Main Issue in Public Sector:

strategic Change
PSCM Lecture 2
 stimuli for New Agenda
• Organization exists in changing envi: Economic,
Political, Social & Legal
– Economy fluctuates – generation of changing demand for
goods & services
– Political envi changes – new parties come to power & bring
in new ideas
– Legal context changes [in Europe, for example, influence
from European Union
– Demographic changes [changes in birth rates, death rates
& labor mobility]
* All of these affect how the government provides services.

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• Johnson & Scholes (1993) identify 4 aspects of
environment that influence organizations
• (a) political and legal
– Factors that give rise to conflicts between people
or groups of people
– Manifest in party politics & its products such as in
legislation and interest group politics – leading to
power struggle

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 Johnson & Scholes
4 aspects of environment
that influence organization

• (b) Socio-cultural
– Include factors:
• Changes in population pattern – e.g. increase in
number of elderly people
• Expectation of the people
• Attitude to change
• Cultural expectations
• Values

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• Changes in population lead to changes in
demand. E.g., increasing number of elderly
leads to increase in certain types of health &
social care
• Knowledge about birth rate helps policy
makers to make projection about future
demand for schools
• Increasing expectation means people want
better service

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• (c) Economic
– Issues include:
• Availability & distribution of resources [land, labor &
capital]
• Prices of resources
• Quality of resources
– Core themes & assumption that underpin
approach to public services
• The objective of the flourishing public sector
• The need to reduce the size of the public sector
borrowing requirement
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• The need to reduce the overall size of the public sector
• The assumption that monopolistic public services are
inherently inefficient
• The wish to create a mixed economy of welfare.
Providers of services from both the public & private
sectors
• The wish to create competition inside the public sector
– Perception – public service is a group of people who dominate
& control service provision. Serving own interest rather than
the consumers of services

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–Initial attention given to Trade Union & later
to monopolies of professional groups such
as Doctors.

–Attempt to reform the supply side of the

economy – to ease up factors such as wage
rates & restrictive practices that inhibit the
supply of labor.

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 Johnson & Scholes
4 aspects of environment
that influence organization

• (d) Technological
– Refers to the potential of technology & techniques use to
make efficiency savings. Improve Performance.
– New technology offers both threats & opportunities
• Example – new systems of data storage, transfer & retrieval offer
possibility of developing & changing organization structure
– Centralizing
– Decentralizing
– Organization that fail to utilize this may be at a
disadvantage

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 Economy, Efficiency & Effectiveness [3Es]

• 3Es must present in Context, Content &

Process {see Pettigrew’s model of strategic
change}
• 3Es important in government policy and public
service managers cannot escape from its
influence
• Efficiency and effectiveness important for
improving organizational performance

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 Figure 1
(adapted from Lawton & Rose, 1994: 155)
Impact
Inputs Outputs (what is achieved
(Resources) (Service products) by producing services

Efficiency Effectiveness
relationship relationship

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• Fig. 1 explains an organization as having
Inputs, Products & Outputs
• Example
– In a car manufacturing
• Inputs [metals, plastics & glass combined with design,
labor & energy]
• Inputs are put into the production process to produce
the output [the car]

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 Definition of Terms [3Es]
• Economy
– An economic measure describes the extent to which the
Cost of Inputs is minimized.
– Usually measured in money saved by switching to cheaper
inputs
– Concept relates to the inputs – for motor car
manufacturers, this means minimizing the cost of physical
inputs [labor for example]
– For public service – purchasing goods & services at the
lowest price or using competitive tendering to lower labor
costs

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 definition of terms [3Es]
• (b) Efficiency
– Achieve by minimizing of Inputs to the programme in
relation to the Output from it or by maximising outputs in
relations to Inputs.
– Concerns with relationship between Inputs & Outputs
– an Efficiency Programme – when the target is achieved
with the least possible use of resources or the actual target
(is) secured with the least use of resources
– about getting more for less

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• Determinant of the relationship between
Inputs & Outputs is the Process
– In a car company
• About making the best use of manufacturing processes,
technology & staff to add value to the raw materials
when making car
– For PUBLIC SERVICES
• about managerial reform & introduction of ne working
practice. Competitive tendering system encourages in-
house organization to as question s about what needs
doing & how it should be done

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 definition of terms [3Es]
• (c) Effectiveness
– an effectiveness measure indicates the extent to which
objectives have been met. Makes no reference to cost.
– about achieving what we want to achieve
– About relationship between intended outputs & actual
outputs
– example – a target to achieve 10% share of the market for
a particular car company
– a more problematic concept in the public service

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 Economy, Efficiency & Effectiveness in the
Public Sector
• Easier to apply the concepts in a car company as it
needs to improve performance. Customers go for
other brands if price is too high or quality too low.
• Difficult to apply in the public sector because of:
– Many public sector organizations are monopoly suppliers
of goods and services. Example, only one Department of
Social Security.
• Claimant cannot go elsewhere if not satisfied
• In competitive envi – incentive to be efficient [increase profits,
increase dividends for shareholders. Inefficiency could lead to
disclosure. Monopolist does not have this incentive.

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• A car co. has a clearly identifiable PRODUCT– the car. Not so in
the Public Service. Example, what does a University produce?
[lecturers., seminars, researches, ideas, educated citizens or
personnel for business.
• A car co. has a clearly identifiable CUSTOMER that enters
financial exchange with the co. Not so in the Public Service.
Customer could be
– member of the public,
– minister in charge of the service. Minister may want to reduce the
overall expenditure of the services, but the public may want more
services.
– Parliament (elected by & represents the electorates) or
– taxpayers.

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• A car c. has a clearly explicitly stated OBJECTIVE – the
maximization of profits. Efficiency creates savings, so
more profits. Not the case in the public service.
Values underpin in the civil service is the Demand for
EQUITY. Example, is it correct for the police to focus
on the area where the rich live & ignore the area
where the poor live.
• ALL of these problems make it difficult for the 3Es to
be pursuit in the public service.

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• In Britain, for example, various initiatives been
undertaken to improve public service performance:
– In 1980s – followed the efficiency strategy
– Efficiency strategy to be achieved through cultural change
– Critics of the strategy argued that it was more about the
economy than about efficiency.
• Argue that strategy aimed at reducing inputs to the process
instead of improving the ratio between inputs & outputs as
reflected in the policy of reducing the level of public spending.
• Strategy could not be neutral as political decisions have to be
made – reflect the values of decision makers.

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• Audit Commission promotes 3Es in local authorities
& National Health Service
– through encouraging improvement in management
practices. Concentration is on improving process that
transforms inputs into outputs.
• Primary lever in the strategy is to improve
management in British public services
– Quality targets (85% of customers to regard the service
they receive from the agency as satisfactory or better)

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– Financial target (achieve at least £57.3m from new
efficiency saving
– Throughput targets (social fund crisis applications
cleared on the day the need arises.

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 Pettigrew Model (1988)
• Pettigrew identifies 3 classes of variables for
strategic change
(a) Context
(b) Content
(c) process
• Outer Context refers to broad environment
containing these factors in which the organization
operates:
(a) Social
(b) Economic
(c) politic
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• Inner environment refers to organization
Structure, Organizational Culture and Politics.
• Content refers to what changes occur
• Process deals with how changes occur

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Thank You.

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