals
◉ Short planning cycles: electoral
term, annual budget cycle
◉ Path dependence of the
institutions: the weight of
previous legislation
Organisational processes
◉ The possibility of agencies to cooperate
with others
◉ The contradiction and cooperation
between professionals and managers
◉ The importance of stakeholder networks in
different levels (community, network,
organisation/participant).

45. Performance regimes
◉ Agencies are a result of political struggle, technical efficiency is not
a good evaluation criteria (Moe 1986)
◉ Agency formation as blame avoidance strategy (Hood 2011)
◉ Potential outcomes of strategic management are the development
of enhanced organisational capacities or long-term consequences
of performance (Poister 2010).
◉ A prospecting strategy improves performance and usually
produces better results than defender or reactor strategies (Boyne,
Walker 2010).

46. Case: design of entrepreneurial
university (Case 5.2)
◉ University of Warwick was a small and new university
established in 1965, but it has since expanded and gained
academic recognition
◉ In 2013 over 23 000 students, top 60 university in the
world (qs world university ranking)
◉ Entrepreneurial culture, Diversified funding, orientation to
applied research, projects and research centers for external
interaction
◉ Critical incident in 1970: student unrest and discovery of
documents indicating that management was spying
students and faculty for outsiders. - Beginning of a healthier
identity?

47. Case: Value-based healthcare
(Porter & Teisberg 2006) (Case 5.1)
◉ The ultimate goal of healthcare: maximal health
outcomes with the given resources
◉ The measurement problem: concentration of
assessing input and processes, but not health
concequences
◉ Assessment should consist of 1) health status, 2)
process of recovery, and 3) sustainability
◉ Implications for strategy: the definition of
outcomes not only in term of profits, more voice
to the customers

48. Empirical findings of strategic design in public agencies
◉ Size matters: larger organisations are more likely to engage in formal planning procedures (Boyne,
Gould-Williams et al. 2004).
◉ A change in an organisation’s mandate encourages strategy formulation (Barzelay, Jacobsen 2009).
◉ strategic management practices are adopted through network connections between agencies and
contacts with private businesses (Berry 1994).
◉ Available resources are an important determinant of strategic management exercises (Boyne &
Walker. 2004),
◉ The bottom-up approach to strategy formation tends to increase consensus regarding goals but
complicate implementation (Kissler, Fore et al. 1998, Wheeland 1993, Hendrick 2003).

49. Design challenges
◉ Strategy as an entity. Separation of strategy from everyday activities. Separate task which
becomes yet another administrative duty.
◉ Enforced strategy. Outside political influence dictates the initiation of strategy formation.
Ritualistic tendencies, box-ticking practices. Limits strategic options of the agency, but might
increase the strategic nature of the government as whole.
◉ Fallacy of performance. A lesson from the private sector is the importance of studying the
interconnections between proximate outcomes of strategy making and their performance
consequences instead of trying to tie performance to the initial stages of strategy formulation.
◉ Double-bind strategies. the combination of ex ante input control and ex post performance
measurement. As a result, strictly restricted actions.