Critically appraise the following assertion - Contemporary strategic decision making in the public sector, like much of the New Public Management doctrine, should be regarded as 'old wine in new bottles' with limited utility to the public manager.

University Degree Business and Administrative studies

The aim of this essay is to critically appraise the following assertion. Contemporary strategic decision making in the public sector, like much of the New Public Management doctrine, should be regarded as ‘old wine in new bottles’ with limited utility to the public manager. For the purpose of this essay, it is important to highlight the core values of the New Public Management doctrine to illustrate its effect on public sector management. In order to fulfil the aim of this essay a review of strategic management shall be conducted, incorporating sections on strategic planning, strategic analysis, strategic option and choice, implementation and performance measurement. This essay shall provide a conclusion incorporating a brief summary and whether or not this essay is an agreement with the above assertion. This essay will now begin by looking at the New Public Management.

The aim of this section is to explain the importance New Public management. It is rather hard to define New Public management, Osborne and Gaebler, we would say it ‘a revolt against values of traditional bureaucracy and a belief that the public sector can be transformed by the power of leadership, the introduction of market mechanisms, a focus on results and decentralising power’. This is a common view by shared by various academics such as Chris Pollitt, author of Managerialism and Public Services.

One of the main professionals in the field of New Public management is Chris Hood, Hood believes that there seven main tenets of the New Public management doctrine:

1. Unbundling of public sector into corporate units by product service

2. More contract based competitive provision with internal markets and term contracts

3. Stress on private sector styles of managerial practise

4. More emphasis on visible hands on top managers

5. More Stress on discipline and frugality in resources use

6. Explicit formal measurable standards and measure of performance and success

7. Greater emphasis on output controls.

Hoods seven tenets are in contrast very similar Osborne and Gaebler’s definition of New Public management, for instance number one of Hoods Tenets can be matched up to ‘desterilising power’. Table 1 illustrates this point

By providing views on New Public Management form authors such as Hood and Osborne and Gaebler, hopefully this section has highlighted the importance of New Public management. This essay will now look at strategic management; the main aim of this section is to define strategic management.

Due to widespread and profound re-structuring within the UK mainly the rise of the ‘NPM’a there has been a growing similarity between the public and private sectors with respect to the senior managerial tasks undertaken. Given this development strategic management techniques are becoming increasingly valid within the public sector. NPM has led to a greater focus on operational and strategic tasks rather than policy, constitutional or judicial tasks. Administrators have become ‘managers’ with associated performance issues.

Strategic managers identify long-range targets, scan their operating environments, evaluate their organization’s structures and resources, match these to the challenges they face, identify stakeholders and build alliances, prioritize and plan actions, and make adjustments to fulfill performance objectives over time. Brinkerhoff (1991 and 1994) characterizes strategic management as “looking out, looking in, and looking ahead”. Looking out means exploring beyond the boundaries of your organization to set feasible objectives, identify key stakeholders, and build constituencies for change. Looking in implies critically assessing and strengthening your systems and structures for managing personnel, finances, and other essential resources. Finally, looking ahead entails melding your strategy with structures and resources to reach your policy goals, while monitoring your progress and adjusting your approach as needed.

Balancing strategic management’s outward-, inward-, and forward-looking functions helps you develop a vision and a strategy for where and how to move health sector reform forward. Balancing these different perspectives is the essence of managing strategically (Brinkerhoff 1991). Table 2 taken from shows that there are five key tasks of strategic management.

These are the integral elements that, when applied together, distinguish strategic management from less comprehensive Approaches, such as operational management or long-term planning. S. Scribner states, “Strategic management is an iterative, continuous process that involves important interactions and feedback among the five key facets”.

Fakey states that strategic management is “...how to lay the foundation for tomorrow’s success while competing to win in today’s marketplace”. Strategy is defined by Fakey as “choices” and the sum of its choices is “...what an organization does in the marketplace”. The gist of these definitions is anticipating and envisioning the future and using that knowledge to position the organization to be successful in the changing environment.

Strategic Management according to Bowman and Asch “ is the process of making and implementing strategic decisions…[it] is about the process of strategic change. [It is] the match an organization makes between its own resources and the threats and opportunities created by the external environment in which it operates. So strategy can be seen as a key link between what the organization wants to achieve-its objectives-and the policies adopted to guide its activities”. Conditions facing public services differ from those to the private sector, which have an impact on the strategic management model used within the public sector. Ranson ...

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According to Elcock “ there are a number of approaches to strategic management ranging from the highly rational, logical and structured approach…to the ad hoc, opportunistic or reactive approach.”. Small organisations operating in a fast changing, unpredictable environment would adopt the reactive, ad hoc approach. Larger organisations such as the public sector that takes a longer-term view would more likely adopt a rational approach outlined in figure 1.

An important concept of Strategic Management is strategic planning, Strategic planning is defined as “...a disciplined effort to produce fundamental decisions and actions that shape and guide what an organization is, what it does, and why it does it”. Strategic planning is about the process of strategic thinking, not the publication of a document. It is a process to assist in creating the future based on a structured process that incorporates data. It is idea driven, not driver numbers. This essay will analyse two strategic planning models, Bryson and Nutt and Backoff followed by a standard model for strategic planning in the public sector. Bryson’s model (figure 2) identifies ten distinct elements, which can be seen in the model bellow.

According to Bryson (1988) an effective strategic planning model must meet several criteria. “It must be technically workable, politically acceptable to key stakeholders, and must mesh with the organization’s philosophy and core values. It must also be ethical, moral and legal”. Bryson’s model represents a generic process to strategic thought and action, and it is adaptable to a variety of organizations - both small and large.

The Nutt and Backoff model identifies six stages with sub activities within each stage:

Historical context

Trends
Events
Directions
Ideals

Situational Assessment

SWOT

Strategic issue agenda

Important issues

Strategic Options
Evaluation of options

Cost
Stakeholder views

Implementation

Public sector strategic management theory has wisely emphasized the need to take political contexts into account. This is done by "meta-planning," the design of planning processes that incorporate the viewpoints of multiple stakeholders. In Figure 3 W. Earle Klay provides a "standard" model of strategic management for public agencies. Kay states “It is a simplified abridgment of more complex models proposed for public organizations by such scholars as John Bryson (1988), Nutt and Backoff (1984)”

This section of the essay has hopefully provided a general understanding of strategic planning by using models from academics such as Bryson, Nutt and Backoff. This essay will now discuss strategic analysis, highlighting a selection of the techniques available. Strategic analysis is the process by which an organisation can take a view of key influences that have an impact on its present and future well being. According to Lawton “ A number of techniques are available to managers”. The use of a technique such as STEP analysis helps the manager make sense of a complex environment. Taken from Rose and Lawton STEP analysis consists of:

Social: At a generic level these will include demographic features such as an aging population and so on
Technical: these might include new opportunities provide by information technology
Economic: this refers to change in the economy
Political: This includes change in legislation or political power

Another popular and simple tool is a SWOT Analysis, which is an acronym that stands

For Strengths, Weaknesses, Opportunities, and Threats. It is a simple framework for

Conducting a situational analysis of an organisation which identifies a firms internal

Strengths and weaknesses as well as environmental opportunities and threats. A

SWOT analysis is both “internally and Externally focused and it identifies areas for

Action” One tool of analysis that is favoured by those within a competitive

Environment is Five Force Model. The Five Forces model, developed by Michael

Porter, is used to assess the competitive forces at work in a given industry and

Determine the overall attractiveness of that industry. The five forces are:

1.Internal Rivalry - The level of rivalry amongst incumbent firms within an Industry.

2. Treat of New Entrants - The threat that non-traditional competitors will enter the industry. This threat is increased when barriers to entry are low and above average profits is enjoyed by industry incumbents.
3. Threat of Substitutes - The competitive threat posed by products, which provide the same functionality as the existing products. This threat is high when the switching costs of customers are low or when products are susceptible to technological change.
4. Supplier Power - The level of influence suppliers have within the industry over such things as over price, quality, service, or terms and conditions of sale. Supplier power is high when there is supply-side concentration, when switching costs are high, or when the inputs are key components of the final product.
5. Buyer Power - The level of influence buyers have within the industry over such things as over price, quality, service, or terms and conditions of sale. Like supplier power, buyer power is dependent upon such things as concentration, switching costs, and product composition.

Taken from

The Balanced Scorecard, popularised by Kaplan & Norton, is a measurement

Framework that incorporates both financial and non-financial measures. These

Measures allow strategic objectives to be cascaded throughout the organisation down

To an individual level, thus linking the activities of the individual employee with the

Strategic objectives of the firm. The next section of this essay will discuss the concept of strategic choice.

Within the private sector research has led to the development of a number of models, which can be used for strategic choice within the public sector. Porter has described a number of generic strategies, which can be used within a competitive environment:

Cost Leadership: this requires a low overall cost position and often a high market share
Differentiation: A differentiated strategy involves offering a differentiated product, creating something which is perceived to be unique
Focus: A focus strategy involves concentrating upon a limited number of lucrative products

Organisations may offer a range of products or adopt a portfolio approach to its strategy. Developed by the strategy consulting firm , is a portfolio approach to strategic analysis based on two key variables: market share

And market growth. The entities within the portfolio (traditionally business units

Within a conglomerate organisation, but equally individual products or market

segments) can be positioned within the matrix, and strategies developed based on

their relative position. The four quadrants of the matrix, derived by categorising the

two variables into "high" and "low", allow the businesses to be categorised into:

Stars - Represent the best long-term prospects in the firm’s portfolio. Companies should invest and nurture these businesses for long-term benefit.
Question Marks - A company should invest in Question Marks in to turn them into Stars, or divest them (i.e. an "up or out" strategy).
Cash Cows - The stable environment these businesses enjoy should be exploited. These businesses should be "milked" for resources for redeployment to Stars or Dogs.
Dogs - Represent a long-term liability for the company and should be divested.

The table bellow illustrates the BCG Matrix

Organisations need cash cows and stars, Question marks are high risk activities and decision need to be taken on continuing to support dogs. Difficulties arise when dogs are statuary responsible of as public sector organisation. This section of the essay has provided various techniques for strategic analysis which can be used in decision making within the public sector.

Nutt and Backoff (1992) have developed a similar matrix model for examining issues in public services organisations involving the amount of stakeholder support for an issue and the possibility of dealing with that issue. Tractability indicates the prospect that an issue can be successfully attacked by an organisation. The degree of tractability depends on technical problems, target group mix, or the extent to which a target group is expected to change. they have characterised issues as :

Angry Tigers: these issues such as unemployment, inflation arouse public interest
Sitting Ducks: these include public health programmes and transport that have public support
Dark Horses: such as providing life management skills that recieive low public support
Sleeping dogs: which are neither high on public agenda nor easy to deal with such as aids

The model bellow is the Nutt and Backoff’s matrix model

High

Low High Relative Stakeholder support Low

Source Nutt and Backoff (1992p 103)

This essay has highlighted the importance of services or products and issues as being key variables. There is also on organisational dimension, according to Miles and Snow 191978) organisation can be characterised as being of four different strategic types:

Defender : which operates best in stable, well defined markets, where prevailing beliefs are essentially conservative and well tried solutions are valued
Prospector: which seeks out new products, services and opportunities and where high risk strategies are valued.
Analyser: combination of the above maintaining exiating market while seeking new ones
Reactor: fails to act effectively on any field, it is bold when it should be cautious and vice versa

For local authority the strategic choices may include the extent to which the authority wishes to exercise a wider role of local governance going beyond its services responsibilities. They may also include the degree to which it wishes to introduce market mechanisms and the relative importance it gives to services to individuals or to communities. Richard and Rodrigues (1993) argue that there are two types of strategies in public services Type B; driven by central planning and control with implementation within tight specifications and Type B driven by market considerations. Type A typifies the NHS and Type B has been used for civil service reform in the form of market testing. This essay will now discuss implementation.

Implementation of a strategy is not an automatic process; there are two major parts to the process. The first step is the development of an action plan, which is a statement of what, who, when, and how the actions necessary to carry out the strategy will be done. Performance goals and objectives will also be specified. Much of the information needed to develop the action plan will have been generated in Step Seven.

The second part of implementation consists of actions aimed at marshaling and applying resources. In the context of policy change these actions may consist of (but are not limited to), changes in organizational structures, shifts and reclassification of personnel, the establishment of new routines, tasks, and procedures; installation of new incentive systems; retooling production for new products or services; marketing of new services or creation of demand among new beneficiaries or consumers; development of new financing mechanisms; organizing coalitions to maintain

political, budgetary, and beneficiary support; and developing collaborative mechanisms with cooperating organizations. It should be noted that the managers’ task is more than just the internal operation of his organization, they must also manage its fit with the environment.

Implementation is an important aspect of NPM due to initiatives such as PPP, best value and CCT which are related to implementation. These iniatives remove the public sector from the point of delivery, replaced by the private sector or the best tender. This change in service delivery enforces greater importance on performance measurement since the quality of the service provider shall be judged by its performance. This essay will now discuss performance measurement in relation to the public sector.

According to Flynn Public sector performance measurement is important “both for the accountability of organisations and individuals and for managers to produce better services”. Traditional political accountability is replaced with managerial accountability where mangers have to reach and maintain targets. It enables measurement particularly of VFM (value for money) and the three E’s efficiency, effectiveness and economy. It is possible to measure not only the three E’s but other factors such as accuracy, timeliness, customer satisfaction, etc. This can be seen in the NHS with hospital waiting lists. These measures can be used to construct league tables (school) that can enable both the public and managers to measure performance of different organisations. This approach has been widely adopted to drive improvements in quality, which is an important theme in NPM as part of charters and best value. Public sector performance measurement is not unproblematic Flynn states “ Measures… appropriate for external accountability may not be the right ones for improving management. Measures, which are used to expose publicly poor performers, may not be the best ones for helping management to bring about improvements. In any case managers will necessarily become defensive if the systems are used to punish the weak”

There are tools and services that are available to the public sector seeking to improve performance by learning from good practice. Within the UK, the (PSBS) is the government's focal point for managing knowledge on benchmarking and good practice. The Public Sector Benchmarking Service was launched in February 2001and provides a comprehensive service on benchmarking and good practise. Benchmarking has been recognised as a key tool for effective and efficient public services. It has a useful role to play in bringing about improvements in aspects, some of which are shown below, that modern day public sector organisations are involved with. In each aspect, it can provide a framework for learning from those who are doing things well.

Taken from www.servicefirst.gov.uk

Benchmarking can help with continuously improving public services. In particular, it can assist with:

identifying examples of good practice from organisations in the public and private sectors in the UK and internationally;
monitoring progress in making improvements against leading edge organisations;
reviewing services to identify best suppliers;
bringing about continuous improvements in policy making and service delivery; and
encouraging individual and organisational learning.

Benchmarking can be used in conjunction with other improvement tools. They all identify good practices and opportunities that can help improve performance. It is important not to view each scheme in isolation; they may each play a part in bringing about excellence in public services.

The aim of this essay was to critically appraise the following assertion. Contemporary strategic decision making in the public sector, like much of the New Public Management doctrine, should be regarded as ‘old wine in new bottles’ with limited utility to the public manager. This essay has pin pointed strategic management as an important change in public sector management. Concepts such as strategic planning, strategic analysis, strategic option and choice, implementation and performance measurement have been discussed. These have highlighted major changes that have taken place due to the New Public Management doctrine such as strategic planning, it is hard to believe that strategic planning was not used before the new public management doctrine was introduced since it creates a sense of direction for he public service a quote from Marilyn Munroe in the film bus stop sums up th eold public administration “ If you don’t know where you are going you end up going around in circles”. Where strategic planning is concerned there is no ‘old wine in new bottles’.

Does Strategic analysis fit into the category of ‘old wine in new bottles’? Well it is hard to believe that before NPM the management of the public sector neglected to view its key influences that have an impact on its present and future well being during decision making, but this essay does believe that some form of analysis was used in the old public administration it was not to the same extent as in NPM. Could Strategic choice be labelled as ‘old win in new bottles’? For local authority the strategic choices may include the extent to which the authority wishes to exercise a wider role of local governance going beyond its services responsibilities. This essay believes that strategic choice can be classed as ‘old win in new bottles’ since it is hard to believe that they failed to consider various options. Is implementation in NPM considered to be ‘old wine in new bottles’? This essay believes no. Due to initiatives such as CCT and PPP etc, which involves public sector services being replaced by the private sector at the point of delivery, implementation cannot be considered as ‘old wine in new bottles’. This change in implementation is a major change in public sector management and it brings up issues such as accountability. Since the public sector no longer provides a particular service is it still held responsible for its quality of service? Yes, local governments monitor its performance though performance measurement techniques such as charters and league tables. Each provider has to obey with charter requirements its performance may be publicly displayed in the form of a league table. Performance measurement did exist in the old method but is more important in NPM. One of the main changes that has occurred in terms of decision making due to NPM is the change in accountability. Previously the minister for that department would be held responsible for any mishaps, however under NPM the manager is held responsible.

The seven Tenets of NPM by Hood that were highlighted at the start of the essay can be linked up to strategic management. Unbundling of public sector into corporate units by product service. More contract based competitive provision with internal markets and term contracts can linked to implementation. Stress on private sector styles of managerial practise can be seen due to methods such as strategic planning. More emphasis on visible hands on top managers is seen in strategic management because managers make decisions. More Stress on discipline and frugality in resources use, due to strategic management resources are used efficiently. Explicit formal measurable standards and measure of performance and success, a main concept of strategic management is performance measurement which leads to greater emphasis on output controls. In conclusion a selection of NPM methods of decision making can be considered as ‘old wine in new bottles’ but not all of its concepts.