ADS553 STRATEGIC

MANAGEMENT IN PUBLIC
SECTOR
1

1ST LECTURE
 DISCUSSION OUTLINES
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INTRODUCTION
THE NEED OF STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
NEW PUBLIC MANAGEMENT
UNDERSTANDING PUBLIC MANAGEMENT IN
PUBLIC SECTOR
Linking Strategic Planning and Human Resources

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 INTRODUCTION
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The terms ‘strategy’, ‘strategic management’ and

‘strategic planning’ are now very common in all different
types of organization from the largest multinationals
through to small business entity including public sector
as well as nonprofit organizations
Strategic management has gained a sustained
prominence in the management of public services in the
past two decades or so
Public organizations are increasingly being asked to use
it as part of their management techniques
It has become an attractive management tool to
reformers
 Bovaird (2009) argues for an organization to be without a strategy is
to appear directionless and incompetent.
 INTRODUCTION
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 Strategic planning is a relatively new innovation in the public

sector management and according to some observers, it
represent a major change in the management of public sector
organizations (Bryson, 1988)
 According Poister and Streib(2005) strategic management
was only introduced into the public sector 20 years ago, with
much of the early literature focusing on local government
applications
 This observation implies that strategic management is
basically a new management instrument imported to the
public sector
 Llewellyn and Tappin (2003) insist that strategic
management is not rooted in the public sector so strategies
have to be ‘planted’ in the public services
 INTRODUCTION
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 For private sector the reasons for the use of strategic

management is rather justified by the circumstances in which
they operate- a competitive and market driven
environment in which the innovation for survival strategic
is crucial
 In order to survival and prosper firms have to develop a
means of aligning their missions to their environment
and that means is strategic planning
 For public sector the need for strategic management seems to
be lower because their survival are not in immediate threat
and that their environment is not that major threat for their
survival ( Snow and Hambrick 1980)
 Despite this observation public sector is being forced to
adopt strategic management approach in their
performance
 STRATEGIC MANAGMENT
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The process of identifying, choosing and

implementing activities that will enhance the
long-term performance of an organization by setting
direction, and by creating compatibility
between the internal skills and resources of the
organization, and the changing external
environment within which it operates
The art and science of formulating, implementing
and evaluating cross functional decisions that
enable an organization to achieve its objectives
 GOVERNMENTAL ROLES AND
RESPONSIBILITIES
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It possesses diverse roles and responsibilities,

ranging from those with potential commercial
focus to boost up country economy to those that are
socially oriented such as welfare programs,
education and public health campaigns
Traditional / Housekeeping functions – economic
management & social welfare
Non-traditional functions – programs that can assist
government to correspond to the environmental
needs
PUBLIC SECTOR ROLES AND RESPONSIBILITIES
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 THE NEED OF STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
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 The current surge for strategic management in the public sector is

related to a number of recent events that also triggered far
reaching public sector reforms.
 There seem to be a clear connection between economic crisis of
the later 1980s and the increased emphasis in the use of strategic
management in public sector organizations (economy deteriorates
significantly).
 For example the strategic management literature includes extensive
writings on "cutback management" (Rubin, 1990) and as well as
the alignment of organizational goals and the available resources
(cut spending, lower level resource consumptions).
 During periods of fiscal austerity, public organizations are likely
to adopt strategic planning to assist agency managers to contain
their budgets and maintain funding for the agency's highest priority
areas (Caiden, 1990) (strict economic policies implemented by a
government to reduce government spending and public debt).
 THE NEED OF STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
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 Since funding uncertainties and constraints are endemic to

public services, public sector organizations are required to
make their organizational aims, outputs and outcomes
much more transparent in ‘strategies’, in order to secure on-
going funding from government bodies (Llewellyn and Tappin
2003)
 The use of strategic management is triggered by governments’
desire to control public expenditure via enhance
efficiency of public organization (Green 1998)
 This desire is reflected in government’s emphasis to link
organizations’ performance targets with funding ceilings
 Traditionally the link between organizational performance
results and costs involved is not clear and the introduction
of strategic management is assumed to correct this past legacy
 THE NEED OF STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
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To deal with the complexities, new methods and

approaches are needed and, over time, these have been
called ‘strategic management’
Public organizations are considered under-
performing and uneconomical in their use of public
resources
With strategic management, it could help to enhance
public organizations’ image and legitimacy
Berry (2001) noted that widespread recession of the
early 1990s precipitated the need to ‘hold down the size
of the government’ thereby forcing political leaders to
initiate public sector reform process that takes strategic
management to its heart
 THE NEED OF STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
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Hughes (2003) see the rise of strategic management in

the public sector as a critique to traditional public
administration model, which he describes as inward
and short-term focused, routine oriented based with less
considerate to long term planning issues (Classical Public
Administration)
As Hughes (2003) insists strategic management has to go
beyond routine management tasks and consider in a
systematic way a long- term organization mission and
vision
Similarly, Eadie (2000) suggests that the purpose of
strategic management is to maintain a favorable
balance between the organization and its environment
over a long period
 THE NEED OF STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
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There are still skeptical–minded people who see

strategic management as unfit for the public sector
management (Berry 2001)
This skepticism emanate from the fact that
traditionally, planning efforts in the public sector
have often ended unimplemented, meaning that
planning documents often end up on the
‘dusty shelves’ as their contents were rarely
implemented
 THE NEED OF STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
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The present practice of management tools consumed

by public managers which are based on an older
mechanistic school of strategic management and
which are in line with laymen’s concept of
management ignore the active, context-dependent
nature of learning and makes it is an impediment to
collaborative knowledge creation, learning and
change (Marika Vanttinen, Kirsi Pyhalto, 2009)
Modern concepts of strategy and strategy process
offer a more formalize manner of strategic
management activities
NEW PUBLIC MANAGEMENT AGENDA
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 NEW PUBLIC MANAGEMENT AGENDA
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 Recent, more systematic efforts to make public administrations more

accountable, efficient, and responsive
 The core techniques borrow from the managerial methods of the private
sector
 From the beginning of the 8Os the public sector has seen a large influx of
private sector principles and tools into the public sector in the attempt to
improve efficiency and effectiveness
 The reform movement can be summarized as “New Public Management”, or
“New Steering Model” in Germany, and has been implemented with different
results almost worldwide
 Since the 90s “Governance” has emerged as an additional concept, which some
see as an enrichment of the NPM philosophy, others as a paradigmatic shift
towards a more outward focused public sector, emphasizing co-
operation, democracy and citizen participation
 NEW PUBLIC MANAGEMENT AGENDA
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 Governance is understood as the shaping and optimizing of the

interdependencies between actors in a society which cooperatively
attempt to produce public value (Kooiman, 1999; Schedler & Siegel 2005; Benz,
et al., 2007; Schedler 2007)
 Some scholars or politicians argued NPM as ‘new global paradigm’ and
skeptical
 Decentralized and liberalism
 Emerge at 1980 & 1990s, it is new managerial approach in public sector
 Related terms:
 “managerialism” (Pollitt,1990),
 “new public management” (Hood,1991),
 “market-based public admin”(Lan & Rosenbloom,1992),
 “post-bureaucratic paradigm” (Barzelay,1992)
 “entrepreneurial government” (Obsorne & Gaebler, 1992)
 NEW PUBLIC MANAGEMENT AGENDA
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 It represent a major shift from traditional public

administration with far greater attention paid to the
achievement of results and the personal
responsibility of managers
 Intention to move from classic bureaucracy to make
organizations, personnel, and employment terms &
conditions more flexible
 Achievement through the performance indicators
 Reducing government function through privatization
and other forms of market testing & contracting
The differences of traditional & public management model
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Traditional model Public management model

Focus on structure and process rather Focus more on the result-oriented
than results

Relationship with the political Relationship more fluid and closer

leadership narrow & technical than before

Less profitable to generate revenues High profit to generate revenues

(decentralizations, privatization)

less flexible in decision making Flexible in decision making

 NEW PUBLIC MANAGEMENT AGENDA
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 Privatization.
 Quasi-market competition (and contractualization).
 Management, relational, and personnel contracts; competition between
public agencies; inter-agency fee charging; out-sourcing.
 Performance orientation: changing the accountability relationship from
an emphasis on inputs and legal compliance to one on outputs.
 Results-oriented budgeting, full-costing of products.
 Devolution of discretion. Devolution of decision making: reducing the
burden of hierarchical rules and fostering greater discretion at lower
points in the hierarchy.
 Agencification, decentralization of personnel-management.
 Specialization by splitting policy making and policy implementation,
service financing and service delivery.
 Executive agencies, hospital trusts.
 Client-focus: reporting to and "listening" to the clients of the public
sector.
 Citizen’s Charter; e-government, participative budgeting.
 NEW PUBLIC MANAGEMENT AGENDA
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Understanding what changes are needed

How to implement and manage these changes
How to create a roadmap for sustaining
improvements that lead to better performance
 THE NATURE OF STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
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Public sector organizations or departments seldom

have a clear link between their level of
performance and the budget they receive.
This tends to encourage a focus on efficiency (do
things right) rather than effectiveness (do right
things) because being effective may be very costly,
will not attract a greater level of funding and is more
likely to be subject to public criticism and political
pressures.
 THE NATURE OF STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
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Public sector organizations, particularly government

departments, exist to implement the political
agenda of the parliament of the day. This political
agenda often makes the strategic management
process difficult to implement effectively.
 THE NATURE OF STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
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Public sector management often requires collective

actions between departments and agencies that are
strategically separate but functionally
interdependent. For example, the implementation of
key transport policies may also invite the resources
and activities of the education, main roads and police
departments.
UNDERSTANDING STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
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UNDERSTANDING STRATEGIC MANAGEMENT IN
PUBLIC SECTOR
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Strategic Management in Public Sector
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Cont…
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The first step is information gathering, which

identifies key market, industry and internal
organizational trends and opportunities that will
impact the organization.
Cont…
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Where “market”, in the public sector contexts, refers

to all relevant stakeholders.
Understanding the interests of stakeholders is
extremely critical in public sector management.
 Government responsiveness to these interests and
the interests of society as a whole are fundamental to
service delivery and performance.
Cont…
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The organization’s ability to respond to these critical

strategic issues and challenges is manifest in their
vision and the mission statement describing:
 what they do, with/for whom they do it
 their distinctive competence
 why they do it
Cont…
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The strategic goals and specific strategies for achieving

these goals should be formulated in an operational plan
that also addresses change management issues.
A discussion of strategic management would not be
complete without addressing the role of change
management as a key enabler for innovation.
Change management recognizes that a “multiplicity of
factors influence an organization’s ability to change”.
In this regard, a definitive strategy and structure are not
enough when considering the implementation of a
customer-focused approach.
Cont…
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In government, meeting the challenges of

transforming this, previously slow and bureaucratic,
agency of government into a more dynamic and
responsive organization.
The leadership of senior management staff was
critical for change management, and fostered change
agents that worked for a common benefit.
These factors, together with continuity in
management (not always possible in government)
provided stability.
 TUTORIAL QUESTIONS
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1. Define the term strategic management.

2. Disscuss the nature of strategic management in
public sector.
3. Identify the significance of new public management
agenda in strategic management.