Understanding and Managing

Public Organizations
Chapter 14
Advancing Public Management
Through Collaboration

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 Reform Movements: Forerunners to
Collaborative Governance
• There has been a long history of reforms to
make government more efficient and
effective.
• New public management (NPM) has arguably
been the most influential around the world.

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 Reform Movements: New Public
Management (NPM)
• Different countries different flavors.
– More business-like practices (e.g., pay for
performance)
– More reliance on private sector (e.g., outsourcing,
P3s)
– More decentralization
– More arm’s-length agencies (Netherlands)
 From NPM to Collaborative
Governance
• Concept of collaborative governance goes
back a long way.
• Two (of many) conceptualizations:
– Collaborative governance involves multiple
organizations, often of different sectors, working
together to achieve common goals (Agranoff and
McGuire).
– Successful contracts between government and
nonprofits involve a degree of collaboration (Van
Slyke).
 From NPM to Collaborative
Governance
• Collaboration and contracting come together with
“relational contracting” (Milward and Provan).
– “Relational contracting” is a phrase invoked by economists
to describe contracts that embrace trust and reciprocity.

– Relational governance is the study of exchanges that

include significant relationship-specific assets combined
with a high level of interorganizational trust and “is
embodied in both the structure and the process of an
interorganizational relationship” (Zaheer and
Venkatraman, 1995, p. 374).

– More on relational governance later in chapter

 From NPM to Collaborative
Governance
• Another view: collaborative governance is a
reaction to NPM.
• Cross-sector partnerships and adoption of
some business-strategies remain (as with
NPM) but new forms of collaboration appear
to recognize the importance of public sector
values.
 The Literature on Collaboration
• Many terms used interchangeably and not always
differentiated (e.g., P3, cross-sector partnership,
alliance, network)
– An alliance is “any agreement between two or more
organizations to jointly carry out a task involving more
interaction than the one-time arm’s-length contract”
(Rivera-Santos and Inkpen, 2009, p. 199).
– Network are “structures of interdependence involving
multiple organizations or parts thereof, where one
unit is not merely the formal subordinate of the
others in some larger hierarchical arrangement”
(O’Toole, 1997, p. 44).

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 The Literature on Collaboration
• Four broad themes/key questions:

1. What motivates parties to collaborate?

2. How do parties select partners for
collaboration?
3. What mechanisms are used to sustain
collaborative relationships?
4. What do we know about collaboration
performance?
 Reasons for Collaboration
• Most frequently cited reasons:
– To obtain needed resources (invoking theories of
resource dependence and resource-based view)
– To solve complex problems, also called “wicked
problems”
 Collaboration to Solve Complex
Problems
• A single organization is unlikely to have the
capacity or range of know-how to address
complex social problems (e.g., homelessness).
– Homelessness has implications for health, drug,
and employment policies, and so on (multiple
policy areas).
– Government increasingly turns to cross-sector
collaboration to address complex social issues of
this kind.

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 Collaboration to Solve Complex
Problems
• Problems can also be complex when they
involve a range of different stakeholders with
different views on how the problem should be
addressed. Example:
• Health care delivery
– A range of public, private, and nonprofit
organizations have a part in shaping how any
health program will operate.
• Community hospitals, labs, insurance companies
Collaboration to Solve Complex Problems.
(Health Care Example continued)
– Efforts to solve one aspect of the health care
problem such as eligibility for coverage may have
cascading effects, for example, on government
budgets and insurer solvency.
– The range of effects are more likely to surface and
to be considered when multiple and diverse
stakeholders are involved in the service.
– Collaboration can be a way to obtain buy-in from
diverse stakeholders.
 Partner Selection
• Argue one of the most important decisions organizations make when
collaborating.
– Based on the view that sector distinctions have implications for outcomes.
• Literature extols the attributes of nonprofits, describing the unique
strengths nonprofits bring to the table when partnering with government
for the provision of social services.
– Van Slyke (2007) describes the different functions unique to
government-nonprofit relationships, including nonprofits’ general
experience in serving clients and the fact that nonprofits are widely
perceived as legitimate by elected officials, citizens, and the media.

– Witesman and Fernandez (2013) find a number of differences in the

way public managers structure and manage contractual relationships
with nonprofits compared to for-profits that suggest the former are
more trustworthy and reliable partners for government.
 Partner Selection
• Public management scholars recognize the
importance of finding partners that fit with the
pursuit of public value, longer-term relationship
management skills focused on conflict resolution,
trust building, information, and goal clarity.
• Importantly, studies show that we should not
assume value congruence between organizations,
or even within the public domain (van Thiel and
van der Wal, 2010).
 Collaboration Mechanisms
• Collaboration mechanisms are the tools that facilitate continuity,
lessen the potential for conflict, and make collaboration less
vulnerable to dissolution. They are the formal and informal rules
that provide structure for interaction.
• Mechanisms are the glue intended to sustain the collaboration.
• Some scholars go as far as to predict collaboration failure without
the right mechanisms in place to transform the relationship from a
lose-lose situation to a win-win situation.
• Collaborations pose the classic collective action problem: although
multiple parties may benefit from a certain action, the cost of such
action makes it unlikely that they will do so.
• Collaborations are further vulnerable because parties engaged in
them cannot cannot anticipate all possible contingencies ahead of
time.
 Collaboration Mechanisms
• Classic literature on collective action and
institutional design are a starting point for
understanding the challenges in sustaining
exchange relationships and have inspired
research on collaboration mechanisms (for
example, Axelrod, 1984; Olson, 1965; Ostrom,
1990).
• Mechanisms can be formal (e.g., contract
provisions) or informal mechanisms (e.g., trust,
norms).
 Performance
• Whether or not a collaboration can be
considered successful depends on the
partners’ initial goals.
• Same holds true for P3, which are widely
viewed as a type of collaboration.
• P3 success may also depend on type of P3
 Performance
• Hodge and Greve (2007) conceive of five broad categories of P3
arrangements:

1. Institutional cooperation for joint production and risk sharing

2. Long-term infrastructure contracts
3. Public policy networks that emphasize loose stakeholder relationships
4. Civil society and community development
5. Urban renewal and downtown economic development

• These categories cover an array of governance types in the US and

elsewhere including contracts and alliances.

• There are a range of factors in the literature associated with

collaboration success and/or failure.
 Performance
• Important factors:
– Manager experience
– Access to needed resources
– Place within network
– Quality of partners’ relationships
– Whether partners’ share ties with other partners
– Likelihood of conflict may increase with number of
partners).
– Sharing of institutional logic: institutional pluralism
increases potential for conflict
 From Formal Transactional Contracts
to Formal Relational Contracts
• Transactional contracts are common in government. The
are formal in tones. They focus foremost on accountability
and are designed to be enforceable by a third party.
• Common language in transactional contract:
– “The supplier shall deliver [tasks/ product] on or before [date].”
– “The supplier shall be required to produce [deliverable] in
accordance with the standards outlined in [ ].”
– “The government shall pay the amount of [ $$ ] by [date].
– “The supplier shall not be paid for any work not explicitly stated
in paragraph [ ] of this contract.”
 From Formal Transactional Contracts
to Formal Relational Contracts
• A formal relational contract aim to fosters trust and
cooperation as much as it does accountability.
• It specifies mutual goals and establishes governance
structures that align and keep aligned the parties’
interests.
• Formal relational contracts are not new. In fact, many
large organizations, such as Dell, Federal Express,
AstraZeneca, and the Canadian government, use them.
 From Formal Transactional Contracts
to Formal Relational Contracts
• Emerging research suggests that formal contracts
do not work for many complex relationships,
where there is a high levels of uncertainty, the
parties are interdependent, and where risks of
nonperformance can be severe.
• Relational contracts cannot completely replace
transactional contracts.
• For government contracting the goal is to find the
right balance between the features of both.
Often Overlooked Considerations
for Outsourcing Successfully
 Consideration Explanation/Advice
Low cost/efficiency Outsourcing can enhance efficiency when multiple service
providers compete for business.

Outsourcing has not consistently delivered on low-cost

service or quality.
Performance assessment When objectives are hard to measure, the power of
incentives are weakened.

Hard-to-measure services are some of the many challenges

often overlooked in performance management.

Effective performance monitoring requires sufficient

resources, including government personnel with contract
and program expertise; this is often overlooked.

The problem is more acute with knowledge workers.

Desired performance Public-sector organizations aim for more than efficiency, for
outcomes example, maximizing social welfare, transparency, equity.
Determine how a range of outcomes will be assessed.
 Consideration Explanation/Advice
Enhancing competition Although it is important to clearly specify duties, obligations and rights, the
via contract contract document is also a tool to facilitate competition. The market “is
specifications defined by contract specification”

The scope/range of activities is an important mechanism to control

opportunism. For example, a smaller scope will attract more bidders.

The contract binds the parties for the specified length, effectively creating
monopoly until the contract end date.

Outsourcing’s effect on Motivations of public and private personnel differ, a fact sometimes used
government employees to justify government provision

Research shows outsourcing’s differential effects on government

employees.

Contracts are not always at expense of goal alignment. Effects may depend
on whether government is considered the principal in principal-agent
relationship or steward.
Partner section Government can select among a range of partner types (public, private,
nonprofit), each with different motives. Consider entire range of options.

Repeated transactions with the same supplier can build trust, reduce
transaction cost.

The objective of the private firm is to maximize profit .

Repeated transactions with the same suppliers can build, lower transaction 25
cost, and enhance exchange performance.
Steps Involved in Formalizing a
Relational Contract

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 Steps Involved in Formalizing a Relational Contract
1 Lay the The primary goal of step 1 is to establish a partnership mentality. Both parties must
foundation. make a conscious effort to create an environment of trust, one in which they are
transparent about their high-level aspirations, specific goals, and concerns.

2 Create a To keep expectations aligned in a complex and changing environment, both parties
shared vision (not just one with the greater power) need to explain their vision and goals for the
and relationship.
objectives.
3 Adopt guiding When the contract environment includes many unknowns, there is a high risk of
principles. friction and a high risk that one or both parties will feel unfairly treated. In step 3,
commit to six guiding principles that contractually prohibit opportunistic behavior.
Shading refers to retaliatory tit-for-tat behavior when one party stops cooperating or
makes countermoves. The six principles are reciprocity, autonomy, honesty, loyalty,
equity, and integrity. (Example autonomy: we agree to give each other freedom to
manage, to make decisions within the framework of our unique skills training, and to
keep our professional responsibilities.)

4 Align Now that the foundation is in place, the parties the parties work on the terms of the
expectations deal (for example, responsibilities, compensation, metrics).
and interest
5 Stay aligned The parties go beyond crafting the terms of the agreement and established
governance mechanisms that are formally embedded in the contract. For example,
the parties might name a team to monitor the health of the relationship and another
team to work out schedules and deadlines.
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