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Abstract and Figures

Strategic management has become an integral tool in the organization of government actions, although a majority of strategic management research focuses on private enterprises. Within the public sector, politics plays an important role in decision-making and the realization of goals, which foregrounds political struggle and bargaining. Many developments in strategic management can be viewed from the perspectives of strategic design, internal strategic scanning, and strategic governance, which emphasize both system strategies adopted by governments in making choices and strategic choices within public agencies. These strategy modes imply different approaches to evaluation, goal-setting, and use of capital.
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19. Strategic management: public sector view
Jan-Erik Johanson
Analogies are powerful tools to orient attention to the relevant features of the research subject.
Vision and eyesight is a functional analogy to the examination of strategic management in
the public sector. The ability to see is one of the human faculties and one of its aspects is the
possibility to perceive colors. There is a discussion in evolutionary biology as to the reasons
for human and other vertebrae to detect colors. The variety of color vision found today in
most primates, including humans, describes vision based on three classes of photoreceptors
(trichromacy) which, in practice, signifies the ability to differentiate between reds, greens and
blues. Dichromatic vision relies on data from only two classes of receptors, which still allows
for some color discrimination. This deficiency is commonly called color blindness. In the most
common form of dichromacy in humans and other animals, individuals cannot differentiate
between reds and greens. Color vision provides organisms with important sensory information
about their environment. For instance, the ability to distinguish colors allows organisms to
avoid predators as well as to recognize food and mates (Gerl & Morris, 2008).
However, color blindness has selective advantages. It enables better detection of
color-camouflaged objects and it may improve perception in lower light conditions (Yokoyama
& Takenaka, 2005). There are also compromises in sensing colors. While the evolutionary
shift to color vision undoubtedly gave animals advantages, it also meant that there were
tradeoffs. For instance, when primates increased their ability to distinguish red and green, they
reduced their reliance on chemical signals which in humans has degraded the sense of smell.
On the other hand, it is assumed that among some sea animals the increased weight related
to superior vision had to give way for buoyancy and ability to escape from predators (Gerl &
Morris, 2008).
What has the visual impairment has to do with the theories of strategic management?
Strategic management is a tool to see future conditions with the knowledge of the present.
Strategic management is also a human condition which enables us to formulate and anticipate
change on the grandest scale, but it might not be most pertinent for following minute details
or day-to-day operations of the organizations. It also serves to illustrate that there are tradeoffs
as concentrating on one aspect of strategic management may involve handicap in another.
Strategic management refers to many aspects in organizing future circumstances and conse-
quently some of the actions according to one line of strategic thought may contradict another
way of strategy formation. Further, strategic management is not only a viewpoint for guiding
business operations as it originated from the organization of warfare (Strachan, 2005) and it
is embedded in political thought in maneuvering among conflicting interests (Hood, 2011;
Weaver, 1986).
The chapter is structured in the following way. First, the framework for studying strategic
management gives an idea of the possible focus of strategic thinking and action in both the
political nexus of the government as well in the operation of public agencies. The examination
takes place at both systems as well as organization-level analysis. Second, the main features of
the three identified strands of strategic thought—strategic design, internal strategic scanning
Figure 19.1 Public strategy formation
Strategic management: public sector view 235
and strategic governance—are elaborated in the public sector context in light of the empirical
findings with these respective areas. The concluding discussion provides further avenues in
thinking of goal-oriented action in government circles.
Three themes in the literature on strategy can be applied to the public sector on macro and
micro levels of analysis (Johanson, 2009, 2018). These themes or strategy modes are strategic
design, internal strategic scanning and strategic governance (Figure 19.1).
Strategic design. The fundamental assumption of strategic design is that organizations can face
future circumstances with their current understanding. While it is obvious that strategy, by its
very nature, incorporates planning, the strategic design mode relies heavily on predetermina-
tion: The future can be programmed in advance (Mintzberg, 1994). The use of strategic design
begins with analyzing threats and opportunities in the environment. The anticipation of future
events and the subsequent programming of actions is, in its essence, a very practical task that
does not differ for different types of organizations. In the public sector, strategic management
is often equated with planning (Bryson et al., 2010; Poister, 2010). Strategic planning has its
roots in a spatial examination of the physical environment, but, most importantly, it offers
a goal-oriented perspective on both macro and micro developments within the government
(Archibugi, 2008). For example, macroeconomic planning deals with the maintenance and
development of markets. On the micro level, strategic design creates a predefined strategy
which can incorporate alternative goals and a number of theoretical approaches. From a polit-
Government Organization strategy:
Public agencies
the economy Balancing between
Dealing with
and rivalry
design cycle
systems Planning for
Internal strategic
role for
public administration
public good
Defining the nature
Relating with others [
236 Handbook of theories of public administration and management
ical point of view, strategy has to do with securing re-election (König & Wenzelburger, 2014)
as well as seeking credit and delegating blame (Hood, 2011; Weaver, 1986).
Internal strategic scanning. A government or an organization succeeds because of its unique
combination of resources. In a government, administrative reforms are the embodiment of
experimentation with new combinations of resources. On the micro level, public agencies need
to pay attention to their particular compilation of valuable resources to fulfill their mandates
and create value for society—and, indeed, to survive. Identifying an organization’s internal
strengths is one part of this. Strategic scanning looks at internal strengths and weaknesses
rather than outside opportunities and threats, which are the focus of strategic design. The
inimitability of resources and capabilities gives a business organization an advantage over its
rivals (Barney et al., 2011). Within the government sphere, the lack of market competition
puts forward the need for gathering resources for survival and retaining relevance in the policy
process as suggested by the politics of bureaucracy view (see Jones, 2017; Peters, 2010).
Strategic governance. The third mode of strategy formation, strategic governance, is
emerging from, on the one hand, the increased interdependence of the world at the global as
well as national and local levels (Kersbergen, & van Waarden, 2004) and on the other hand,
the developments in sharing knowledge and duties across the borders of organizations (Dyer
& Sing, 1998). The strategic governance framework considers both internal strengths and
environmental opportunities. Nowhere is the arm’s length control of government clearer than
in the expansion of government regulation (Gilardi et al., 2006) and in the emergence of new
forms of self-regulation and co-regulation (Steurer, 2013). These regulations comprise a large
part of governance at the macro level of government. From a micro point of view, networks
play an important role in connecting different levels of the government and of organizations
in various network management structures (Simmel, 1950). The networks are part of the inter-
play among public agencies within government circles (Moore, 2013; Provan & Kenis, 2008).
Building a network involves challenges in government. To mutually benefit from sharing
duties, networkers must relax control over their own actions, which can be difficult due to
business secrecy, democratic control or fear of the loss of resources.
The three modes of strategic management orient themselves not only to different aspects of
governing, but they attune the subject matter differently. The strategic design sees program-
ming of actions as key strategic action; strategic governance puts emphasis on relating with
others in the external environment and internal strategic scanning highlights the possibilities
in guiding internal operations of the system.
The level of analysis issue is important in the study of government. In a fundamental tone,
there are multiple levels for choices in a society (Kiser & Ostrom, 1982). Hill and Hupe (2006)
translate choice options in society into the policymaking arena. Constitutional and collective
choices may take place in different loci, which define the scale of action in particular situa-
tions. Constitutional choices appear in the design of political and administrative institutions
or intergovernmental relations on the system level. Such choices are fundamental to the gov-
ernment in a sense that they define rules for making other rules. Governmental policymaking
and the rules for implementing policies are system-level collective choices. They are genuine
choices between alternatives, but the choices are conditioned upon constitutional rules.
Constitutional governance takes place in an organizational setting in the design of rele-
vant contextual relations. For instance, mapping powerful and interested stakeholders could
be a relevant activity here. Here again, there are general choices, but they are conditioned
upon the system-level decisions. At the organizational level, collective choices maintain the
Strategic management: public sector view 237
designed external relational structures. These two aspects allow for a meaningful separation
between system-level strategy in governments and organization strategy within public agen-
cies. The following examination deals with both of these levels in the aspects of system-level
macro strategies in areas of policy planning and evaluation, administrative reform and policy
management. The equivalent organization-level micro strategies appear in areas of strategic
planning, organization change and network management within public agencies.
Not all science has evolved out of philosophical considerations into scientific disciplines.
Instead, many areas of scientific endeavor have evolved through the collection of rules of
thumb and the development of these rules into a collection of directives. This describes the
development of many applied sciences and design sciences. The professionalization of the
practice of everyday experience is present in the application of medicine, engineering and
farming, to name a few examples. The mechanization of technological tools in these and
other areas of practice has increased the efficiency of the application of the tools. Design
sciences often include a normative aspect as they do not merely describe how things are; they
provide prescriptions for how things ought to be in order to attain goals (Niiniluoto, 1993;
Simon, 1996). Planning and its various forms showcase design science. Planning has evolved
out of practical tools used to design the future of our environment and actions. Plans can be
time-consuming to formulate and they might require a lot of work and effort and take a long
time to accomplish. However, planning is not only assessed based on its formal quality, truth-
fulness or accuracy. In the end, the value of planning lies in its usefulness to the users.
Despite the practical origin of planning, changing government structures is hardly a neutral
exercise in achieving goals in the most efficient fashion possible. Here, political strategy
inspired by political science puts forward a much less rational model of goal-setting. A strate-
gic political action is a method for achieving electoral success while implementing policies that
are not always popular. In essence, strategic political action seeks to influence the popularity
of a policy and the attribution of responsibility for that policy (König & Wenzelburger, 2014).
At times, it might be a good strategy to limit one’s political agenda in order to avoid dealing
with blame generating alternatives, or to neutralize an issue by redefining it. A number of
imaginative catchphrases capture the different ways politicians manipulate public perception
of policies and responsibility for them such as: Throwing good money after bad (increasing
resources after losses to avoid suffering), Pass the buck (place responsibility for a decision on
someone else); Jump on the bandwagon (deflect blame by supporting a popular alternative)
(Weaver, 1986).
One reason interest in this kind of analysis has increased is the need to explain seemingly
risky policies, such as welfare cuts, for which the responsible politicians have not been
penalized. In an analysis of welfare retrenchment strategies, Pierson (1994) argues that
retrenchment is an exercise in blame avoidance rather than claiming credit, because the costs
of retrenchment are concentrated and often immediate, while the benefits are dispersed. This
means that it is primarily a strategy of blame avoidance rather than credit seeking. Hood
(2011) uses assumptions of negativity bias to argue that ‘potential losses are commonly
weighted more heavily than equivalent gains.’ This implies that blame avoidance can be more
important than credit seeking. For instance, by creating more autonomous public agencies,
238 Handbook of theories of public administration and management
the market-emulating reforms built fertile ground for politicians to avoid blame. In this way,
politicians can more easily insulate themselves from disasters and accidents and delegate
responsibility to others.
The prominence of planning in the literature on strategic management relates partly to the fact
that planning offers an encompassing view of society. First, planning appears in the macro
development of entire countries as well as within micro developments of individual firms,
public agencies and local communities. Second, as indicated by the micro–macro distinction,
planning can refer to action in economic circles, in government or in civil society. Third, the
most obvious effects of planning relate to the temporal aspect of social life. In other words,
planning is a means of achieving goals and objectives in the future. Fourth, planning efforts
do not need to be confined to the realm of national governments, as witnessed by the devel-
opmental planning efforts of the United Nations (UN), the World Bank and the International
Monetary Fund (IMF), or the rise of supra-national institutions such as the European Union
(EU). Traditionally, planning was viewed as its own area of activity, separate from the conse-
quences of strategic actions. In this view, the feedback loop between strategy outcomes and the
formulation of new strategies is not the main concern of strategic planning.
There is a useful typology of different areas of strategic planning in specific subject areas that
have succeeded in the past century through the use of managerial methods of public decision
and intervention: (1) physical planning; (2) macroeconomic planning; (3) socio-environmental
planning; (4) development planning; (5) operational system planning. The value of planning
is its ability to look forward to distant futures without concern for the practices of the past.
Although many planning developments begin as bottom-up, grassroots movements, it is
fruitful to coordinate these activities from the top down. Physical planning is an obvious
example. Within the confines of a country, it makes sense to coordinate urban planning and
regional planning. Macroeconomic planning deals with national governments’ allocation of
scarce public resources. The practical impetus for this field of study lies in the preparation
and recovery from the world wars, in the need to design economic structures without markets
in former socialist countries. Socio-environmental planning builds on the local grassroots
engagement of communities and groups in improving their own social conditions in a variety
of areas such as housing, employment conditions or the care of children and the elderly. These
actions have their macro counterpart in national health, social and education policies, among
other things. Developmental planning aims to improve conditions in the developing world,
often with the help of international organizations such as the UN, IMF or the World Bank. The
intellectual origin of operational planning lies in management science; the design of planning
programming and budgeting (PPB) systems developed by national governments signify such
developments (Archibugi, 2008).
Evaluation research has evolved, not as antithetical to the planning movement, but as a par-
allel development in the process of changing society’s ideas in focus areas. The neoliberal
focus was related to the market-emulating reforms in the 1980s. If governments should operate
like private enterprises, their performance and use of taxpayer monies should be evaluated in
terms of value for money. The current evaluation focus supposedly began at the beginning of
the new millennium. The fundamental idea of this movement is that policies should be based
Strategic management: public sector view 239
on what works and what does not, according to prior evidence (Vedung, 2010). Evaluation
is useful for strategic planning in two main respects. First, evaluation can provide valuable
information about a plan’s progress during the implementation phase. It can help organizations
reorient and reformulate strategies based on concrete empirical evidence gathered during the
strategy-formation process. Evaluation can also inform the initial phases of strategy formula-
tion by distinguishing possible futures from less likely ones based on the strategic goals. The
importance of measurement brings strategic management closer to performance management,
which is essentially setting goals and managing the achievement of those goals; the focus on
goals means that strategic management occurs at the level of operations (and not only plan-
ning) (Poister, 2003).
In strategic design mode, strategy is a model or a plan. It integrates goals into an integrated
whole. The strategy deploys resources in a unique and viable fashion. The strategy builds on
the organization’s abilities and accounts for anticipated changes in the organization’s envi-
ronment. The basic ingredients of a strategic plan are vision (where?), mission (why?), goals
(what?) and primary means (how?) (Quinn, 1980). Strategic planning is the formulation of
strategy. It defines what an organization is and why it does what it does. Strategic planning
does not simply extrapolate current trends into the distant future; it also requires the invention
of new practices and the development of measures to track progress.
Strategic design addresses the temporal aspect of achieving a public organization’s goals.
Many of the tools and procedures adopted by public agencies are used to anticipate future
circumstances based on present knowledge in the formal design cycle. This cycle moves
between planning and implementation and follows a predefined series of steps, from strategy
determination through strategic management to, finally, identifiable outcomes. It begins with
an analysis of the environment and of institutional and organizational features, which leads
to the formulation of a strategic plan and the content of the strategy. The cycle then moves to
the implementation stage with more operative programs and projects; employees’ individual
duties are defined here. After implementation, the organization assesses the outcomes in terms
of changes in capacity and performance (Wheelen et al., 2017).
Although agencies deal with policies more than with political struggles, analyzing bureau-
cracies from a purely technical point of view is a fallacy. Public agencies are born in political
struggles, which means that they are political compromises caught between pressures from
those in political power, the opposition and interest groups. These pressures tend to decrease
an agency’s efficiency. Furthermore, because of these struggles, politicians and interest groups
routinely and deliberately create bureaucracies that are structurally ill-suited for effective
action. In addition, bureaucracies are established to protect certain functions or actions from
the political agenda in order to make it difficult for political opponents to influence policies
when they gain power (Moe, 1989). At worst, strategic planning reduces to ritual, something
which serves to meet the demands of others, typically superior government units or funding
bodies (Bunning, 1992). In the analysis of national park management in the UK and the US,
Llewellyn and Tapping (2003) found that strategic plans were initially ‘dormant documents’
which had little use for the organization although their completion required a considerable
amount of time and expert involvement (20 years in some cases). Interestingly enough, as
240 Handbook of theories of public administration and management
park funding was curbed, the role of strategies changed into a management tool to prioritize
projects and to attract new additional funding from stakeholder groups
The role of the manager is weaker in the public sector than in the private sector. Politics play
a bigger role in guiding choices in the public sector and many choices are predefined. The tra-
ditions of organizational culture also have more influence in the public sector. However, these
two realms of action do not differ much in the amount of planning or the speed of changes
(Scholes & Johnson, 2001). Due to the controversial nature of many public policies, the
actual planning tends to concentrate on the use of resources instead of on strategic goals and
these controversies can easily lead to political bargaining. The influence of politics in public
agencies is not so much connected to the political struggle between parties, but to the nature
of political institutions. From an institutional point of view, the existence of prior legislation
is an impediment to any drastic governmental change. In this way, most government actions
and spending have already been stipulated by prior legislatures (see Greener, 2005). Another
aspect of strategy in government circles is the electoral cycle, which prevents the formulation
of long-term strategic commitments. Further, the one-year budget cycle shortens the time
horizon to the most immediate issues and actions (Di Francesco & Alford, 2016).
In their review of strategic management research in the public sector, Poister (2010) points
out that, until recently, there has been little effort to synthesize efforts in the use of strategic
management tools in the public sector. He argues that policy areas and the nature of constitu-
ency groups play a significant role in determining engagement in strategic planning. Political
decision makers sometimes compel organizations to formulate strategic plans. On the other
hand (Bryson et al., 2010), public agencies might lack the authority to make decisions or the
operative space to manage their organizations strategically. It seems that an organization’s
size is a factor that affects strategy as well, as larger organizations are more likely to engage
in formal planning procedures. Available resources are an important determinant of strategic
management exercises (Boyne et al., 2004), but a lack of resources has also been found to
encourage the formulation of a plan (Berry & Wechsler, 1995). Studies comparing top-down
strategies to bottom-up ones have produced complementary findings. The bottom-up approach
tends to increase consensus regarding goals but complicates implementation (Kissler et al.,
1998; Hendrick, 2003; Wheeland, 1993).
Market competition does not hinder interagency cooperation, but successful agencies are
able to generate information and provide advice about the policymaking process. Agencies that
can generate information are able to control the flow of information flow through the policy
process. Interestingly enough, a focus on internal administration is not the main factor affect-
ing an agency’s success. This is because agencies tend to be evaluated based on the success
of their policies, not the success of their internal operations (see Ellison, 2006). Interestingly
enough, as the number of strategic targets increases, performance tends to decrease (Boyne
& Gould-Williams, 2003). This finding suggests that, while clear goals are an important part
of strategy, simple strategic goals are valuable in their own right. In an analysis of austerity
measures in Italy, Cepicu et al. (2018) found out that economic crises do not increase the focus
on performance-based criteria in strategic planning or in budgetary processes in Italy. The
quality of strategic planning appears in another fashion as a more responsible behavior. When
the quality of planning has been good, strategic management has led to tax increases to cover
debts and to directly addressing the most pressing social and economic issues.
Empirical assessments of the performance outcomes of strategic planning in public organi-
zations are rare; most originate in analyses of English and Welsh local authorities. According
Strategic management: public sector view 241
to these findings, the prospector strategy is most likely to lead to high performance. A research
project at the Cardiff Business School analyzed local government strategies using the Miles
and Snow strategy typology (Miles et al., 1978). This typology includes three main strategies
(defender, prospector and analyzer) that enable organizations to survive in their environments.
The model also adds the non-strategy of failure (reactor), which consists of inconsistent com-
binations of strategy, technology and processes. Defenders seek to find a stable spot in the
market, which they then try to protect against rivals. Prospectors try to adapt to dynamic envi-
ronments by finding new opportunities and exploiting innovations. Analyzers fall between the
two other strategies and try to balance stability with seeking new opportunities. According to
a number of empirical studies (mainly in the UK and the US), a prospecting strategy improves
performance and usually produces better results than defender or reactor strategies (Boyne
& Walker, 2010). However, there is some evidence that the defender strategy leads to high
performance (Andrews et al., 2009). The analyzer strategy is rarely included in these studies.
The simple storyline of the development of public administration describes a movement from
the old form of public administration – with its red tape, hierarchical control and sometimes
overly legalistic rules and procedures – into a streamlined, business-like, market-oriented form
of public management in the 1980s. Recently, some voices have supported a shift to a new
form of public governance defined by voluntary networks, cooperation and the co-production
of public services (Kisner &Vigoda-Gadot, 2017). In assigning these broad labels, it is not
easy to determine whether they refer to specific reform, actual forms of public administration,
or theoretically driven models of the current state of current affairs. It is possible that some
reform models actually contain all of these elements, while others do not possess any of them.
In terms of strategic management and specifically the internal strategic scanning mode, the
important feature of administrative reforms is that they focus on changing the government as
a whole and offer guidelines for how to implement this change.
The analysis of New Public Management (NPM) reforms has dominated the academic scene
since the 1980s. The reasons for the NPM reform doctrine, along with descriptions of it
and its outcomes and efforts to make governments more business-like, market-oriented and
client-friendly have been thoroughly covered in discussions about the role of public adminis-
tration (Hood, 1991). It is very easy to see public management reforms partly as a consequence
of problems and a failure of planning. Centralized control and comprehensive planning were
not able to remove society’s problems. A sometimes-naive belief in progress and the scientific
method that dominated society during the period of steady economic growth following World
War II turned into distrust of the government during the economic instability of the 1970s.
The fact that NPM has become more or less the catchword for any administrative reform effort
has to do, at least partially, with developments in the political sphere. In the 1980s, the role of
public administration became, for the first time, a political question and administrative reform
became a topic of political struggle (see Pollitt & Bouckaert, 2017).
242 Handbook of theories of public administration and management
In the area of strategic management, public sector reform offers a showcase for the govern-
ment’s self-referential action. The primary focus of public sector reform is the reorganization
of governmental ranks, particularly within the executive branch. Administrative reform has
evolved into a business of improving, streamlining and reinventing public administrations
to a degree never seen before. In an influential examination of public management reforms
in Organisation for Economic Co-operation and Development (OECD) countries, Pollitt and
Bouckaert (2017) offer a descriptive model of administrative reforms. In this model, politi-
cians and senior civil servants channel the influence of politics and socio-economic forces in
the decision-making arena. Elite decision-making defines the feasibility and desirability of
a given reform agenda, but the agenda is vulnerable to events such as scandals and disasters.
Despite sometimes ambitious efforts, public administrations tend to change slowly.
In his examination of US government reforms after World War II, Light (1997, 2006) pro-
poses four different approaches to reform. In the first, scientific management, people trust the
government, which takes a centralized approach to implementation. This approach is defined
by strict rules, clear guidelines and procedures and close oversight by central agencies. The
second approach, the war on waste, involves audits, inspections and centralized oversight by
quasi-independent bodies. This centralized implementation approach is also characterized by
a lack of trust in the government. The third approach, the watchful eye, sees freedom of infor-
mation and openness of procedures as a way to improve the government’s functioning. This
approach is decentralized and also includes a lack of trust in the government. E-media, interest
groups and citizens use their voices and actions to prevent governmental mischief. The fourth
approach, liberation management, is characterized by trust in the government. This approach
is decentralized and seeks to empower employees by avoiding oppressive rules and to achieve
innovation through commitment and group effort.
Research on public administration has identified several strategies for administrative
reform that include both the goals of and means to implement strategic action. New Public
Administration (NPA), New Public Service (NPS), New Public Management (NPM), Public
Value Management (PVM) and New Public Governance (NPG) are some options for realizing
macro changes in government. Each of these approaches has its own vision of public good,
defined methods for achieving that vision, its own idea of the roles of the state and the gov-
ernment and definition of the role of the public administration (see Pyun & Gamassou, 2018,
pp. 255–8).
Within the analysis of internal operations of the organizations resource-based view offers
promising theoretical building ground for strategic management in public agencies and it
coincides well with the notion of political nature of bureaucracy in the politics of bureaucracy
discussion (see Jones, 2017). One of the basic tenets of the resource-based view is that the
resources are valuable, rare, inimitable and non-substitutable. If resources are valuable, rare
and hard to imitate, they provide the firm with a sustainable competitive advantage. The value
criterion of resources is not problematic in public organizations. Agencies can use valuable
resources to produce superior performance due to the nature of the resources (see Peteraf,
1993). The other criteria assume the existence of some type of competitive situation in which
organizations seek a sustainable competitive advantage; this does not apply to government
Strategic management: public sector view 243
entities. In other words, the dominant focus on rent extraction does not apply to a discussion of
public agencies (Vining, 2016). Quite the contrary, for public agencies, increasing dependence
on other organizations might reduce autonomy, but sharing resources with other organizations
might increase the agency’s legitimacy in the eyes of its political masters, resulting in broader
actual autonomy over the long run (Verhoest, 2018). A very interesting finding of public
missionary organizations in promotion of peace and human rights suggests that such strongly
ideational organizations are able to survive better if they can insulate them from other agen-
cies. However, those few surviving agencies that are embedded with others are more likely to
influence national policy than insulated ones (Drezner, 2000).
Since many resources of public agencies, such as expertise or administrative procedures,
are not mobile or easily transferable from one agency to another, it is quite likely that these
agencies control unique resources which cannot be easily acquired or developed by other
agencies. In other words, immobility of resources might be one factor explaining performance
differences among public organizations even in the absence of interagency rivalry. Klein et
al. (2010) offer valuable insights for the importance of resources in the public setting. Public
organizations are stocks of resources. They employ routines and capabilities and acquire
excess capacity by deploying these resources. Public entities control important resources
such as infrastructure, military information and knowledge systems, as well as organizational
assets such as bureaucratic cultures. Public organizations produce public outputs but use both
public and private inputs. Another aspect is the nature of value generation. Private firms aim
to capture value (profit), but most often they first need to create at least some part of the value
that can be captured. Public agencies create value for wider public interests, but they also need
to capture some value for their own goals, which may include survival, conflict resolution or
tax revenue. In other words, private firms aim to appropriately create value, whereas public
agencies try to create appropriable value (Klein et al., 2010).
The politics of bureaucracy discussion puts forward a view of the political nature of public
administration in which the executive side of government has considerable influence on the
government decisions. The actual decisions are based on bargaining and negotiations which
most often result in unintended decisions. The politics of bureaucracy view highlight the roles
and positions of actors in influencing decision-making (Jones, 2017). In this line of thought
there is also competition over resources and power struggle in getting one’s own goals repre-
sented in the decision-making agenda (Peters, 2010). The most important resources of public
agencies are tied to the knowledge and capabilities of administrators: their expertise, ability to
generate information and advice and possession of a dominant profession (see Ellison, 2006).
An agency can clarify its mission by encouraging administrators to specialize. The agency
can also strengthen its position if it masters complex technical duties that cannot be easily
contested by the political masters or the general public. The technical language of engineers,
lawyers and medical doctors illustrates this point. The possession of a dominant profession
describes an agency that employs members of a single profession. The position of an agency is
further advanced if the professionals within the agency belong to a group that performs highly
valued duties in society.
Resource-based ideas have attracted empirical attention in studies of knowledge and
dynamic capabilities which have been extensively documented in recent review articles (see
Pee & Kankanhalli, 2016; Piening, 2013). The perspective on knowledge sheds new light on
the nature of public agencies. From this viewpoint, their limited operational decision-making
power is not the main problem with public agencies’ strictly defined mandates. The problem
244 Handbook of theories of public administration and management
is an overreliance on explicit knowledge, as seen in standard operating procedures, manuals
and codes of conduct (Janhonen & Johanson, 2011). This can mean that agencies have too
few opportunities to combine the sedimented structures of tacit knowledge with fluid forms
of explicit knowledge. One of the key lessons is the importance of creating knowledge, dis-
seminating it and using it for productive purposes. The ideal goal is most often a horizontally
and vertically integrated ICT system connecting all walks of administrative life, from local
to central government (Layne & Lee, 2001). Another recurring theme in this research is that
abundant resources are important if dynamic capabilities are to be developed and reconfig-
ured. It also seems that dissatisfaction with the status quo is a significant trigger for capability
Governance offers a broad perspective on the functioning of society. What is seen as unifying
features behind the viewpoints is the pluricentric rather than unicentric view of the number
of parties involved. In other words, it is assumed that governance takes place between many
rather than few actors. Networks play an important role in the study of governance signifying
not only the multitude of actors, but also the different types of actors such as public and private
organizations, as well as civic engagement. There is also an emphasis on the processes of gov-
erning rather than on structures of government. To put it otherwise, processes of governance
highlight soft coordination mechanisms, such as negotiation, alliance formation and cooper-
ation, in contrast to hard methods of command and control. The relationships between actors
are assumed to contain risk and the discussion of governance has taken into account the insti-
tutional arrangements to reduce and handle such risks (Kersbergen & van Waarden, 2004).
In a networked environment, there are two ways to guide interactions: (1) guidance of the
network structuring processes and (2) direct guidance of the networks. In a sense, this differ-
ence is the distinction between micro interactions within organizations and macro interactions
within governments. In the discussion on governance, there is a clear division between these
two aspects. The designing of institutions and policy management define macro governance
and network creation and maintenance are the tasks of public agencies.
There is an emerging idea that regulation, in its multiple forms, actually covers most aspects
of governance (Jordana & Levi-Faur, 2004; Levi-Faur, 2013). It is too narrow to define
regulation as government control of economic interactions and it is even more restrictive to
see regulation only as the activity of overseeing the functioning of utilities such as energy or
water. Regulation includes the self-regulation of industries or community groups and it takes
place not only through legal rules, but also through less formal but equally binding norms.
Governments can influence other areas of society not only through the hard method of laws,
but also through soft methods such as economic incentives and knowledge dissemination. Put
another way, the law represents the stick, incentives the carrot and information the sermon in
government regulations (Bemelmans-Videc et al., 2017).
Strategic management: public sector view 245
In the era of governance, civil society has taken a more active regulatory role. A mixture of
formal standards and informal pressure extends government influence. Setting standards for
environmentally-friendly forestry practices, creating an index for governmental corruption
and selling certificates to sustainable tuna fisheries are examples of regulations exercised
by institutions of civil society. In business, self-regulation may be done collectively through
industry standards, such as the adoption of corporate governance standards or the implementa-
tion of corporate social responsibility policies in individual firms (Steurer, 2013). Private firms
may also oversee the functioning of governments, such as when private firms audit public
sector accounts (Vakkuri et al., 2006). Co-regulation and co-management practices blur many
existing borders by forming identifiable types of hybrid arrangements between government,
economy and civil society (Johanson & Vakkuri, 2017; Vakkuri & Johanson, 2020).
Regulations may include a specific set of rules, a deliberate state influence, or any form of
social or economic influence. Regulation is not always restrictive; it can also enable actions.
Although regulation is mainly directed to economy and civil society, there has recently been
an increase in certain types of regulations, such as formal auditing procedures and financial
control of appropriations in the public sector. Regulative strategies include command and
control, incentive-based regimes, market-harnessing controls, disclosure regulations, direct
action and design solutions, rights and liabilities, public compensation and social insurance
schemes (Baldwin et al., 2012).
The examination of management of networks deals with operation of organizations, in which
the public agencies offer an empirical illustration. Although there is a discussion of collabo-
rative management in the public sector, little work has been done on the strategic aspects of
collaboration (Bryson et al., 2010). Within the public administration literature, there are three
clusters of relational perspectives focused on (1) policy formation, (2) governance and (3)
policy implementation with overlaps between the first and second as well as the second and
third clusters. It seems that network-analytic studies of public administration concentrate on
questions of policy implementation (Lecy et al., 2014). The strategic task of the public manager
is to use imagination when combining the tasks of an agency, authorizing environment and
operational capabilities. Although the role of public managers is to find new opportunities
to achieve strategic goals by using their cunning in an imaginative value search, fairness
and accountability are what legitimize them. Legitimacy does not stem only from political
approval; it includes harnessing stakeholder support from service users and local communities.
Furthermore, the probity of public officials is not limited to the confines of a public agency or
the users of its services but extends to those who provide services to the agency. Approval does
not result from keeping a suitable distance from politics; it is a result of constant and repeated
actions of integrity before multiple audiences (Moore, 2013).
The analysis of tasks of public agencies illuminates what type of network constellations
would contribute to the efficiency of the agency within network structures. The fundamental
transformation in sociability emerges in moving from the examination of dyads, that is, groups
of two, to the examination of triads. The triad is composed of three elements that connect
to one another forming a group. For public administration, the efficiency of initiating and
governing such groups becomes a virtue. There are three roles in triads: Non-partisan, Tertius
246 Handbook of theories of public administration and management
gaudens (the third who benefits) and Divide et Impera (divide-and-rule). One non-partisan role
is the mediator, who remains as a neutral outsider to decision-making. In the tertius gaudens,
the third party uses the social structure for his or her own egotistic purposes. Competition is the
key to understanding the benefits of the situation. In such a case, it makes sense to keep your
contacts apart to gain control and informational advantages (Burt, 1992). The distinguishing
nuance of the divide-and-rule position is embodied in the fact that the third element tries to
gain a position to dominate the others (Simmel, 1950, pp. 150–63). This examination of triads
suggests that the network role of public agencies is not constant, but that it depends upon the
administrative duties (Johanson, 2009) of the agency at hand. The public agency can be (1)
a benevolent mediator in the non-partisan role, (2) a business partner in the tertius gaudens
role and (3) an antitrust agent in divide et impera role. Client group support is a relevant aspect
of triadic interaction of the non-partisan type. Empirical evidence in US state agencies shows
that in agencies where top administrators perceive a strong influence from clients, budgets
are greater (Ryu et al., 2008). In contrast, in competitive environments, public agencies are
business partners to their clients and providers. Here, a lack of connections between outside
partners enables the agency to gain benefits in the marketplace. In an antitrust agent role
in regulating and controlling external parties such as industries, the agency wishes to have
an all-powerful position in discouraging coalition formation among network partners. This
hinders the possibilities of, for instance, regulatory capture, which is an outcome of sectional
interests influencing the working of the government (Bó, 2006).
The empirical studies of networks put forward fruitful network constellations not unlike the
theoretical models in acquiring control, benefiting from the social intercourse and mediating
the action of others. In the analysis of the effectiveness of public agency networks, the exam-
ination of total networks draws attention to the overall configuration of the network structure
rather than the aspects of its individual members. Shared network governance allows members
equal representation in the overall guidance of the network. If one member of the network
dominates the others, one can speak of a lead organization-based network and if the network
contains a separate coordinating actor, this is a network administrative organization. In their
analysis of governance of public networks, Provan and Kenis (2008) argue that shared network
governance works best in small high-trust consensual networks that do not require a high level
of network-level competencies. The lead organization-based governance on the other hand
performs best in medium-sized networks under conditions of relatively low trust and level of
consensus as well as a moderate need for network-level competencies. The network admin-
istrative organization (or the coordinated network) appears to function best in conditions of
relatively high levels of trust, a moderate number of participants and when the goal consensus
and the need for network-level competencies are high.
All of the basic orientations of the third party appear in agency context. Agencies can
behave as non-partisan intermediaries between politics and the environment, self-interest
seeking profit maximizers or harsh rulers aiming at domination of network partners. The
role of an agency with its partners depends on the duties it performs and also on the flow of
financial transfers, as well as on the nature of recipients of such transfers. In other words, there
is not one definite network role for a public agency, but role-based orientations for different
types of agencies.
Strategic management: public sector view 247
The description of color blindness at the beginning of the chapter draws attention to the defi-
ciencies and advantages of visual impairment. In one way or the other, strategic management
is geared toward change in programming action, combining resources and managing contacts
with external stakeholders and constituencies. The tradeoff in adapting the strategy approach
might be that one becomes estranged from the everyday duties in the operation of the gov-
ernment. The discussion pointed out two types of choices in society, constitutive ones which
define the framework for action and collective choices which function within the selected
framework. In this way, many of the system-level developments in the government can easily
be viewed from the strategy perspective. It is not evident that all strategic views represented
here are attuned to changing the system of governing in any fundamental way. Within gov-
ernment there is a double bind in not allowing great alteration of the operations. In the system
level checks and balances between institutions and stricter demands for the modification of
constitutions works against radical changes and legal restrictions put similar obstacles for
organization of public agencies.
To continue with the metaphor of vision and eyesight, it has been suggested that color is not
an inherent property of an object but a property of the visual system of the organism that per-
ceives it (Endler, 1978). The discussion clearly shows that strategic management is not only
business for private enterprises, but strategy is very much a business of government. However,
the way in which strategy is seen in the study of business enterprises is quite different in the
realm of politics. In the government decision-making strategy puts forward a struggle for
power as well as maneuvering between credit seeking and blame avoidance. There is no reason
to belittle the energy and struggle involved in formation of business strategies, but the way
in which they are framed as a neutral exercise in meeting goals for gaining market share or
entering quickly expanding markets tends to hide potential and actually occurring conflicts.
One implication of this is that in government circles strategic management does not appear
as an impartial tool to improve the quality of government, but also a tool for acquiring and
maintaining power.
Although some of the basic assumptions of strategic management differ between govern-
ment and business, there are many lessons learned from the private sector practice. One key
insight within strategic planning in the private enterprises is that the significance of planning
is difficult to show. One of the key topics in this field is the interaction between strategic
planning and performance, but the results of this analysis remain inconclusive (Wolf & Floyd,
2017). The lack of studies in the public sector does not enable us to assess the benefits of
strategic planning in any detailed fashion, but it is fair to assume such assessment is likely to
be at least equally difficult in the public sphere.
The separation into three strategy modes offers thought for further contemplation (see
Johanson, 2018). Here it suffices to point out their main obstacles of their adoption and their
connections to the types of capital. In strategic design mode the planning necessitates some
form of continuity. Constant, drastic or sudden changes can render the best of plans futile
exercises in putting forward imagined futures. However, some evidence from business enter-
prises suggest that extremely complex and unstable environments encourage the adoption
of more comprehensive long-range planning processes (Wolf & Floyd, 2017). This finding
is extremely interesting as it does not rule out strategic planning in turbulent environments.
Failure to define a well-functioning resource combination is the most obvious obstacle for the
248 Handbook of theories of public administration and management
successful internal scanning strategy. The problem is made even worse as the required capa-
bilities tend to change. However, problems with the division of labor also take place among
and between professionals in their inability or reluctance to mix fruitful expertise to fulfill the
most important goals of the organization. In external interactions, the role of the partners in
interaction can be misinterpreted, the efforts to reach agreement may consume a multitude of
resources and powerful external stakeholders may overwhelm public authority.
It is possible that these strategy modes follow temporal orientation in the appreciation of
capital from financial and human capital to the valuation of social capital in modern societies.
In the building of infrastructure and physical facilities the financial capital enables investment
in machinery to make concrete artifacts and to modify physical environment which is at the
focus of strategic design mode. In internal strategic scanning the rise of a knowledge-based
economy has increased the production of virtual products and services which have raised the
relevance of human capital in terms of knowledge, skills and capabilities embodied by the
minds and actions of the employees. Further, strategic governance points to social capital in
an interconnected society which promotes the value of network relationships over financial
possessions or knowledge-based assets.
The aim of this chapter has been to improve our vision of strategic management in govern-
ment. The application of the three strategy modes has enabled strategic management not as
different shades of grey, but rather as different coloring schemes in which the perceiver has an
important influence. In practice, all of these aspects are important features of governing. There
is a need for planning for the future, experimentation with the resource combination as well
as establishing and maintaining connections with the environment. Successful amalgamation
of these features gives us a promise that strategic management is a form of art able to depict
government in its true splendor.
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