Management Strategy in the Public Sector

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Table of Contents

Introduction
Theory
Case study
Conclusion
References

Introduction

Local authorities are embracing the use of strategic management in their daily processes. Many have recognised the usefulness of the approach but few are yet to optimize its potential. Internal and external environments in public organisations make strategic management a challenging task for many.

These firms require a comprehensive analysis of strategy use in the public sector, which the essay will attempt to do. The extent to which firms in the UK apply strategy management depends on the management model chosen for the analysis.

Organisations in the public sector feel the impact of strategy management depending on their strategic stance, which could be defensive, reactive or prospective; their strategic action or their strategic processes. These dynamics will be applied to a case study about a local council known as Brownsville.

It is essential to determine how the council’s strategic challenges came about and how it can solve them effectively through strategic management theory.

Theory

How public organisation use strategic management

Extent to which organisation employ elements of strategic management

Research conducted by (Poister & Streib, 2005: 47) indicates that several public firms in the UK implement strategic management.

The prevalence of the phenomenon in these institutions is an effective way of determining whether strategy use is still a theoretical approach, or whether it has become part of public sector organisational life.

Almost 90% of the institutions that carry out strategic planning reported that the effort was worthwhile, they recorded appreciation of outcomes and willingness to stick to the process as reasons behind strategy effectiveness.

Poister& Streib, G. (2005: 51) report that among the respondents they interviewed, a third of them had accomplished 60 to 80% of their goals. Since this research employed a range of city councils with over 25,000 residents, then one may assert that the adoption of strategic management is becoming widespread.

Local councils, public health organisations, educational institutions, and other public firms sometimes exhibit elements of strategic planning. They can define organisational missions and visions as well as goals and objectives of the firm.

This assists members in having a direction and knowing the purpose for which they are working. Boyne et. al. (2004: 328) explain that rational planning must be done effectively within public institutions in order to facilitate development.

In the UK context, these authors found that a number of public organisations have difficulties in following up on planning owing to technical challenges. If local authorities lack expertise on rational planning and adequate resources, they are more likely to fail than those with political problems alone.

These findings do not apply to all organisations. Public firms must look at their settings and identify the most pressing concerns among their citizens.

Furthermore, because managers and other authorities are chiefly responsible for allocation of resources among populations, then it is likely that political issues may come into play (Boyne et. al., 2004: 328).

Geography and Strategy

The extent to which public health organisations exhibit strategy use depends on geographical preference. For instance, in Scotland, the public has a preference for professionalism.

This implies that devolution is inconsequential in these areas and public policy is in the hands of professionals (Boyne and Ashworth, 2001: 860). Such an area is likely to exhibit a high degree of strategic management. England has a preference for markets.

Individuals believe that competition and the market are the most effective ways of handling public service. Since choice is a central aspect of service delivery, then one is also likely to find consistent use of strategic management in delivery of public services.

In Wales, a great degree of localism exists. The government plays a key role in the public sector even though most institutions prefer market reformers. This implies that strategy use is not a common occurrence. Such an approach has been brought on by the low population density of the area.

It was not suitable to adopt competition or choice models because of these factors. Performance is quite slow in Wales, and it takes long to improve on systems. This is a hostile environment for strategy use by those entities that want to implement change (Boyne and Ashworth, 2001: 860).

Hyndman and Eden (2002: 579) challenge this perception of management models in the UK public sector. The authors affirm that most management models are more flexible than other scholars assume. This implies that strategy may be applied even in areas that are deemed unfavourable.

For instance, as mentioned above, Northern Ireland has permissive managerialism, which is characterised by serious mistrust of politicians and no strong professional substitute.

The appointment of executive agencies in the country has ensured that the job of effectiveness and efficiency within the public sector is placed in the hands of a separate entity. Therefore, the absence or presence of favourable geographical climate will not affect how effectively these institutions use strategy.

Several chief executives in those executive agencies in Northern Ireland assert that they carry out performance measures, set objectives and clarify mission statements (Hyndman and Eden, 2002: 579).

Factors that cause UK public firms to adopt strategic management

The extent to which institutions use strategic management may also be viewed through the lens of recent changes made throughout the UK. In many local governments, budgets have been minimised by 25% yet this requires early action as well as efficiency savings (Martin, 2002: 300).

Therefore, many local actions will have to rely on strategy management to meet the needs of the electorate. In the NHS, companies have realised the need for efficiency savings worth 20 billion Euros. This will require ring fencing of the budget as well as instatement of independent boards.

The latter have been associated with strong reliance on strategy. In the law enforcement sector, police authorities have devolved service provision. This is also accompanied by an elimination of task setting.

Crime commissioners set new tasks for authorities. Such an approach would provide numerous opportunities for strategy use. The policing sector has taken on a task-based approach to work and this may tremendously impede service outcomes.

A number of things are yet to be learned by institutions within the public sector concerning strategic management. Bryson et. al. (2010: 496) affirm that a lot of progress has been made in many non profit or government-led organisation but they have to include certain aspects to make them highly successful.

First, public institutions need to focus more on strategic management practice as much theoretical knowledge is available. Knowledge management is also another area that should be studied and improved during service provision. Institutions need to know how to learn about strategic management.

They need to understand how to develop it and thus apply it in running their enterprises. The issue of communication and information technologies have not been substantially integrated into strategic management (Poister et. al., 2010: 533).

Several companies often associate the use of these tools with innovation but they rarely delve into the actual process of doing so. It is crucial for public enterprises to have a long-term perspective in the adoption of strategy (Furrer et. al., 2008: 43).

While several local authorities, public hospitals, and other firms use strategic management for improvement of annual returns, it is essential to know how this can relate to long term measures of the same.

How firms apply strategic management

Public firms may use strategy to manage their finances. They can combine their strategic plan with their budget and thus create effective financial management machinery. Successful organisations often require their departmental heads to use objectives that emanated from the strategic plan.

As a result, resource use will also depend on this process and thus lead to acceptable outcomes. Salary allocations have an adverse impact on financial use within public institutions.

Companies in the public sector can link this component to strategic planning by basing salary increments or reductions on how well a certain entity contributed to the strategic plan.

When these institutions take on new projects, they do so with regard to their overall strategy as well as the resource confines of the firm (Liddle, 2001: 311).

Performance management is also another way in which companies use strategy. They can treat performance measurement as a means of tracking strategic plan attainment (Andrews et. al. 2009: 19). Strategy.

This approach can be utilised in typical organisational processes as well as other forms of practice within the institution, such as new project development. Institutions that carry out this approach will assess whether they have improved with time, in accordance with their strategic goals.

For performance and strategic management to work effectively, companies must have a centralised system of measuring outcomes. Otherwise, haphazard implementation will not yield much change. Additionally, they need to be consistent about the use of strategy in performance assessment (Liddle, 2001: 320).

Influence of strategic management on public organisations

How strategy content impacts performance

Certain organisations claim to use strategic management but they rarely realise the full outcomes of the approach. This may be as a result of substituting strategic action for strategic stance. Strategy content may entail either strategic action or strategic stance.

The latter is more rhetorical while the former is practical, yet both components are crucial to organisational success (Moore, 1995: 33). Public sector organisations can choose to prospect for new opportunities, defend or react to their circumstances.

Institutions that prospect are risk takers, innovative and pragmatic institutions. They have high chances of success. Conversely, defenders focus on improving their programs rather than developing different ways of achieving their goals. To a certain extent, these firms may be efficient and successful.

Reactors are poor at responding to their circumstances because they do not have a formal stance on anything. Some scholars have defined their approach as a lack of strategy. Therefore, strategy content can impact a firm’s ability to tackle different dynamics owing to its strategy stance.

Andrews et. al. (2009: 1) wanted to find out the effects of stance and content on Welsh organisations. They discovered that defensive and prospective strategies cause high organisational performance while absence of strategy leads to negative organisational performance.

Companies that only do incremental changes in accordance with new developments are likely to find themselves in unwanted scenarios.

Institutions may also use strategic action to adapt to their environment. The public sector is a platform that has minimal financial resources, few service offerings and fixed markets. Successful organisations often juggle these challenges with ease through strategy application.

For instance, instead of sticking to the same markets, some public agencies have entered different geographical areas through mergers. Others may raise additional income through donations and grants or simply improve the processes and structures in their institutions (Miles and Snow. 2003: 53).

While legislations can constrain the services a public firm provides, some pragmatic organisation have used strategy to stretch these limits. They may diversify social welfare or meet a certain need among its community. For instance, lately, many citizens have gained a lot of interest in the area of environmental stability.

Strategy-conscious institutions have responded to this need by offering sustainability-based services. Institutions in the public sector will enjoy better service delivery and greater revenue collection if they have a strategic stance and combine it with strategic action. (Miles and Snow. 2003: 60)

If strategic stance and action are both regarded as rituals within a public enterprise, then they may yield undesirable outcomes.

If mission identification, goal setting, performance measures and all other aspects of strategy formulation and application are reduced to formal ceremonies, then organisations will not enjoy accountability, efficiency or effectiveness.

Improper strategy use can lead to resource wastage as companies would merely be instating some aspects of strategy control without benefits from the tangible outcomes of the program.

Some institutions may get frustrated with the failure of the performance to yield results thus causing them to abandon it altogether (Boyne et. al., 2004: 328).

This would cause time wastage and senseless misapplication of organisational human resources. Some institutions may instate various aspects of strategy content in order to make themselves appear rational and focused.

This can become a myth to the organisation as no real benefits emanate from the process. Improper strategy use can lead to cost ineffectiveness and ritualisation in service provision (Sminia& van Nistelrooij, 2006: 100).

How strategy process impacts organisations

Goal-identification is a crucial component of strategic management and planning. Mission-driven companies are synonymous with holistic companies that take a proactive approach to their mandate.

Therefore, those institutions that engage in strategic planning will enjoy the advantage of identifying problems before hand or dealing with challenges as they arise. Employees will also have a clear understanding of the role that they must play in accomplishment of these goals or at least they will prioritise certain tasks.

Work will not be done haphazardly and the firms will attempt to make the most of their time (Moore, 1995: 55).

Public organisations do not operate in isolation. Their effectiveness depends on how well they meet the needs of the citizens who use their services or other partners who collaborate with them.

Unless these institutions understand their internal and external environments, they cannot make a substantial impact on their stakeholders. It is the identification of stakeholder needs in strategy content that leads to effective understanding of one’s external and internal environment.

Companies that assess their threats, weaknesses and strengths are better placed to understand their environments and thus respond to alterations accordingly. They will also benefit from continual citizen support and strong intergovernmental relations (Joyce, 2001: 83).

The most important outcome that comes from engagement with one’s stakeholders is the provision of high quality services.

It is likely that such an outcome also comes from other elements of strategy application, such as performance measures or planning; however, engagement with stakeholders has the greatest impact on this parameter. It allows companies to know their users’ needs in order to meet them effectively (Moore, 1995: 92).

Institutions in the public sector need to know how well they have accomplished their goals and objectives. If their strategic process entails the use of performance measures, then they are likely to assess how well they have achieved their goals. This ensures that they link theory to practice (Christensen, 2007: 41).

Decision making processes will be well-informed and they will also create more positive outcomes. These employees are also likely to have a greater degree of control than before instatement of strategic management. Some of them will be motivated to work hard as they have something to accomplish.

Certain key issues stand out when examining performance management in the public sector. First, while profit-making is the key goal in the private sector, public institutions tend to dwell on making a contribution to society through delivery of services.

Strategy affects these organisations by allowing them to define and measure efficiency, outcomes and resource usage in an organised manner (Boyne et. al., 2004: 333). A company can identify its input, activities, outcome, impact and output.

After doing so, it may apply this information in its policy cycle, to instate accountability systems or simply to connect with the masses.

Institutions that prioritise stakeholder needs in performance management often increase levels of public satisfaction. They also report a great degree of accountability as actions are accurately recorded and assessed.

Certain challenges must be overcome by institutions in order to achieve results from performance management. If a public firm does not consider its context, then it is likely to experience problems.

Hyndman and Eden (1999: 12) explain that most challenges in the management of resources emanate from making sweeping applications of strategy within an organisation regardless of its context. This could impact a company very negatively by creating tunnel vision.

Such firms will only focus on specific components of service provisions without considering elements of the external environment. Poor strategy use in performance measures may also lead to sub optimisation and ossification. Companies may also have to contend with misrepresentation as no holistic view will be present.

Context is a fundamental aspect of the success of performance measures. If an institution adopts mechanistic systems of measurement yet their outcomes are non-linear, then it would not exert real control in the institution (Hyndman and Eden, 1999: 12).

Budgetary allocation is also a key aspect of strategic management. Companies are affected by how well they intertwine strategy use with resource allocation. If an institution merges its annual budget with strategic plans, then it is likely to report strong outcomes.

Local councils and other public firms often write their budgets annually. When carrying out this process, they have the option of reviewing it and incorporating new strategic goals. Those entities that perform this task efficiently will reap substantial rewards.

They will not have budget deficits or are less likely to be indebted to their partners. This is especially true for new money that gets into institutions. Surprisingly, Mintzberg, (2000: 97) reports that most public firms rely on line item budgeting and this explains why they are not performing optimally.

Companies that tie their resource use with performance, programs or rewards are likely to create positive competition within their companies and thus be more effective.

The lack of effective structures in public institutions may lead to inefficiency. Strategic management allows companies to effectively control their structures such that every area of performance is linked to the effectiveness of the outcomes.

Problems with departmental collaboration and specialisation are likely to be eradicated if a company has a strategic plan. Additionally, resource use, performance measures, and succession will all occur in accordance to the clarifications made during the strategic application process (Pollitt, 2009: 290).

Employees in institutions that engage in strategic management are more likely to feel empowered than those who simply use an ad hoc process to carry out institutional tasks (Llewellyn & Tappin, 2003: 980). Because of a strong organisational structure, workers are more likely to take ownership over decisions.

Several public firms struggle with the aspect of structure as bureaucracy has become the norm. In conventional style institutions, managers rarely have the autonomy needed to exercise strategic outcomes.

This is evident when instating new changes as a lot of obstacles will come one’s way (Llewellyn & Tappin, 2003: 978).

Case study

Challenges in the use of strategic management

Some municipal councils fail at the implementation and planning levels by refusing to include all stakeholders in the operational and strategic process. In this case study, management seems to have sole control over strategy issues.

The new management team has tried to be more inclusive but there is still room for improvement. Positer and Streib (2005: 48) state that municipal councils often give departmental heads, CEOs and top officials the mandate and sole preserve of strategic management, yet lower level employees are just as important.

Since they play a critical role in daily processes, then they ought to be included in planning, resource allocation, and other elements of strategic planning. Brownsville local authority did not get input from its key participants, and this explains why it performed dismally in the past.

Joyce, (2001: 103) also adds that external stakeholders must also be included in strategic management. Citizens and other partners utilise or facilitate service provision in the public sector, so it only makes sense to include their opinions in strategy application.

Members of this local council should also work in tandem with external partners in order to ascertain that their outcomes are satisfactory to those who use them (Poister and Van Slyke, 2002: 59).

The problem of poor stakeholder engagement was also manifested through the strained relationship between the city inspectors, regulators and the health sectors. Unless a public organisation works with its stakeholders effectively, it cannot accomplish its goals effectively.

The health sector and city inspectors are indispensable to Brownsville local authority, so they cannot afford to antagonise them. It is also evident that the problems in the council stemmed from the lack of a centralised approach to stakeholder engagement (Stewart, 2004: 18).

If each council members only engages the needs of their electorate without thinking of the overall effects on the institution then disorder is bound to arise.

Members of the council seemed to have done a good job of engaging with their citizenry, but because they only had a localised approach to this engagement, then it resulted in disagreement.

Brownsville had a poor approach to strategic planning, as well. No evidence exists to prove that members assessed feasibility of proposals (Eadle, 1983: 72). This implies that they merely took on projects and hoped that they would accomplish their goals.

Since this council is a non profit institution, it ought to have instated accountability or equity goals. Additionally, the institution did not have an action plan with which to accomplish its strategic roles. Problems of rational planning may also have contributed to failure in this institution.

As Boyne et. al. (2004: 328) explain, public institutions are characterised by high incidences of rivalry, especially between planners and deliverers.

Brownsville appears to have this problem because there was intense rivalry between politicians and officers. The former frequently interfered with the work of the latter as they had an antagonistic relationship.

Financial management was a serious problem in this case study. The concerned company demonstrated minimal connection between service planning and service financing. It also had a reactive approach to resource allocation by choosing elements of service delivery and causing them to fit the budget.

These challenges have been identified in literature extensively (Johnson and Scholes, 2001: 43). Brownsville needed to tie its strategic plan to budget requests. It needed to reverse the order of management of resources by ensuring that the budget was implemented according to a plan.

A reactive approach to finance often stems from institutional isolation of the budgeting process. In this case, the budget was not tied to performance or any other parameters in strategy planning.

Therefore, projects were financed haphazardly. Members of the council did not know what to prioritise because they lacked a strategic plan. They took on projects regardless of how irrelevant or relevant they were to their overall objectives.

The council did not have a performance management system in place hence contributing to the failure in the institution. When a public sector firm has no data with which to assess its results, then it has no way of knowing whether it is performing well or not.

The current management team at the council is working on a number of challenges; however, it is yet to link strategic goals to performance evaluation. Andrews et. al. (2012: 55) reports that this is a fundamental aspect of successful strategy application.

Unless the new management team provides direction in the area of performance management, through instatement of gaols, then it will not succeed at effectively managing service delivery. Since the concerned organisation is a public sector firm, then it must incorporate the public in this performance assessment.

For instance, reporting those measures to the public could be an effective incentive for improving outcomes within the organisation. The current management team needs to be wary of potential challenges in performance management.

Linking salary increment to performance could create short-sightedness and distortion of outputs. Some individuals may even trance others in order to get to the top (Boyne & Dahya, 2002: 182). Therefore, the Council needs to apply increments to the entire organisation in order to curb these tendencies.

To prevent data manipulation, the council should safeguard its information reserves shrewdly. Short-sightedness may be eliminated by focusing on performance measures that are important not just anything that can be measured.

The new team has a task of centralising performance measures such that they do not just dwell on current predicaments. They must also choose parameters that work well for them and not borrow from best practice without considering their specific circumstances (Bevan and Hood, 2006: 520).

It is likely that this institution reported a change in performance because of new managerial strategy as well as external intervention. Not only was the previous team expelled, but the new one instated new mechanisms that have led to the current turnaround.

When conducting strategic management in public institution, strategy content must be aligned with strategy process. Brownsville Council appeared to fail on both fronts. The entity’s members did not have strong strategic action or a strategic stance.

One could classify the Council prior to the management change as a reactor. It seemed not to be certain about its ability to respond to the external environment. Innovation was inconsequential to the institution and so was risk taking. The institution was also not a defender since it seemed not to improve its processes at all.

In the area of strategy action, the council had a poor understanding of its external and internal environment. Not only did the previous management team assume that the Council was independent but it did not understand the way it operated.

The assumption probably emanated from the fact that no competition for service delivery existed. Existence of other stakeholders, such as regulators and health providers, proves that the external environment was more complex than the Council had assumed.

If the company regarded these stakeholders as a vital part of the management environment, it would have incorporated them in decisions. Strategic action also allows organisation in the public sector to introduce market mechanisms or partner with new stakeholders (Bryson, 2011: 15).

Such ideas are yet to be pursued by the new management. It was not even bothered about new collaborations and rules of competition. In the internal environment, this institution has not analysed some of the effective ways of implementing it strategic stance.

For instance, an adjustment of the processes used by the company has not taken place. Even election of new members was out of touch with the reality on the ground. Most modern-day citizens have lost trust in politicians (Poister, 2010: 247).

Having a succession process that it mostly political minimises an organisation’s public support as well as inv involvement of the public. Scholars also support this view because it complicates operational processes unnecessarily.

Instead, of focusing on what all members of the electorate want, politicians will dwell on the needs of their supporters. These entities will also look for the most effective strategies for re-election.

The approach creates divisions in the organisation and minimises normal functioning. Members of Brownsville Council had become so caught up with the political issues that they had blurred the lines between management officers and politicians. It is likely that the new management team is aware of those problems.

The team must now instate new procedures for replacement of officers and council members such that politics plays a minimal role in governance. Policies ought to reflect the needs of all constituents rather than the needs of those with the highest electorate or the most vocal representatives.

The council under analysis has clearly undergone an organisational change. Public sector firms often carry out change management in response to external drivers, such as changes in legislation or policy, economic developments and other alterations.

The strategic approach to management of organisations demands that institutions ought to take a proactive stance to change management. Dunford and Jones (2000: 1208) affirm that companies need to have a narrative of change management that will guide their form of adaptation.

Brownsville’s new management team appears to have created a management system that responds accordingly to the needs within its organisation. This approach is not as clearly laid out as scholars would suggest. The institution needs to have a narrative that it will adhere to whenever change need to be instated.

As such, it would protect its workers, the public, regulators and other partners from bearing the brunt of such rapid changes.

A lack of coordination was also apparent within this case study prior to the introduction of a new management team. It makes no sense for an institution to possess all aspects of mission, targets, and performance measures if it cannot coordinate these aspects.

There were plenty of misjudgements that arose from external parties such as the regulators as well from within the organisations, and these came from the poor coordination of all those elements.

Hyndman and Eden (1999: 12), Hyndman and Eden, (2000: 188) affirm that a prison breakout in one British prison emanated from the presence of strong organisational values, goals, performance indicators, strategic priorities as well as a visions and statement of purpose.

The key issue with this prison system was that it lacked a clear way of relating those components of strategy development.

Conclusion

Theory indicates that the extent of adoption of strategy management in the UK is laudable. Institutions still need to work on a number of issues before they fully optimise outcomes in the area of strategy use.

Strategic management practice, knowledge management, development of strategy and application of the concept are just some of the missing component. Communication and information technologies should also be integrated into future strategic management efforts.

Context consideration, stakeholder involvement and proper coordination are essential ingredients to successful strategy use. If firms apply strategy in performance and finance management, then they will be more effective.

The impact of strategic management is felt though greater employee commitment, greater efficiency, successful completion of projects, ample use of finance and harmonious relationships with one’s partners.

In the case study, it was found that a number of issues ailed Brownsville Council. These problems must be corrected by the current management team. Possible adjustments include improving stakeholder involvement, greater strategic planning and proper financial planning.

Performance management systems require improvement but they should not be ritualistic or devoid of organisational context as this would lead to no results.

The institution needs to have a strong strategic stance as well as an action plan that can govern all aspects of service provision. In addition to these changes, the entity should properly coordinate all aspects of strategy.

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