Public Management

Public and Private Distinction Wednesday, April 19, 2023

Hun Myoung Park, Ph.D.

Public Management & Policy Analysis ProgramGraduate School of International Relations

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Essential Distinctions

• The purpose of public organizations• Politics versus markets• Market failures or incapacities

Public goods and free riders Individual incompetence; information

asymmetry Externalities or spillovers Natural monopoly

• Political rationales for government

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Public & Public Values

• Significant indirect consequence of an act; “Those indirectly and seriously affected fro good or for evil from a group…” Dewey (1927: 35)

• “the value of that enterprise must be judged again citizens’ expectations for justice and fairness as well as efficiency and effectiveness” Moore (1995: 52)

• Bozeman (2007): Public values provide normative consequences about rights, benefits obligations of citizens, and principles of government and its policies.

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Public versus Private Goods

Excludable Not excludable

Individual consumption

(rivalry)

Private goods

(individual goods)

Common-pool resources (fish, water, forest)

Jointly consumption

(non-rivalry)

Toll goods

(highway, cable TV, telephone)

Public goods (collective goods)

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Public vs. Private?

• The blurring of the sectors– Mixed, intermediate, and hybrid forms– Functional analogies—doing the same things– Complex interrelations– Analogies from social roles and contexts– Ownership and funding

• The importance of avoiding oversimplifications• Agencies and enterprises as points on a

continuum

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Classification of Public Services

Public Non-publicGovernment Public administration, USPS NA

For-profit Railroad, Bus services, water transportation, air transportation, communications, utility and sanitary services, noncommercial educational and scientific research

Agriculture, mining, construction, manufacturing, wholesale, retail, finance, business, taxicab, trucking service, theaters and motion pictures, bowling alleys, billiard, etc.

Nonprofit Social services (welfare), health services, education services, museums, art galleries and zoos

Membership, religious organizations

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Public and Private Ownership and Funding

Department of DefenseSocial Security AdministrationPolice departments

Defense ContractorsRand Corporation Manpower Development Research CorporationOak Ridge National Laboratories

U.S. Postal Service Government-owned utilitiesFederal Home Loan Bank Board

General Motors*IBMGeneral ElectricGrocery store chainsYMCA

Public Ownership Private Ownership

Public Funding (taxes, government contracts)

Private Funding (sales, private donations)

*These large corporations have large government contracts and sales, but attain most of their revenues from private sales and have relative autonomy to withdraw from dealing with government.

Source: Adapted and revised from Wamsley and Zald (1973).

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Typology of Organizations Created By Cross-Classifying Ownership, Funding, and Mode Social Control

Bureau

Government corporation

Government-sponsored enterprise

Regulated enterprise

Governmental enterprise

State-owned enterprise

Government contractor

Private enterprise

Public

Public

Private

Private

Public

Public

Private

Private

Public

Private

Public

Private

Public

Private

Public

Private

Polyarchy

Polyarchy

Polyarchy

Polyarchy

Market

Market

Market

Market

Meier (1993)

Walsh (1978)

Musolf and Seidman (1980)

Mitnick (1980)

Barzelay (1992)

Aharoni (1986)

Bozeman (1987)

Williamson (1975)

Bureau of Labor Statistics

Pension Benefit Guaranty Corporation

Corporation for Public Broadcasting

Private electric utilities

Government printing office that must sell services to government agencies

Airbus

Grumann

IBM

Ownership FundingMode of

Social Control

Representative Study Example

Source: Adapted and revised from Perry and Rainey (1988)

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Agencies, Enterprises, and Hybrid Organizations

The continuum between government ownership and private enterprise. Below the line are arrangements colloquially referred to as public, government-owned, or nationalized. Above the line are organizational forms usually referred to as private enterprise or free enterprise. On the line are arrangements popularly considered neither public nor private.

Private nonprofit organizations totally reliant on government contracts and grants (Atomic Energy Commission, Manpower Development Research Corporation).

Private corporations reliant on government contracts for most revenues (some defense contractors, such as General Dynamics Crummen).

Heavily regulated private firms (heavily regulated privately owned utilities).

Private corporations with significant funding from government contracts but majority of revenues from private sources.

Private corporations subject to general government regulations such as affirmative action, Occupational Safety and Health Administration regulations.

Private Enterprise

Government ownership of part of a private corporation

State-owned enterprise or public corporation (Postal Service, TVA, Port Authority of NV).

Government Agency

Government sponsored enterprise, established by government but with shares traded on stock market (Federal National Mortgage Association).

Government program or agency operated largely through purchase from private vendors or producers (Medicare, public housing).

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“Publicness”: Political and Economic AuthorityEconomic Authority

Private firm managed by owner

Closely held private firm, professionally managed

Corporation heavily reliant on government contracts

Government- sponsored enterprise

Government corporation or government organization funded through user fees

Government agency (funded from taxes)

Political Authority

Government- industry research cooperative

Corporation with shares traded publicly on stock market

Research University

Private nonprofit organization

Professional association

Small voluntary association

Source: Adapted from Bozeman (1987)

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Factors To Be Controlled

• Size: Big versus small organizations

• Task (functions): – simple vs. complex task – specific functions (e.g. selling apples vs.

policing)

• Technology

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Problems in Comparison

• Difficulty in obtaining the very large samples needed to represent the “sectors”

• Comparing incommensurable organizations Government is monopoly without competitors Government and Apple selling smartphones?

• Interviews with executives and managers who have served in both public agencies and private business firms

• Comparisons of public and private organizations within functional categories (hospitals, schools, refuse collection)

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I. Environmental factors

• I.1. Absence of economic markets for outputs; reliance on governmental appropriations for financial resources– I.1.a Less incentive to achieve cost reduction,

operating efficiency, and effective performance– I.1.b. Lower efficiency in allocating resources (weaker

reflection of consumer preferences, less proportioning of supply to demand)

– I.1.c. Less availability of relatively clear market indicators and information (prices, profits, market share) for use in managerial decisions

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I. Environmental factors

• I.2. Presence of particularly elaborate and intensive formal legal constraints as a result of oversight by legislative branch, executive branch hierarchy and oversight agencies, and courts– 1.2.a.More constraints on domains of operation and

on procedures (less autonomy for managers in making such choices)

– 1.2.b. Greater tendency for proliferation of formal administrative controls

– 1.2.c. Larger number of external sources of formal authority and influence, with greater fragmentation among them

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I. Environmental factors

I.3. Presence of more intensive external political influences1.3.a. Greater diversity and intensity of external informal

political influences on decisions (political bargaining and lobbying; public opinion; interest-group, client, and constituent pressures)

1.3.b. Greater need for political support from client groups, constituencies, and formal authorities in order to obtain appropriations and authorization for actions

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II. Organization-Environment Transactions

II.1. Public organizations and managers are often involved in production of public goods or handling of significant externalities. Outputs are not readily transferable to economic markets at a market price.

II.2 Government activities are often coercive, monopolistic, or unavoidable. Government has unique sanctioning and coercion power and is often the sole provider. Participation in consumption and financing of activities is often mandatory.

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II. Organization-Environment Transactions

II.3. Government activities often have a broader impact and greater symbolic significance. There is a broader scope of concern, such as for general public interest criteria.

II.4. There is greater public scrutiny of public managers.

II.5. There are unique expectations for fairness, responsiveness, honesty, openness, and accountability.

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III. Organizational roles, structures, and processes

• III.1. Greater goal ambiguity, multiplicity, and conflict. – II.1.a.Greater vagueness, intangibility, or difficulty in measuring

goals and performance criteria; the goals are more debatable and value-laden (for example, defense readiness, public safety, a clean environment, better living standards for the poor and unemployed)

– II.1.b.Greater multiplicity of goals and criteria (efficiency, public accountability and openness, political responsiveness, fairness and due process, social equity and distributional criteria, moral correctness of behavior)

– II.1.c. Greater tendency of the goals to be conflicting, to involve more trade-offs (efficiency versus openness to public scrutiny, efficiency versus due process and social equity, conflicting demands of diverse constituencies and political authorities)

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III. Organizational roles, structures, and processes

III.2. Distinctive features of general managerial rolesIII.2.a.Recent studies have found that public managers’

general roles involve many of the same functions and role categories as those of managers in other settings but with some distinctive features: a more political, expository role, involving more meetings with and interventions by external interest groups and political authorities; more crisis management and “fire drills”; greater challenge to balance external political relations with internal management functions.

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III. Organizational roles, structures, and processes

III.3. Administrative authority and leadership practicesIII.3.a. Public managers have less decision-making

autonomy and flexibility because of elaborate institutional constraints and external political influences. There are more external interventions, interruptions, and constraints.

III.3.b. Public managers have weaker authority over subordinates and lower levels as a result of institutional constraints (for example, civil service personnel systems, purchasing and procurement systems) and external political alliances of subunits and subordinates (with interest groups, legislators).

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III. Organizational roles, structures, and processes

III.3.c. Higher-level public managers show greater reluctance to delegate authority and a tendency to establish more levels of review and approval and to make greater use of formal regulations to control lower levels.

III.3.d. More frequent turnover of top leaders due to elections and political appointments causes more difficulty in implementing plans and innovations.

III.3.e. Recent counterpoint studies describe entrepreneurial behaviors and managerial excellence by public managers.

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III. Organizational roles, structures, and processes

III.4.Organizational structureIII.4.a.Numerous assertions that public organizations

are subject to more red tape, more elaborate bureaucratic structures

II.4.b.Empirical studies report mixed results, some supporting the assertions about red tape, some not supporting them. Numerous studies find some structural distinctions for public forms of organizations, although not necessarily more bureaucratic structuring.

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III. Organizational roles, structures, and processes

III.5.Strategic decision-making processesIII.5.a.Recent studies show that strategic decision-

making processes in public organizations can be generally similar to those in other settings but are more likely to be subject to interventions, interruptions, and greater involvement of external authorities and interest groups.

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III. Organizational roles, structures, and processes

• III.6. Incentives and incentive structures– III.6.a.Numerous studies show that public managers

and employees perceive greater administrative constraints on the administration of extrinsic incentives such as pay, promotion, and disciplinary action than do their counterparts in private organizations.

– III.6.b.Recent studies indicate that public managers and employees perceive weaker relations between performance and extrinsic rewards such as pay, promotion, and job security. The studies indicate that there may be some compensating effect of service and other intrinsic incentives for public employees and show no clear relationship between employee performance and perceived differences in the relationship between rewards and performance.

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III. Organizational roles, structures, and processes

• III.7.Individual characteristics, work-related attitudes and behaviors– III.7.a.A number of studies have found different work-

related values on the part of public managers and employees, such as lower valuation of monetary incentives and higher levels of public service motivation.

– III.7.b.Numerous highly diverse studies have found lower levels of work satisfaction and organizational commitment among public than among private managers and employees. The level of satisfaction among public sector samples is generally high but tends consistently to be somewhat lower than that among private comparison groups.

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III. Organizational roles, structures, and processes

• III.8.Organizational and individual performance– III.8.a.There are numerous assertions that public

organizations and employees are cautious and not innovative. The evidence for this is mixed.

– III.8.b.Numerous studies indicate that public forms of various types of organizations tend to be less efficient in providing services than their private counterparts, although results tend to be mixed for hospitals and utilities. (Public utilities have been found to be efficient somewhat more often.) Yet other authors strongly defend the efficiency and general performance of public organizations, citing various forms of evidence.