CHAPTER SIX
ORGANIZATIONAL GOALS, EFFECTIVENESS, AND PERFORMANCE

Organizations are goal-directed, purposive entities, and their effectiveness in pursuing goals influences the quality of our lives and even our ability to survive. All research and theory on management and organizations concerns, at least implicitly, how an organization and the people in it can perform well by pursuing goals. This chapter presents major issues about goals and addresses the challenges people in organizations face in linking goals to performance. The discussion then turns to diverse and conflicting performance criteria that all organizations must pursue, but especially public organizations. Then the chapter describes models that researchers have developed to assess the effectiveness of organizations and reviews an extensive body of literature on strategies and practices that managers use to achieve high levels of performance.

In recent decades elected officials and reformers in many nations have concentrated on improving government agencies' pursuit of goals. Governments around the world have invested heavily in reforms that require government agencies to state goals and performance measures. The Governmental Performance and Results Act (GPRA) in the United States in 1993 mandated that federal agencies publish strategic plans that include goals and performance measures; the legislation was renewed in 2010. Starting in the 1980s and continuing today, officials in the United Kingdom, New Zealand, and many other nations adopted reforms in a movement called New Public Management (NPM) (Barzelay, 2001; Kettl, 2002; Pollitt and Bouckaert, 2011). Many NPM reforms required government agencies to specify goals and performance measures and to monitor performance against them. These efforts became so prevalent that scholars coined terms such as “performance regime” to capture “the embedded nature of these practices in almost all aspects of contemporary governance” (Moynihan, 2008; Moynihan et al., 2011, p.141). Others referred to “performance frameworks.” These observations emphasized the importance not just of goal statements, but also of the provisions for managing and using goals and performance measures to evaluate, improve, and reward performance. More generally, aside from reform initiatives, prominent authors call for more effective goal-setting in government activities and organizations (e.g., Metzenbaum, 1998).

These themes about public organizations' goals coincide with research and discussion in general management and organizational analysis. Chapter 10 will describe Edwin Locke's and Gary Latham's (1990a) theory of goal-setting. A survey of researchers on organizational behavior found that the survey respondents considered this theory the most successful ever developed about organizational behaviors (Miner, 2005). Researchers found again and again that when given clear, challenging, but acceptable goals, individuals and groups perform tasks more productively than when they do not have such goals. Similarly, numerous non-academic sources emphatically stress the importance of goal-setting. Doerr's (2018) best selling book, Measure What Matters, extols the goal-setting system of specifying “Objectives and Key Results” that Doerr describes as having led to success at many corporations. A search on the web for “goal-setting” leads to many sources offering consultation and training in how to set “SMART” goals. SMART goals are specific, measurable, achievable, realistic, and timely. These and many other sources of ideas and advice about goal-setting apply to all organizations.

Advocates for goal-setting contend that organizations perform better if the people in them clarify goals and measure progress toward them. Advocates for goal-setting in government often link this assumption to the claim that government agencies need to perform a lot better. They can do so by becoming more like business firms, which the reformers assume to have clearer goals and performance measures. Many analysts of such reforms, however, agree that these initiatives have produced mixed results (e.g., Radin, 2006; Moynihan, 2008; Heinrich, 2012; Thompson, 2006). Many approaches to goal-setting, such as the Locke-Latham theory and the calls for SMART goals, apply to individual and group goals for specific tasks. Goals for complex organizations raise more challenges for goal-setters. Organizational sociologist W. Richard Scott (Scott and Davis, 2003, p. 183) declares that “the concept of organizational goals is among the most slippery and treacherous of all those employed by organizational analysts.” Nevertheless, organizational analysts have developed valuable insights about organizational goals.

General Organizational Goals

An organizational goal is a condition that members of an organization seek to attain. Organizations state goals in mission statements, strategic plans, and in other ways because goals serve valuable functions. Goals communicate an organization's purpose and encourage recognition of the organization's legitimacy. Organizational goals can express the organization's values and identify the clientele whom the organization claims to serve. Goals can motivate individuals to participate in an organization's activities (Goodsell, 2011) and serve as premises that guide decisions (Simon, 1945, p. 151–152).

Concepts related to organizational purpose, however, such as goals, motives, incentives, vision, objectives, values, “metrics” and key performance indicators (KPI's), overlap in various ways. Some organizations publish statements of key values and also state goals, objectives, and performance indicators, making it difficult to identify the organization's priorities among these statements of purpose. Goals and similar concepts of purpose exist in hierarchies and chains in which we pursue a goal not as an end in itself, but because it leads to a later goal or a higher-level goal. For example, people may pursue one goal (increased efficiency in responding to client requests for services) in pursuit of another goal (enhancing the well-being of clients). Organizations have multiple authorities and stakeholders who can influence goals and who often disagree about them.

For such reasons, organizations pursue multiple goals (Rainey and Jung, 2015). Nobel Laureate Herbert Simon (1973) pointed out years ago that a goal almost always represents one of a set of multiple goals. Decision makers have to deal with balancing among the various goals in a goal set. This balance can be particularly challenging in public organizations. For example, advocacy groups press leaders in prison systems to emphasize rehabilitation of prisoners; other groups call for firm control and punitive measures for prisoners (Hargrove and Glidewell, 1990). As this chapter is written, nationwide strife embroils the United States over police killings of African-Americans during arrests. African-American leaders and demonstrators demand that police officials do more to prevent such deaths, and want the police to protect and respect them during peaceful protests. At the same time, governmental and police leaders also face pressure to prevent looting and property damage by some of the people involved in the demonstrations. Prison wardens and police chiefs have to deal with these pressures that represent conflicting goals. Other common examples include conflicts among goals for short-term and long-term profits and service performance, community and public relations, employee and management development, and social responsibility (such as compliance with affirmative action and environmental protection laws).

In spite of these complications, in one of the most influential books in the history of organizational analysis, Chester Barnard (1938, p. 21) pointed out that any formal system of cooperation requires objectives, purposes, and aims. Goals provide a unifying element and a vital aspect of an organization (p. 21). The importance of goals has led organizational analysts to develop insights about the types of goals and functions of goals as well as the challenges involved with setting goals. Organizational mission statements have become ubiquitous in recent decades; one has difficulty finding a large organization that does not publish a mission statement. The statements typically list very general goals that organization theorists call official goals (Perrow, 1961). Official goals express formal goals that present an organization's major values and purposes. For example, the Veteran's Administration (VA), a US federal agency, states that its mission is “to fulfill President Lincoln's promise [and] to care for him who shall have borne the battle, and for his widow, and his orphan” – by serving and honoring the men and women who are America's veterans. The mission of the Animal Welfare Institute, a Washington, DC–based nonprofit, is “to alleviate the suffering of animals caused by people.” Obviously, these organizations communicate their general purpose by stating these official goals in mission statements to enhance legitimacy, increase motivation, and guide their decisions. Goodsell (2011) provides evidence that the missions of government organizations can enhance motivation and engagement in the organization when people feel that they are contributing to a valuable public mission.

Obviously, the official goals do not specify how the organization will achieve the ideal-sounding purposes. Operative goals provide more specific objectives that an organization seeks through actual operations and procedures. For example, the statutory role of New Zealand's State Services Commission (SSC) is to provide leadership and oversight of state services to government agencies. Part of the SSC's mission is “to unleash the service potential of New Zealand.” The agency's operative goals – how the agency plans to achieve its broad mission – can be found by searching deeper into the agency website, where one finds plans to eliminate the gender pay gap, among other efforts. The SSC example is typical of how agencies seek to link broad statements of purpose in mission statements to operative goals. Yet this example also underscores the challenge of clearly linking the more general goals to more specific operative goals. What priority should this goal receive in relation to other operative goals? What metrics will be used to measure agency progress in reducing the gap?

Goals of Public Organizations

While all organizations face the challenges of stating and analyzing organizational goals, prominent political scientists and economists have asserted that public organizations and public policies have distinctively multiple, vague, and conflicting goals.1 The list of authors expressing such observations includes major scholars from decades past (e.g., Allison, 1983; Dahl and Lindblom, 1953; Downs, 1967; Drucker, 1980; Lipsky, 1980; Lowi, 1979; Lynn, 1981; Wildavsky, 1979; Wilson, 1989) and more recently (e.g., Heinrich, 1999; Lewis, 2008; Moynihan, 2008, 142–45).

As discussed in the preceding chapters, in the US and other nations, characteristics of government systems influence the formulation of goals in public organizations to make them distinctive. Authorizing legislation often assigns vague missions to government agencies and provides vague guidance for public programs (Meier and Bothe, 2006; Seidman and Gilmour, 1986). The need for compromise leads to vague statutory language because more precise statements of goals can intensify disagreements among factions whose votes are needed to pass the legislation (Lowi, 1979). In sharp contrast to the recent reforms that emphasize goal-setting, major experts on public policy and governmental systems have advised that public officials need to avoid specifying agency goals and policy goals to avoid controversies over them (Lindblom, 1959; Wildavsky, 1988). Vague mandates provide agency personnel with the flexibility to define how to carry out the mandate; this can occur when elected officials and their staff members do not have the expert knowledge to do so. For example, in various nations, laws authorize their environmental protection agencies to control human and environmental exposures to hazardous substances. However, people in the legislative branch do not have the expert knowledge to identify and control such substances. As the subsequent discussion of goal clarity and ambiguity explains, the legislative branch often provides a very general mandate. The agency spells out the details in regulations. In addition, the formal rulemaking process entails hearing from stakeholder groups with varied and often competing interests (Chun and Rainey, 2006; Rainey and Jung, 2015). Consequently, agency managers feel pressured to balance conflicting, idealized goals.

Many observers assert that these goal complexities have major implications for public organizations and their management. Boyatzis (1982), in a study of the competencies of a broad sample of managers, found that public managers displayed weaker “goal and action” competencies – those concerned with formulating and emphasizing means and ends. He concluded that the difference must result from the absence in the public sector of clear goals and performance measures such as sales and profits (c.f. Buchanan, 1974, 1975). Blumenthal (1983), reflecting on his experiences as a top federal and business executive, began his account of the differences between these roles with an often-repeated observation that there is “no bottom line” (i.e., no profit information) to clarify performance measurement in government. Allison (1983) provided an account of the similar observations of experienced public officials about the absence of a bottom line and of accepted and readily measurable performance indicators in public agencies. Parhizagari and Gilbert (2004) identify statistically significant differences in the performance measures used in public and private organizations and in employees' ratings of organizational performance.

Others contend that public organizations' vague goals, coupled with external pressures for accountability, can lead to performance evaluation on the basis of adherence to proper procedure and compliance with rules (Barton, 1980; Dahl and Lindblom, 1953; Lynn, 1981; Meyer, 1979). The absence of clear, measurable, well-accepted performance criteria thus induces a vicious cycle of “inevitable bureaucracy” (Lynn, 1981), in which the demand for increased accountability increases the emphasis on rule adherence and hierarchical control. Similarly, in an important book about an unsuccessful organization change initiative in the US Department of State, Warwick (1975, p. 85; also quoted in Jung, 2018, p. 27) wrote:

Goal ambiguity and the absence of firm performance criteria favor the development of rules and fixed operating procedures … compliance with rules remains the most direct and reassuring sign of a job well done.

Defining and Measuring Goal Ambiguity and Goal Clarity

In spite of these repeated assertions that government organizations and public policies have particularly multiple, vague, and conflicting goals, there remains a need to clarify what such observations mean. There have been few efforts to define and measure the difference between a clear organizational goal and a more ambiguous one. In their research, the goal-setting theorists (Locke and Latham, 1990a) usually compare one group's performance against a specific goal to the performance of a second group that receives the instruction to “do your best.” This stream of research provides valuable insights, but does not show how to measure goals along a dimension of clarity or ambiguity.

How can we “measure” the clarity or ambiguity of an organizational goal? The Government Performance and Results Act (GPRA), described earlier, provided an opportunity to try. GPRA mandated that each federal agency publish a strategic plan that includes statements of performance goals and indicators, following a similar format for all the agencies. This raised the possibility of developing definitions and measures of the clarity or ambiguity of those goals and performance indicators, comparing the agencies on these measures, and analyzing other variables that might influence the levels of ambiguity. Chun and Rainey (2005a) undertook such an effort. They began with a general definition of organizational goal ambiguity: the extent to which an organizational goal allows leeway for interpretation. Feldman (1989, 5), in her analysis of decision making in government agencies, defined ambiguity as “the state of having many ways of thinking about the same circumstances or phenomena.” An organizational goal becomes more ambiguous when it is subject to differing interpretations (DiMaggio, 1987; Kelemen, 2000; Locke et al., 1989). Chun and Rainey noted that goal clarity or ambiguity can vary along at least three dimensions: directing organizational activities, evaluating organizational performance, and making decisions about organizational priorities.

Directive Goal Ambiguity. This refers to the amount of interpretive leeway available in translating an organization's mission or formal goals into directives for specific actions to accomplish the mission (Ginger, 1998; Lerner and Wanat, 1983; Lowi, 1979; Miller and Dess, 1993; Moore, 1995; Scott, 2003). The measure of directive goal ambiguity uses a “rules to law” (R/L) ratio developed by Kenneth Meier (1980) as a measure of the power of bureaucratic agencies. This measure is the ratio of the number of pages of administrative rules for an agency written in the Code of Federal Regulations to the number of pages of legislation that apply to the agency. When legislation provides vague, general mandates, agencies must clarify the meaning of the statute by issuing administrative rules. The fewer the pages of legislation and the greater the number of pages of rules clarifying the legislation, the higher the R/L ratio. This indicates that Congress gave the agency a broad, general directive that provided agency personnel more leeway to interpret the directive with rules and regulations.

Evaluative Goal Ambiguity. For performance evaluation, an organizational mission should be transformed into performance indicators (Lee, 2020). Organizations vary in the extent to which performance objectives can be precisely described and to which objective performance indicators are available. For some organizations performance targets can be expressed in an objective, measurable manner. In other organizations, performance targets are described in a subjective manner, and workload indicators are used rather than results or outcome indicators (Bohte and Meier, 2000).

For the measure of evaluative goal ambiguity, multiple raters coded the agency's goal statements presented in the agency's strategic plan as required by GPRA. The raters coded whether the goal statements were “objective” (e.g., archival performance data) as opposed to “subjective” (e.g., stakeholder perceptions) and “results-oriented” (e.g., number of railroad-related fatalities in the fiscal year) as opposed to “workload-oriented” (e.g., number of inspections conducted). Then the number of subjective and workload-oriented indicators was expressed as a percentage of the total number of performance indicators. The higher this percentage, the higher was the evaluative goal ambiguity.

This measure draws on an observation that analysts of organizations and decisions have often made. When we have clear evidence about the results of an activity, we use the evidence to evaluate performance. When we lack such evidence, we often turn to inputs and work activities to evaluate the activity. For example, a university president may refer to the high SAT scores of the incoming freshman class as an indicator of the university's quality, because providing clear indicators of the results of the university's educational processes is very difficult.

Priority Goal Ambiguity. This refers to ambiguity about priorities among multiple goals. The presence of multiple goals without any hierarchical arrangement and prioritization leaves much room for interpretation about which goals take precedence (Weiss and Piderit, 1999; Lee, Locke, and Latham, 1989). The measure of priority ambiguity, or the degree of imprecision in priorities among multiple goals and performance targets, counted (a) the number of long-term strategic goals and (b) the number of annual performance targets (Franklin, 1999; Weiss and Piderit, 1999).

Chun and Rainey (2005a) provided evidence of concurrent validation of these three concepts against other similar concepts and measures.2 In addition, agencies' ratings on these goal ambiguity measures provide face validity – they appear to be accurate measures. For example, agencies that scored highest on all three measures of goal ambiguity included research agencies such as the Agricultural Research Service. Regulatory agencies such as the Food and Drug Administration and the Environmental Protection Agency scored high on directive and evaluative goal ambiguity. Agencies with low scores on the three goal ambiguity measures – indicating higher goal clarity – include the US Mint, which makes and distributes coins, and the Bureau of the Census, which collects and disseminates census data. These agencies and many other examples show rankings on the goal ambiguity measures that make sense and suggest their face validity.

Analyzing Antecedents of Agency Goal Ambiguity

With the three measures of different types of goal ambiguity developed, the next step analyzes antecedents that should influence or relate to the level of organizational goal ambiguity. The term “antecedents” avoids the more assertive term “causes” because the causal directions and linkages are complex, and the antecedents may not serve as direct, immediate causes. This analysis examines the relationship of the following variables to the goal ambiguity measures:

Type of Policy Responsibility (Regulatory, Nonregulatory, or Hybrid). Many authors have observed that regulatory agencies have vague general mandates such as maintaining clean water and air supplies and stable economic markets (e.g., Meier and Bothe, 2007; Ripley and Franklin, 1986).

Complexity of the Policy Problem and Work Routineness. Some agencies handle more routine tasks and policy issues while others must carry out more non-routine, complex policies (Lee, Rainey, and Chun, 2010, p. 293).

Financial “Publicness.” Most government agencies attain their financial resources through budget allocations from legislative bodies. Some government organizations, such as government corporations and public authorities, attain financial resources from sales of products or services or user fees. The more of its financial resources the organization gets from governmental sources such as budget allocations, the higher the “financial publicness” of the organization (Bozeman, 1987).

Political Salience. External political entities can increase goal ambiguity in government agencies (Meier and Bothe, 2007; Wamsley and Zald, 1973). Political salience refers to “the level of attention that an external entity (or entities) with political authority or influence devotes to the agency” (Lee, Rainey, and Chun, 2009, 463).

Competing Demands from Constituencies. Different groups and authorities often exert multiple, conflicting influences that can make an agency's goals more ambiguous (e.g., Ring and Perry, 1985; Wilson, 1980).

Managerial Capacity. Government agencies vary in managerial capacity to clarify organizational goals through such activities as strategic planning and performance measurement (Lee, Rainey, and Chun, 2009; Perrin, 2006).

These antecedents show relations to the goal ambiguity measures. Directive goal ambiguity was positively related to financial publicness, to policy problem complexity, and to status as a regulatory agency. The more of the agency's financial resources that came from government allocations and the more complex its policy problems (as indicated by a higher proportion of professionals), the higher the R/L ratio, indicating higher directive goal ambiguity. Regulatory agencies had higher levels of directive goal ambiguity than other types of agencies.

Evaluative goal ambiguity was very strongly and positively related to financial publicness and to policy problem complexity. A higher proportion of government funding and more complex policy problems related positively to the agencies' stating goals in terms of workload measures (as opposed to results) and of subjective measures (as opposed to more “objective” measures). Status as a regulatory agency had a similar positive relationship to evaluative goal ambiguity. The more the president, the Congress, and major newspapers pay attention to an agency – political salience, the higher the evaluative goal ambiguity.

Priority goal ambiguity showed a different pattern of results. Competing demands of constituencies showed the strongest positive relationship to priority goal ambiguity of any relationship in this analysis. More competing demands from constituencies increases the number of goals and performance indicators. Contrary to the patterns for the other two types of goal ambiguity, however, regulatory agencies had significantly lower levels of priority goal ambiguity. This makes sense in that regulatory agencies often do not have a greater variety of goals than other types of agencies; they simply have goals – formal mandates – that are more vague. Financial publicness was significantly and positively related to priority goal ambiguity but not nearly as strongly as it related to the other two types of goal ambiguity. More public funding increases directive and evaluative ambiguity but does not expand an agency's goal set. Political salience relates to higher priority goal ambiguity, suggesting that attention from political actors expands the set of goals.

These results show that the measures of goal ambiguity related meaningfully to other variables in ways that political scientists and public administration scholars predict. More recent research has extended the analysis of goal ambiguity to federal programs, as distinguished from federal agencies. Jung (2014) used evidence from the Program Assessment and Rating Tool (PART) evaluations of hundreds of federal programs to show that higher goal ambiguity relates to lower work satisfaction, lower program performance scores, and higher levels of intent to turnover. During the first George W. Bush presidential administration, the PART was initiated as a process in which federal programs in agencies specified their goals and performance measures to be used in evaluating the programs. Jung used these goal statements to carry out analyses of the relations of these goals and the variables mentioned earlier. More recently, Jung (2014, 2018) developed research on goal ambiguity and clarity using similar but original concepts. He used data from the PART. Federal officials in the US Office of Management and Budget developed PART to assess the performance of hundreds of federal government programs. Program representatives responded to batteries of questions about how the program's goals were expressed and measured and about evidence of progress in achieving the goals. Experts debated PART's validity – whether it actually measured program performance accurately (Heinrich, 2012). Jung used PART information, however, for evidence about the clarity of the programs' goals, and the relation of goal clarity (or ambiguity) to other factors.

Jung developed a concept of “target ambiguity” based on whether the program provided clear targets for levels of improvement in pursuing program goals. “Timeline ambiguity” refers to whether the program provided timelines for when a level of improvement would be obtained. “Evaluation ambiguity” indicates the proportion of program goals that are expressed as objective results, as opposed to more subjective and workload evidence (such as levels of activity rather than results). Jung then found evidence that program characteristics such as the management capacity of the programs related to lower levels of these three types of goal ambiguity – that is, more goal clarity. If the program involved a third party outside the program that participated in delivery of the program's services, as opposed to the program directly delivering the services (Frederickson and Frederickson, 2007), goal ambiguity was higher. Greater complexity of the program's work – the more professionalized employees involved, the more different activities or subprograms involved – related to higher levels of goal ambiguity. As discussed next, it would oversimplify the evidence to conclude that ambiguous goals reduce performance and clear goals increase performance. The general consistency of the findings, however, suggests the possibility of meaningful analyses of goal characteristics of public organizations.

Later, Jung (2018) conducted similar analyses of evidence from Korea and from Great Britain. The Korean government conducts performance assessments of all Korean government agencies. Jung analyzed these assessments using indicators of goal ambiguity similar to those in his earlier studies of PART evidence. Jung found that factors such as management capacity reduced goal ambiguity and related to higher performance, but other factors such as political insulation (insulation from external political influence and intervention) and the complexity of the organization's work related to more goal ambiguity and to lower performance. The English government has authority over 386 local governments, providing guidance and a substantial portion of their funding. An Audit Commission assessed the local governments (during 2002–2004) and gave them Core Service Performance (CSP) scores. Jung constructed a measure of goal ambiguity from a survey of leaders and managers of the local governments, and developed variables similar to those in the analyses of PART and of Korean government agencies. Analysis of the English evidence showed results similar to the previous studies. For example, the goal ambiguity measure related negatively to organizational performance (based on the CSP scores).

The research on goal ambiguity indicates that one can develop indicators of the levels of goal clarity and ambiguity for organizations and organizational subunits (e.g., “programs”). These levels of goal ambiguity show relations to variables such as management capacity, complexity of tasks and policy issues, and external political influence.

Among many examples of recent research, Carrigan (2018) presents a formal model using priority goal ambiguity to show that when agencies must balance competing missions, the ambiguity has detrimental effects. It can still be beneficial, however, to assign the missions to one organization, because one agency can better coordinate tasks that the competing conditions require. Davis and Stazyk (2015) develop a taxonomy that combines agency goal ambiguity or goal clarity, with external political support or lack of support for the agency. The taxonomy predicts that a politically supportive environment combined with clear organizational goals leads to the highest levels of role clarity for people in the agency (i.e., clear job goals). An unsupportive environment combined with ambiguous organizational goals leads to the lowest role clarity. Stazyk and Davis found support for the taxonomy's predictions in an analysis of a large national sample of local government administrators. Stazyk and Davis (2020) also found that goal ambiguity influences the relationship between transformational leadership and perceptions of public value enhancement. Studies also indicate important effects of goal clarity and goal ambiguity in many different organizational settings. Among many examples, Song, Meier, and Amirkhanyan (2020) find that in nursing homes in the US, management can have positive effects on service quality, but these effects decrease when administrators report high levels of goal ambiguity and multiple goal priorities.

The research on goal ambiguity or clarity shows that these goal characteristics can vary across many dimensions. Even so, research generally indicates that appropriate levels of goal clarification tend to enhance organizational and individual performance. Appropriate levels of clarification refer to the point that organizational missions need to be as clear and meaningful as possible, but that excessive specification can be detrimental. Goal clarification at other levels of organizations, such as task and individual levels, can be more challenging in organizations with more ambiguous missions, and in settings involving complex, technically “non-routine” tasks. In such situations, undue or inappropriate goal specification can raise challenges of potential surrogation and goal displacement. For all situations, researchers and administrators need to develop methods for avoiding dysfunctional goal specification. Such methods can include participation in goal development by multiple stakeholders, including those who will be assigned the goals; procedures for identifying potential dysfunctions in advance of goal implementation; identification of sources of inappropriate goals, such as pressures from stakeholders for rapid specification of performance measures; and “quality control” procedures for reviewing goal implementation over time to detect dysfunctional patterns. A central challenge in goal setting and goal clarification involves the pursuit of what can be called goal validity, or the pursuit of good goals that effectively represent valuable, intended results and avoid dysfunctions.

Behavioral Theories of Organizational Decision Making: Changing Perspectives on Organizational Goals

While all organizations must pursue multiple, conflicting, and ambiguous goals to some degree, public and nonprofit organizations often face particularly high levels of goal multiplicity, conflict, and ambiguity. Nevertheless, what we have called the “generic” approach to the study of management provides insights applicable to challenges in goal-setting and performance assessment in public and nonprofit organizations.

A major book by organizational analysts presented important insights about decision-making and the pursuit of goals in organizations that have had a lasting influence. Developments in research and theory leading to and following from a book entitled A Behavioral Theory of the Firm (Cyert and March, 1963) led prominent organizational theorists to refer to the book as one of the most significant management books of all time (Argote and Greve, 2007; Gavetti, Greve, Levinthal, and Ocasio, 2012). The book exerted a major influence on how organizational researchers analyze decision processes in organizations, including pursuit of goals. Many economists and other analysts assumed that decision makers proceed rationally in seeking to maximize important goals such as making profit. A simple version of such rationality assumptions holds that decision makers know the goals they are pursuing and can place a value on them. Then they consistently review a large set of alternatives for achieving those goals and consistently choose the alternative that will maximize achievement of the goals at the least expenditure of resources.

In his book Administrative Behavior (Simon, 1947) and later work (March and Simon, 1958), Herbert Simon, who would later win the Nobel Prize in economics, wrote that decision makers seek to proceed rationally. Often, however, they must make decisions under conditions of “bounded rationality.” They often face limits on time, resources, information, and analytical capacity to review many alternatives. They have difficulty specifying goals and how to achieve goals. Instead of rationally maximizing goal accomplishment, Simon wrote, decision makers often engage in “satisficing” behavior (Simon, 1947, p. 47). They make the most satisfactory decision they can make within the limits on their ability to decide rationally. Colin Powell, who served as US Secretary of State after a career as the highest-ranking military officer in the nation, provided an example of such a decision process when he described his “70% rule.” He would select an alternative when he felt 70% sure that it was the best choice.

Simon's colleagues, Richard Cyert and James March (1963), conducted a study of decision makers in business firms and found that they displayed satisficing behaviors. The satisficing behaviors influenced the establishment of goals and assessments of their achievement. For example, decision makers may establish a benchmark for performance based on an “aspiration level” rather than on conclusive evidence about the performance that the firm could achieve. They might base the aspiration level (“increase profits by 5%”) on the organization's past performance (“we have increased profit by nearly that much for the past several years, so 5% is a reasonable goal”) (Greve, 2003).

Cyert and March observed, even in these profit-oriented private firms, political processes in which competing coalitions disagree about goals. A “winning coalition” may exert the most influence on decisions.

Decision makers may also engage in “quasi-resolution of conflict.” Resolving conflicts can require high costs and time. Coalitions negotiate and compromise to resolve conflicts well enough so that decision making can proceed.

Decision makers may also employ a “problemistic search” process. Rather than searching through an elaborate set of alternatives, the decision makers may focus on a problem, such as a gap between the aspiration level and actual performance. Focusing on a problem such as a performance deficit, and on alternatives available in the vicinity of the problem, reduces the costs of a more elaborate search for alternatives. An example from government occurs when decision makers in a state agency respond to a problem by examining how similar agencies in other states have dealt with the problem.

Decision makers may also practice “uncertainty avoidance” by relying on standard operating procedures, routines, and short-term decision rules rather than long-term rules. These procedures reduce the costs of searching and reduce the complexities of decisions. At the same time, Cyert and March observed that organizations engaged in “organizational learning” processes to reduce uncertainty.

These observations about how people actually behave in making decisions in business firms had major influences on how many organizational analysts study organizations (Greve, 2017, p. 2). Theorists and researchers advanced analysis of organizational learning processes. Others study “institutional” processes in which organizations may, e.g., make decisions by doing what other similar organizations are doing, or by doing what a regulatory authority requires them to do. That is, the decision makers avoid extensive searches among alternatives by adopting alternatives from available sources.

March and other colleagues would later develop a “garbage can model” of decision making that they described as particularly applicable to public organizations (Cohen, March, and Olsen, 1972). According to this perspective, many important decisions, especially in public organizations, involve substantial uncertainty. These decisions do not proceed in well-planned, systematic patterns. The decisions become like garbage cans, where various factors come into the decision process in unplanned ways. Streams of problems move through time, as do streams of alternatives that might apply to solving the problems. Participants move in and out of the decision process. Some major decisions occur when a certain alternative comes together in a situation where a particular set of participants attach it to a problem that they are trying to solve. Chapter Seven will further explain this perspective. As this perspective shows, analysts of decision making in organizations increasingly recognized the importance of processes that do not involve rational, systematic pursuit of clear goals.

Adding to this perspective on decisions and goals, researchers studying human judgment and decision making advanced understanding of how individuals interpret information. Daniel Kahneman and Amos Tversky (1980) developed “prospect theory” that ultimately led to a Nobel Prize for Kahneman. (Tversky had passed away before he was selected.) This research also draws on Herbert Simon's ideas about bounded rationality (Simon, 1947). Descriptions of prospect theory emphasize that it, too, challenged “expected utility theory” that was widely accepted among economists. Expected utility theory depicts decision makers as consistently pursuing goals by choosing the alternative that leads to maximizing “utility” or the desirable aspects of the goal.

Khaneman's and Tversky's research led them to conclude that decisions often depend on how individuals assess the potential outcomes of a decision. Decision makers often assess the prospects of a decision by referring to their own subjective perception of possible results. These perceptions are influenced by the way information is presented, or “framed.” For example, if information emphasizes possible losses, this can frame the decision differently from information that emphasizes gains. Then, decision makers interpret the information on the basis of their subjective attitudes toward the outcomes presented, such as different reactions to the prospects of gains versus losses. Kahneman and Tversky found that most people tend to be loss-averse. They are more concerned about a loss than a gain.

These ideas have major implications for goals and performance of all organizations, but especially to public and nonprofit activities. Prospect theory helps to explain a process of “surrogation” in performance measurement. Surrogation refers to the tendency for performance measures to take the place of the actual goal that managers intended to pursue (Harris and Tayler, 2019). For example, teachers may receive higher rewards when their students score higher on standardized achievement tests and lose rewards for lower scores. The teachers may then focus on test scores as a primary goal. They may spend more time teaching students how to do well on a test rather than helping students actually learn.

The “theory of attribute substitution” can explain why such surrogation occurs. According to the theory, individuals rely on a mental shortcut when making a judgment about complex, intangible goals that are difficult to access. They may focus on an attribute or target that represents a more general goal, but is more easily accessible. This leads to a focus on “making the metrics” and not on the end goal. This tendency can occur where first, the target attribute is relatively abstract or inaccessible. Second, a related, available “shortcut” attribute is concrete or highly accessible. Third, individuals substitute the shortcut attribute for the target attribute (Harris and Tayler, 2019; Kahneman and Frederick, 2002).

Surrogation and attribute substitution are similar to the concept of “goal displacement” that the major sociologist Robert Merton (1940; March and Simon, 1958, p. 57) advanced many decades ago. One pattern of goal displacement occurs when employees adhere to organizational rules as ends in themselves. Ideally, the rules in an organization represent means to achieve the overall goals of the organization. Where there is heavy emphasis on rule adherence, individuals in organizations may concentrate on following a rule because it supposedly represents an organizational goal, even when it is a very incomplete representation of the goal. Following the rule provides the individual with guidance about what to do, but may lead to behaviors that do not achieve organizational goals and may be detrimental to them.

Problems due to bounded rationality, satisficing behaviors, and surrogation do not negate the value of goal-setting in organizations. These topics, however, show why it is vital to recognize the potential pitfalls of stating goals and selecting performance measures. Performance measures can have unintended, undesirable consequences for behavior. Economists, psychologists, and others still differ over the role of rationality in human decision making (Krause, 1999), with some still adhering to a “theory of rational expectations” instead of theoretical perspectives that emphasize bounded rationality or prospect theory. The theory of rational expectations, however, can also predict substitution of rules or subgoals for goals. When individuals become aware of a system of rewards and punishments, they will behave consistently with that system. For example, an employee rewarded for the number of persons trained may aim to optimize efforts with respect to the measure – train more people – whether or not the training achieves its intended effect.

Psychologist and research methodologist Donald Campbell (1979) explains the phenomenon: “The more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor.” This adage, which has been coined “Campbell's law,” reflects a significant problem with measuring performance. Campbell's law can explain “the cobra effect,” an unintended consequence that occurs when the attempted solution makes the problem worse. The cobra effect gets its name from an effort in India to reduce the number of cobras in the nation. Officials offered financial incentives based on the number of cobras eliminated. Later they found that the incentives were leading enterprising citizens to breed more cobras so that they could eliminate them and get paid for it.

The problems discussed here can occur in all kinds of organizations. The United Nations (UN) Intergovernmental Panel on Climate Change set goals aimed at reducing greenhouse gas emissions. In 2005, the UN decided to issue carbon credits to reward organizations that reduced dangerous pollutants. A company received credits that allowed it to produce a certain amount of a pollutant; companies producing more of a pollutant would receive more credits to produce it. The credits could be bought and sold. The idea was that companies producing more of a pollutant would receive more credits for producing it but could sell the credits if they reduced production of the pollutant. If a company reduced its pollution, it could sell credits to another company that needed to buy credits to avoid a government fine for producing more pollution than allowed by the credits it had. The value of the credits was determined by the seriousness of the pollutant. The chemical HFC-23, a byproduct of a common coolant used in air conditioners, topped the list of damaging pollutants. Credits for producing it were very valuable. This meant that organizations that produced more HFC-23 would receive more credits for producing it, which they could sell if they reduced production of it. Some companies would increase production of HFC-23 to get more credits for producing it, and then reduce production so that they could sell credits to companies that needed them. On balance, this led to increased production of the pollutant. The European Union eventually realized the problem and suspended the program of awarding credits.

These problems may be more likely in public and nonprofit organizations, but the private sector is also vulnerable to the problem of perverse incentives. Harris and Tayler (2019) recount the problems that led Wells Fargo Bank into a widely publicized and very expensive scandal. Bank executives established incentive systems that rewarded employees for increasing the types of accounts an individual customer had with the bank – checking accounts, saving accounts, loans, and others. More accounts made more money for the bank and rewarded employees for adding customer accounts. In addition, bank leaders assigned employees with quotas for the addition of new accounts. This led many employees to create fake accounts. To meet their quotas and to get financial rewards, bank employees would create new accounts for customers without telling the customers. Employees ultimately created millions of such accounts. The new account sales quota created a perverse incentive and ultimately cost Wells Fargo, the nations' fourth-largest bank, a fine of $3 billion and damaging loss of reputation. Harris and Tayler trace the problem to the “surrogation” processes previously described.

Toward Diverse, Conflicting Criteria

Considering the complications and challenges in setting goals, managers often use multiple criteria or measures of performance to determine whether organizations are effective at achieving their objectives. Campbell (1977) and his colleagues, e.g., reviewed various approaches to organizational effectiveness and developed a comprehensive list of criteria (see Table 6.1). People in all organizations face similar challenges of multiple and sometimes conflicting goals.

Cameron (1978) illustrated this point in his study of educational institutions. He drew on a variety of criteria, both objective and perceptual, including student, faculty, and administrator satisfaction; student and faculty development; and organizational criteria like openness, ability to acquire resources, and health. Cameron developed profiles of different educational institutions according to the nine general criteria and found them to be diverse. One institution scored high on student academic and personal development but quite low on student career development. Another had the opposite profile – low on the first two criteria, high on the third. One institution scored high on community involvement; the others scored relatively low. These variations show that even organizations in the same industry or service sector often follow different patterns of effectiveness. They may choose different strategies, involving somewhat different clients, approaches, and products or services. In addition, these differences show that effectiveness criteria can weigh against one another. A university aiming at distinction in faculty research may pay less attention to the personal development of undergraduates than a liberal arts college more devoted to educating undergraduates.

Research by public management scholars has also shed light on the variety of criteria that public managers use to assess the effectiveness of their organizations. One common set of criteria includes economy, or the cost of obtaining inputs; efficiency, or the cost per unit of output; effectiveness, referring to the achievement of formal objectives; responsiveness, denoting customer and employee satisfaction; and democratic outcomes like probity and accountability (Boyne, 2002). Walker and Andrews (2015) undertook a comprehensive analysis of empirical studies of the relationship between management and performance. Their review of nearly 90 studies identified eight types of performance measures representing various performance criteria: cost effectiveness, effectiveness, efficiency, equity, quality, quantity, user or customer satisfaction, and aggregated performance indexes. They found that indicators of effectiveness are by far the most commonly used performance measures in public management research, with nearly 46% of tests using effectiveness measures as the dependent variable, followed by measures of equity (15%), aggregated performance indices (13%), efficiency (8%), service quality (7%), customer or user satisfaction (6%), cost effectiveness (3%), and output quantity (2%) (See Table 6.1.).

TABLE 6.1 ORGANIZATIONAL EFFECTIVENESS: CRITERIA AND MEASURES

Campbell (1977) Boyne (2002) Walker and Andrews (2015)
  • Overall effectiveness
  • Productivity
  • Efficiency
  • Profit
  • Quality
  • Accidents
  • Growth
  • Absenteeism
  • Turnover
  • Job satisfaction
  • Motivation
  • Morale
  • Control
  • Conflict/cohesion
  • Flexibility and adaptation
  • Planning and goal setting
  • Goal consensus
  • Internalization of
    organizational goals
  • Role and norm congruence
  • Managerial interpersonal skills
  • Managerial task skills
  • Information management and communication
  • Readiness
  • Utilization of environment
  • Evaluation by external entities
  • Stability
  • Value of human resources
  • Participation and shared
    influence
  • Achievement emphasis
  • Cost effectiveness
  • Effectiveness
  • Efficiency
  • Equity
  • Quality
  • Quantity
  • User or customer satisfaction
  • Aggregated performance indexes

The foregoing discussion supports two broad conclusions. First, organizational effectiveness is a complex, multidimensional phenomenon, requiring the use of diverse criteria and measures to describe it. As the following discussion of approaches to organizational effectiveness will reveal, managers often combine various performance criteria and corresponding measures to obtain a more holistic picture of how well an organization is performing. Second, consideration of diverse performance measures can result in conflict and trade-offs between two or more criteria as organizations try to satisfy or reconcile the diverging expectations of external stakeholders, prompting managers to make choices when rank ordering or prioritizing competing criteria (Cameron, 1978; Radin, 2006; Andersen et al., 2016).

Approaches to Organizational Effectiveness

While the preceding discussion focused on how to set goals and what criteria to use to assess the effectiveness of organizations, other scholars have tried to develop a more systematic approach to dealing with the issue of organizational effectiveness, referring to the extent to which the organization achieves its goals (Cameron and Whetten, 1983). Over the years, they have developed various approaches or models aimed at defining organizational effectiveness and analyzing if organizations are achieving their objectives. Experts have failed to reach consensus, and as a result, we are left with a variety of approaches and models that provide unique insight into organizational effectiveness and that can be useful under different circumstances (Daft, 2020; Tolbert and Hall, 2009) (see Table 6.2). Because of the importance of assessing performance in the public sector, many public sector reforms of the last few decades are a reflection of some of these approaches to organizational effectiveness.

As researchers began analyzing organizational effectiveness, the Goal Approach obviously offered a first place to start. It defines effectiveness as the extent to which the organization achieves its goals (Etzioni, 1964). The complications with organizational goals elaborated earlier – difficulties in specification and measurement, goal conflicts, multiple stakeholders with differing goals – made this a difficult and costly approach in many circumstances. Yet, as emphasized earlier, goals and assessment of their achievement remain very important, including in the public sector. Indeed, prominent public sector reforms throughout the world that have been inspired by the New Public Management have emphasized achievement of formal goals. In the US, the Government Performance and Results Act (GPRA) of 1993 mandated for the first time in the country's history that federal agencies formulate strategic plans and annual performance plans that outline performance goals and report performance information to Congress and the general public (US Congress, 1993). In 2010, GPRA was modernized and streamlined, compelling agencies to focus on a smaller number of high-priority goals and to analyze factors inhibiting achievement of goals (US Congress, 2010). A similar act was passed by the South African Parliament, the Public Finance Management Act (PFMA) of 1999, to ensure and hold public officials accountable for efficient and effective management of all revenue, expenditure, assets, and liabilities of national departments. As a result of this act, national departments now produce annual performance plans with performance objectives and corresponding metrics for the coming year and data on performance objectives from the previous year. Both GPRA and PFMA allow public managers to set goals and develop performance measures that are suitable to the mission and function of their organizations.

Reacting in part to these concerns about the goal model, Yuchtman and Seashore (1967) proposed a Systems-Resource Approach. They defined effectiveness based on the ability of the organization to attract and maintain valued resources. In the midst of the national protests and demonstrations in 2020 that demanded reforms due to police killings of African-Americans, a former New York City police commissioner, the longest-serving person in that position, implicitly drew on this model (WSJ, 2020). He proposed attracting more highly educated police officers – with college degrees – as one way to improve police effectiveness.3 When college presidents point to the excellent records of the incoming class of freshmen, they implicitly apply this model. Analysts in public and nonprofit organizations can use this model in assessing their ability to attract human resources and other important resources.

The Participant Satisfaction Model focuses on the organization's multiple stakeholders and their satisfaction with the organization (Connolly, Conlon, and Deutsch's, 1980). Organizations of all types survey their stakeholders in various ways. Customer and client satisfaction surveys, employee surveys, and other assessments provide examples of this form of effectiveness evaluation. More elaborate applications can provide valuable information about an array of organizational stakeholders to evaluate the organization. Limitations of the model include the problem of how to evaluate overall organizational effectiveness when participants disagree in their evaluations and the fact that the model does not directly assess effectiveness in achieving various goals.

The Internal Process and Human Resource Models determine effectiveness by looking at whether the organization's processes function well and treat employees as a key component of effectiveness (Bennis, 1966; Likert, 1967). The internal process model assesses organizational effectiveness by referring to such factors as organizational capabilities and capacities, communication and information flow, leadership style, motivation, interpersonal trust, and other internal states assumed to be desirable. During the early 2000s, scholars in public administration and journalists participated in a Government Performance Project (GPP) that evaluated the effectiveness of government organizations at federal, state, and local levels (Ingraham, 2007). The project evaluated the management capacity of subsystems for financial, human resources, capital, and information technology, with leadership and information as integrating mechanisms. The model for this project thus represents an internal process model that focuses on how well internal activities and structures function. Analyses using this model can provide valuable information, but they do not directly assess achievement of organizational goals. In fact, the GPP analysts employed this model in part because across the various diverse government agencies in a nation, there are no standard performance measures like those found in private business firms, such as sales and profits. In a similar vein, the Management Performance Assessment Tool (MPAT) in South Africa assesses the management practices, processes, and capacity in national departments, focusing on four key performance areas: strategic management, governance and accountability, human resource and systems management, and financial management (Department of Planning, Monitoring and Evaluation, 2013). The MPAT, however, does not assess actual outcomes or results.

The human resource model resembles the internal process model, but concentrates on the evaluation of human and social experiences in the organization. The evaluations ask about such factors as the effectiveness of leadership and team processes, and individual perceptions about communication, work satisfaction, rewards and incentives, individual performance assessments, adequacy of resources, support, and training, and engagement with the organization. The human resource model, however, does not directly evaluate achievement of organizational goals. This model assumes that when employees report positive attitudes and perceptions about organizational processes, work conditions, and the quality of work life, the organization will function effectively.

In the United States, the US Office of Personnel Management (OPM) and the US Merit Systems Protection Board (MSPB) for decades have conducted employee attitude surveys of very large samples of federal employees that ask about such conditions as those mentioned previously. OPM's Federal Employee Viewpoint Survey (FEVS) (previously known as the Federal Human Capital Survey) was introduced in 2002 to measure employee attitudes about their jobs, working conditions, organizational policies, coworkers, leaders, and performance. The survey is used to produce information that managers can use to improve managerial capacity and performance and increase recruitment and retention of talented managers and employees in government (Fernandez, Resh, Moldogaziev, and Oberfield, 2015). Recently, a report by the Organisation for Economic Co-operation and Development (2017) indicated that a large majority of member nations were using employee surveys like FEVS to assess organizational effectiveness. Finally, the Partnership for Public Service, a nonprofit organization devoted to enhancement and support for public service in the United States, draws from the federal survey results to designate some agencies as “best places to work” in the federal government. Agency leaders often post these results on agency websites, praise their employees for good results, and use the results for recruitment and retention purposes.

The Competing Values Approach (Quinn and Rohrbaugh, 1983) is based on the idea that effective organizations must balance and manage four major aspects of organizational performance. Accordingly, the model combines and integrates elements of many of the approaches and models that were just described. The competing values model is based on two major dimensions of organizational effectiveness. The first is organizational focus, which ranges from an internal emphasis on the well-being of the organization's members to an external focus on the success of the entire organization. The second dimension is concerned with preference for structure and represents the contrast between control and flexibility. The dimensions combine to create four models of organizational effectiveness.

The human relations model emphasizes flexibility in internal processes and improving cohesion and morale as a means of developing the people in an organization. The internal process model also has an internal focus, but it emphasizes control – through maintaining sound information, auditing, and review systems – as a means to achieving stability. At the external end, the open-systems model emphasizes responsiveness to the environment, with flexibility in structure and process as a means to achieving growth and acquiring resources. The rational goal model emphasizes careful planning to maximize efficiency. Importantly, which model an organization chooses, or how they combine them, depends on the personal values of managers and what aspects of organizational effectiveness they wish to emphasize.

Quinn and Rohrbaugh recognized the contradictions between the different models and values. They argued, however, that a comprehensive model must retain all of these contradictions because organizations constantly face such competition among values. Organizations have to stay open to external opportunities yet have sound internal controls. They must be ready to change but maintain reasonable stability. Hence, managers may develop an approach to organizational effectiveness that emphasizes internal factors more than external ones, or control more than flexibility. However, most approaches to organizational effectiveness reflect each of the four values, at least to some extent.

Like the Competing Values Model, the Balanced Scorecard requires managers to consider and balance multiple perspectives on organizational effectiveness. Kaplan and Norton (1996, 2000) developed this approach to prevent a narrow concentration on financial measures in business auditing and control systems. Devised for use by business firms, this model has been used by government organizations in innovative ways, including the cities of Sunnyvale, California and Charlotte, North Carolina; the Texas Office of the Auditor; and the US Internal Revenue Service.

The Balanced Scorecard requires an organization to develop goals, measures, and initiatives for four perspectives (Kaplan and Norton, 1996, p. 44):

  • The financial perspective, in which typical measures include return on investment and economic value added
  • The customer perspective, involving such measures as customer satisfaction and retention
  • The internal perspective, involving measures of quality, response time, cost, and new product introductions
  • The learning and growth perspective, in which goals and measures focus on such matters as employee satisfaction and information system availability

The Balanced Scorecard raises plenty of issues that can be debated. For example, an emphasis on serving “customers” has grown in the field of public administration over the past decade. This trend has sparked some debate and controversy over whether government employees should think of citizens and clients as customers or as owners. The Balanced Scorecard does, however, emphasize the important point that people in public organizations need to develop well-rounded and balanced measures of effectiveness that combine attention to results and impacts, internal capacity and development, and the perspectives of external stakeholders.

In an often-cited article appearing in Management Science, Kim Cameron (1986) reviewed the different models of effectiveness and discussed when each is most useful. In addition, Cameron adds three other models to the list above: the Legitimacy Model, which defines effectiveness as the extent to which the organization engages in legitimate activity by focusing on the survival or demise among a set of organizations; the Fault-Driven Model, which considers effectiveness as the absence of faults; and the High-Performing Systems Model, which judges excellence in relation to other similar organizations. In the article, Cameron (1986) suggests when a particular approach to organizational effectiveness may be most useful. The models and the conditions under which managers should consider adopting one of these approaches are summarize in Table 6.2.

TABLE 6.2 COMMONLY USED MODELS OF ORGANIZATIONAL EFFECTIVENESS

Model Model Definition: The organization is effective to the extent … When Useful
Goal Model It accomplishes its stated goals. Goals are clear, consensual, time-bound, measurable.
System Resource It acquires needed resources. A clear connection exists between inputs and performance.
Internal Processes It has an absence of internal strain with smooth internal functioning. A clear connection exists between processes and performance.
Constituencies Model All strategic constituencies are at least minimally satisfied. Constituencies have powerful influence and organization has to respond to their demands.
Competing Values The emphasis on criteria in the model meets constituency preferences. The organization is unclear about its own criteria or change in criteria over time.
Balanced Score Card Strikes a balance between competing and equally important aspects of performance. Managers seek a more holistic understanding of how an organization is functioning.
Legitimacy Model It survives as a result of engaging in legitimate activity. The survival or demise among organizations is of interest.
Fault-Driven Model It has an absence of faults. Criteria of effectiveness or traits of ineffectiveness are unclear, or strategies for improvement are needed.
High-Performing It is judged excellent relative to other similar organizations. Comparisons among similar organizations are desired.

Adapted From: K. S. Cameron, “The Effectiveness of Ineffectiveness,” In B. M. Staw and L. L. Cummings, Research in Organizational Behavior, Vol. 6, JAI Press, Greenwich, CT., 1984, 276.

Effectiveness in Organizational Networks

The transformation away from the direct provision of government services is well documented (Heinrich, Lynn, and Milward, 2010). Scholars have described this transformation with various phrases such as “new governance,” “hollowed-out government,” and “networked governance.” The general observation is that organizations are becoming more complex in their structure, and becoming more and more involved in “networks” that bring together sets of organizations. This new form often extends or even replaces centralized, unified authority with networks characterized by fragmented and dispersed control (Galbraith, 1967). Formal connections within a single organization, as between units or departments, are replaced by lateral, often loose connections among partner organizations. As for government more specifically, the evolution of more complex governance forms is often attributed to trends such as privatization and outsourcing of public services, greater involvement of the nonprofit sector in public service delivery, and the need to address complex problems that exceed the capacity of any one organization (O'Toole, 1997). In the public management literature, networks have been defined as “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). There is much to say about the varieties of networks, the key concepts in the literature on networks, and the state of the research on the topic. Here we will narrow the focus to implications for goals and performance.

Certain characteristics of networks have implications for organizational goals and performance. Networks incorporate affiliations with parties more diverse in interests and motives than those under a more traditional organizational setting. On the one hand, such diversity can stimulate innovation. On the other hand, goals are often the result of a negotiation process among competing groups (Cyert and March, 1963, pp. 27–32). As a result, it may be more difficult to reach an agreement on a broad mission or set of values, or on what goals to pursue, how to order goal priorities, and what actions should be undertaken to achieve those goals. The more diversity in motives, the more likely that the broader narrative of the organization is inconsistent with priorities of some of the alliance partners. It may then be harder to gain their cooperation. Free riding is always a concern in multi-party alliances but more so as the motives of individual partners diverge from the organizational-level goals.

As for network success, researchers have examined the role of trust in networks (O'Toole, 1997) and mechanisms of control, as well as the connection between locus of authority and the effectiveness of the overall network (Provan and Milward, 1995; Milward and Provan, 1998, 2000). Public management research on networks suggests that a degree of centralized authority can be a key factor for effectiveness. This finding runs counter to the organic–mechanistic distinction discussed in earlier chapters, which suggests that decentralized, highly flexible arrangements are most appropriate (Provan and Milward, 1995, pp. 25–26) but would not have surprised Herbert Simon (1952), who noted that complex architectures frequently take the form of hierarchies.

With regard to underperformance of networks, topics of concern include the general instability of collaboration networks (Brown, Potoski, and Van Slyke, 2014; Das and Teng, 2000), the role of partner rivalries (Park and Ungson, 2001) and partners' reasons for friction and withdrawal (Greve, Baum, Mitsuhashi, and Rowley, 2010).

Managing for High Performance

In the last decades of the twentieth century, numerous organizational and management analysts began to approach the topic of organizational effectiveness and performance by studying organizations that displayed excellent performance (e.g., Peters and Waterman, 1982). The discussion in this chapter has emphasized the complexities of organizational goals and organizational effectiveness. This section turns to empirical research on characteristics of organizations and managerial processes that are related to high performance, a topic that has garnered a significant amount of interest in recent years.

In a sense, this has meant a return to an earlier period in management, outlined in Chapter 2, when experts believed management mattered. During that time, experts like Towne (1905) urged combining the technical abilities of an engineer with the administrative abilities of a chief executive to achieve ultimate results, while Taylor (1911) and associates employed scientific methods to analyze a task and discover the most efficient way of performing it. Focusing more on organizational design, proponents of Administrative Management sought to develop principles for organizing that could be widely applied to all sorts of organizations to improve coordination and efficiency (Fayol, 1919; Gulick, 1937). By the 1970s, however, interest in management and performance began to wane among organization theorists. Many downplayed the role and impact of management on organizations (Donaldson, 1995). Many of the approaches discussed in the later sections of Chapter Two, such as institutional theory and population ecology, depicted organizations as shaped and directed by external forces, with little influence by the executives and managers in organizations. Scott and Davis (2007) explain that management experts became “dismayed to see American ‘anti-management’ theorists respond with paradigms,” viewing managers as “Machiavellian” (Pfeffer and Salancik, 1978), “lemming-like” (DiMaggio and Powell, 1983), “perverse” (Meyer and Rowan, 1977), or “unable to overcome inertia in order to make sensible organizational changes” (Hannan, and Freeman, 1977). During that time, attention shifted to the environment, its tremendous impact on managers and organizations, and even its power to make the difference between effective organizations and ineffective ones, including those that perish. Similarly, public management scholars such as Kaufman (1985) attributed the success and survival of organizations to factors over which managers had little or no influence. The groundbreaking book In Search of Excellence by Peters and Waterman (1982) stemmed the tide of “anti-management” thinking that was influential during the 1970s (Scott and Davis, 2007). The book introduced a new genre of management research that empirically identifies aspects of organizations and management that appear to lead to high performance and success.

In Search of Excellence : Ideas that Remain Influential

Peters and Waterman (1982) forged beyond complicated debates about organizational effectiveness and put forth stimulating observations about management in excellent firms. The firms they observed placed a heavy emphasis on “productivity through people” (p. 14). They “live their commitment to people” (p. 16), “achieve extraordinary results with ordinary people” (p. xxv), and emphasize both autonomy and teamwork.

The firms that Peters and Waterman studied devoted careful attention to managing their organizational culture. They developed philosophies about product quality, business integrity, and fair treatment of employees and customers. Communicated by stories and slogans that flourished in these companies, these philosophies emphasized the shared values that guided major decisions and motivated performance. The firms nurtured the philosophies through heavy investments in training and socialization. The firms also behaved as if they accepted the principle that “soft is hard,” that is, that the intangible issues of culture, values, human relations – matters that many managers regard as fuzzy and unmanageable – must be skillfully managed.

The successful firms sought coherence in their approach to management, with the shared values of the culture guiding the relationships between staff characteristics, skills, strategies, structure, and management systems. In so doing, they accepted that organizing involves paradoxes wherein one tries to do conflicting things at the same time under conditions that often provide little clarity. The paradoxical aspects are evident in some of these companies' approaches to management, which Peters and Waterman describe in these terms:

  • A bias for action: These companies tended toward an approach that one executive described as “ready, fire, aim.” They avoided “analyzing decisions to death” and took action aggressively.
  • Staying close to the customer: Deeply concerned about the quality of their products and services, people in these companies sought to stay in close touch with their customers and to be aware of their reactions.
  • Valuing autonomy and entrepreneurship: Many of these companies provided autonomy in work and encouraged people to engage in entrepreneurial behaviors. They often tolerated the failure of well-intended, aggressive initiatives.
  • Enhancing productivity through people: As noted earlier, the companies emphasized motivating and stimulating their people through respect, participation, and encouragement. They often used imagery, language, symbols, events, and ceremonies to do this.
  • A hands-on, value-driven approach: The people in these firms devoted much attention to clarifying and stating the primary beliefs and values that guided the organization, what the company “stands for.”
  • Sticking to the knitting: The companies stayed focused on the things they did well and avoided ill-advised forays into activities that diluted their efforts and goals.
  • A simple form and lean staff: The companies often had relatively simple structures and small central staffs. Some massive corporations achieved this by decentralizing into fairly autonomous business units, each like a smaller company in itself.
  • Simultaneous loose and tight properties: The companies balanced the need for direction and control with the need for flexibility and initiative. They might have had “tight” general guidelines and commitments to certain values, but they allowed considerable flexibility within those general values and guidelines.

At about the same time as In Search of Excellence appeared, Americans became increasingly interested in the success of Japanese firms, which had been competing so effectively against American companies in many key industries. Observations of these firms revealed similarities to the particularly successful American companies. In one prominent book on the topic, Ouchi (1981) observed that many Japanese firms offered lifetime employment and avoided layoffs in hard times. They expressed a holistic concern for their employees by moving slowly in evaluating and promoting personnel; they practiced collective decision making and responsibility. The Japanese companies sought to develop trust on the part of their employees so they would have the confidence to contribute to the organization in many ways. Ouchi noted that some successful American corporations, such as IBM and Hewlett Packard, had orientations similar to some of these aspects of Japanese management.

In Search of Excellence and several sequels contributed to a movement in management circles, with numerous similar books appearing and many corporations taking steps to emulate the purported patterns of excellence. Predictably, controversy followed this material on corporate excellence. It is not always clear how one carries out some of the prescriptions the books offer. Peters and Waterman themselves noted that some managers told them that culture is one of many important aspects of an organization. Other features, such as sound technical and production systems, figure just as crucially. Nevertheless, many of their ideas still echo in the management literature and in research and practice of managing for high performance.

Research on High-Performance Management Practices in Firms

The success of In Search of Excellence stimulated a stream of very successful books and articles about well-performing business firms. With titles such as Good to Great (Collins, 2001) and Built to Last (Collins and Porras, 1994), they describe business firms that successfully managed for high levels of performance and draw conclusions about their achievements. Rather than reviewing the many books in this genre, we will focus on two prominent and illustrative contributions to this movement. Lawler and his colleagues at the University of Southern California's Center for Effective Organizations undertook one of the first large-scale studies of management and performance (Lawler, Mohrman, and Ledford 1992, 1995, 1998; Lawler, Mohrman, and Benson, 2001; see also Bowen and Lawler, 1995). For over a decade starting in the mid-1980s, these researchers tracked management practices in the top 1000 firms listed by Fortune magazine in order to establish their relationship to financial performance. The research involved five rounds of surveys conducted in 1987, 1990, 1993, 1996, and 1999. The findings pointed to a set of management practices and approaches related to high performance, including job involvement practices, total quality management (TQM), process reengineering, and knowledge management.

As an approach to managing employees, job involvement entails giving frontline employees and teams more authority over work processes; it also necessitates involving them more in decision making, along with providing them with performance-related information in the form of goal setting and feedback on an ongoing basis, which enables them to identify areas for improvement and provide suggestions of how to effect positive change in work processes and outputs (Lawler, Mohrman, and Ledford, 1992, 1995, 1998; Lawler, Mohrman, and Benson, 2001). Another critical job involvement practice is providing ample training and development opportunities for employees to acquire a range of technical, decision making, planning, and leadership skills to perform at a high level. Finally, job involvement entails rewarding employees for developing new competencies, devising innovative solutions to problems, and seeking ways to improve performance.

In addition to job involvement, Lawler and associates found three other key management practices associated with high-performing organizations (Lawler, Mohrman, and Ledford, 1992, 1995, 1998; Lawler, Mohrman, and Benson, 2001), starting with Total Quality Management (TQM). TQM refers more to a movement or philosophy of management than to a specific set of management procedures. Different authors take different approaches to TQM. W. Edwards Deming, one of the founders of this movement who developed many of the original ideas behind it, did not refer to his approach as Total Quality Management and in fact disapproved of this label. An industrial statistician, he advocated using statistical measures of the quality of a product during all the phases of its production. Deming called for this approach to replace the quality-control procedures often used in industry, which assessed the product only at the end of the production process. He included this commitment to statistical quality control in his general philosophy of management. Well-developed TQM programs tend to involve such conditions and principles as the following (Cohen and Brand, 1993; Dean and Evans, 1994):

  • An emphasis on defining quality in terms of customer needs and responses
  • Working with suppliers to improve their relationship to the quality of the organization's production processes and products
  • Measurement and assessment of quality at all phases of production, with commitment to continuous improvement in quality; benchmarking quality measures against similar measures for similar organizations as a way of assessing improvement and general level of performance
  • Teamwork, trust, and communication in improving quality; use of decision making and quality-improvement teams with participants from many areas and levels of the organization that are involved in the production process
  • Well-developed training programs to support teamwork and quality assessment and improvement
  • A broad organizational commitment to the process, from the top-executive ranks on down, that encompasses strategy, cultural development, communication, and other major aspects of the organization

Another practice identified by Lawler and associates is process reengineering. Process reengineering seeks to analyze business processes systematically to discover ways to radically transform them to achieve improvements in cost, quality, timeliness, and other aspects of performance. It also aims to identify and eliminate inefficient, outmoded, and redundant work processes. Finally, their research revealed the importance of knowledge management, referring to practices that harness advances in information technologies to enable decision makers to efficiently collect, retrieve, analyze, and share information pertinent to work.

At roughly the same time that Lawler and his colleagues at the University of Southern California were studying aspects of structure and management that were related to organizational success, Jeffrey Pfeffer (1998; Pfeffer and Veiga 1999) was at work just up the California coast at Stanford University trying to identify high-performance management practices in American firms. In his book The Human Equation (Pfeffer, 1998), Pfeffer argued that effective management of people can create a competitive advantage that leads to high levels of performance. After reviewing a series of empirical studies and case studies about the link between people management and performance, Pfeffer identified a set of management practices that managers in the most successful organizations tend to engage in. The first of these practices is providing job security and the prospect of continued employment, even during lean years, as an investment in human capital that contributes to long-term success. Managers should also be highly selective in their hiring to ensure that employees have the right skills and knowledge, but more importantly, that their attitudes and values fit the prevailing organizational culture. Third, Pfeffer urges making greater use of self-managed teams with plenty of resources and enough autonomy to solve problems quickly and effectively and improve work outcomes. In a similar vein, organizations should provide frontline employees with ample opportunities to develop skills and abilities and to obtain broad knowledge through extensive training.

The remaining three high-performance management practices identified by Pfeffer pertain to compensation, power, and access to information. First, increases in compensation should be contingent on organizational performance to both attract and retain talented and driven employees across all levels of the organization, from senior management down to the frontlines. In addition, measures should be taken to minimize status differences throughout the organization in order to encourage sharing of ideas, knowledge, and expertise and promote communication and innovativeness. Finally, sharing performance-related information with lower-level employees increases trust, commitment, and involvement in decision making, which can improve the quality of decisions.

Research on High Performance and Excellence of Public Organizations

Research on managing for high performance in the private sector appears to have sparked similar interest among public management researchers. Several lines of research emerged to analyze how managers can achieve high levels of performance in the public sector. This stream of research showed an interesting similarity to the developments in observations of private firms. The work on public organizations was influenced by In Search of Excellence, developments in Total Quality Management, and other general management research and activity. Importantly, it was also influenced by a very influential book of observations and descriptions of very successful practices in government, Osborne's and Gaebler's Reinventing Government. The book became a best seller during the early 1990s and influenced many government reforms in the US (Brudney and Wright, 2002; Brudney, Hebert, and Wright, 1999; Gore, 1993; Hennessey, 1998; Kearney, Feldman, and Scavo, 2000). Its approach and its success resembled those of In Search of Excellence, by providing ideas about achieving excellence in public management and government services. The authors began the book with the claim that government often fails, yet plays a crucial role and must be carried out well – hence, the need for reinvention. The authors wrote that an old-fashioned, centralized, bureaucratic model dominated government agencies and programs. They proposed more “entrepreneurial” activities to supplant that approach. To support this new approach in government, they described government practices that they observed around the country that were already quite effective. They proposed decentralizing government, encouraging privatization, encouraging control of programs at the community level, treating citizens as “customers” of government programs, finding ways for government to make money on its operations (“enterprising government”), and increasing competition among programs and between government and the private sector.

The book gained a wide readership among academics and government leaders and administrators, leading to a trend known as Reinventing Government (REGO). Governments throughout the US attempted reforms based on the book's ideas. The most significant initiative, the National Performance Review (NPR) during the Clinton Administration, included proposals influenced by the book. Vice President Al Gore served as the leader of the NPR, with a staff in the White House and from federal agencies. The NPR initiatives included the establishment of “reinvention labs” in federal agencies to develop innovative and more effective operating procedures. The initiatives sought to “cut red tape” by “streamlining” budgeting, procurement, and personnel procedures and empowering state and local governments. They proposed “putting customers first” by treating citizens as customers with choices among services, by making agencies compete against each other, and by using other market-like arrangements. The NPR sought to “empower employees to get results” by decentralizing decision making and holding employees accountable for results. These examples show the influence of REGO ideas about entrepreneurial, market-oriented, decentralized, results-oriented, and customer-oriented government.

Prominent experts in governmental administration characterized NPR as a highly significant, unprecedented reform initiative (Kettl, 1993). NPR leaders claimed significant results, including cost savings and improved administrative procedures. Analysts examining the REGO reforms around the nation found evidence of important effects (Thompson, 2000). Others found mixed evidence of results of the REGO reforms (Brudney and Wright, 2002; Brudney, Hebert, and Wright, 1999; Hennessey, 1998; Kearney, Feldman, and Scavo, 2000). Ultimately, when the Clinton Administration ended, the NPR disappeared, although some ideas from the reforms remained influential. The REGO and NPR stories illustrate points about government reforms, including the influence of business-oriented publications and ideas that influence government publications. These ideas in turn influence practical initiatives.

In the following section, we present the findings of three prominent streams of research focusing on managing for high performance in public organizations.

Galloping Elephants and the Quest for Effective Public Organizations. Rainey and Steinbauer bluntly asserted that public organizations can be very successful and effective, by reasonable standards, and as effective as business firms. They pointed to various examples of effective performance of government agencies, such as the low administrative expenses of the Social Security Administration (SSA), which represent only about 0.8% of the total benefits that the SSA disburses (Eisner, 1998).

Rainey and Steinbauer reviewed studies of high-performance and excellent government organizations to look for common patterns and generalizations (see Table 6.3). Based on their assessment of these studies, they developed propositions regarding effective public organizations. First, they assert that effective public organizations have supportive and favorable relationships with external stakeholders (e.g., oversight authorities, clients, and partners), who are a vital source of resources, support, and autonomy, the last of which is likely to relate to effectiveness in a curvilinear fashion. Effective public organizations also have high mission valence and a strong organizational culture to attract employees, motivate them to raise effort and performance, and increase their commitment to the organization to promote retention. Third, effective and stable leadership is essential for organizational success, especially leaders who are effective at shaping and demonstrating a strong commitment to the mission and culture of the organization, involving others in decision making, and overcoming political and administrative constraints. In addition, public managers should strive to design tasks that are intrinsically rewarding along with offering attractive extrinsic rewards, including pay, benefits, and promotions. Relatedly, effective public organizations effectively recruit and select employees and provide them with appropriate training and developmental opportunities. Finally, such organizations exhibit high levels of professionalism and the specialized knowledge and skills, training, and performance norms associated with it. Brewer and Selden's (2000) study of federal agencies tested many of Rainey and Steinbauer's propositions and found empirical support for most of them.

Meier's and O'Toole's Model of Public Management and Performance. A very interesting and original approach to analyzing public sector management and performance was developed by Kenneth Meier and Laurence O'Toole (O'Toole and Meier, 1999, 2011). One of their focal questions – namely, whether or not “management matters” – has garnered much attention over the years. O'Toole and Meier put forth the first explicit and formal model of the influence of public management, and they have tested it using data from Texas public school districts, among other sources. Although not easily summarized and possibly difficult for some readers, the model represents an unprecedented effort to develop such a model and test it with empirical evidence. This model needs attention from people seriously interested in public management.

The model employs concepts and initial assumptions about stabilizing factors and networks in the contexts of public managers:

  • The authors posit the presence of stabilizing factors such as hierarchy and formal authority that provide stability and act as a buffer against external shocks and improve coordination.
  • They also posit that public managers must deal with networks of other authorities and groups, particularly those in formation or in flux, which increase complexity and instability in the managerial environment.
  • Management refers to “the set of conscious efforts to connect actors and resources to carry out established collective purposes” (O'Toole and Meier, 1999, p. 510). It involves motivating, coordinating, and providing stability, but also changing structure and exploiting opportunities in the environment in order to improve performance. Multiple actors can share the management task, so management includes the sum of all managerial efforts.

The authors then specify their model of management's impact on public sector performance. They begin with a basic system:

equation

where current performance (Ot) is the result of past performance (Ot − 1) weighted by a rate of stability (β0) and a series of shocks to the system (ε). Shocks (ε) can come from either inside or outside the system. β0 can range from 0 to 1. A set of stabilizing features, S, such as hierarchical structure, can be distinguished from other sources of stability in B0, so that B0 becomes B1 and the equation becomes:

equation

The authors also point out that a shock (symbolized by Xt) can get through the organization's buffering system:

equation

Thus, the authors divide ε into some shock (Xt) that gets through the organization's buffering system with initial impact (β2) and a random component (εt).

They treat management as another input to the system:

equation

with M representing management and β3 its impact. A management coefficient (β3) significantly greater than zero would indicate that management matters. In other words, organizational performance at a given time is a function of performance at an earlier point multiplied by a stability factor, plus a shock to the system multiplied by a factor representing its influence, plus management times its impact, plus the random set of shocks around the system.

O'Toole and Meier then elaborate the model in various ways. For example, management can adopt a strategy of buffering the system by adding to stabilizing features by setting goals, establishing incentives, buttressing the structure, and negotiating contributions from members. Management can also actively exploit the environment for the benefit of the system. If the decision is to buffer the system from the environment, management interacts with the buffering process so that

equation

where M1 is a maintenance function of management, the manager's efforts to add to stabilizing factors, M2 is the management strategy for interacting with the environment, and S is the extent of hierarchical stability. Organizational performance depends on previous performance and the degree to which stabilizing factors such as hierarchy and the manager's maintenance behaviors affect performance.

Alternatively, if the manager's strategy is to exploit the environment (that is, not to buffer the system but to try to magnify some of the environmental influences), then

equation

The first element in this equation, as in the previous one, means that as stabilizing features and the manager's system maintenance actions increase, organizational performance tends to be consistent over time. M2 is the management strategy for interacting with the environment. When M2 increases, the amount that is multiplied by the shock factor β2Xt increases, meaning that the manager's efforts to exploit the shock have increased its influence on organizational performance. So more stabilizing factors and more managerial efforts to maintain the system can enhance performance, and more managerial efforts to exploit an external shock to the system cause that shock to have increased impact on performance.

Studies using Meier's and O'Toole's model have demonstrated empirically the significance of management in the public sector, including management practices and approaches associated with high performance (O'Toole and Meier, 1999, 2011; Meier and O'Toole, 2001, 2002, 2003, 2007). Across multiple studies, Meier and O'Toole have found that managerial networking has a direct and positive effect on performance; it also interacts with other factors related to performance by enhancing the effects of financial resources and human capital and minimizing constraints. Managerial networking improves performance by buffering or protecting employees from shocks and other negative forces from the external environment, acting as a conduit for innovations, and generating support and autonomy for the organization (O'Toole and Meier, 2011).

In addition to managerial networking, Meier's and O'Toole's research also found that an increase in internal management leads to higher performance (O'Toole and Meier, 2011). Internal management entails an array of practices, and activities, including hiring, training, coordinating, and motivating employees. Their empirical research focused on several internal management functions and found that three, in particular, have positive direct impacts on performance. These include efforts by managers to promote internal stability (e.g., in personnel, mission, and operating procedures) in order to build commitment, reduce turnover, and foster improvements in work processes; personnel practices aimed at recruiting, training, and developing talented human capital; and effective decision making about the allocation of resources during times of scarcity and uncertainty.

Research on Management and Performance in Local Governments. As Richard Walker and Rhys Andrews (2015) note, over the last few decades many researchers have explored how management impacts the performance of local governments throughout the world. Quite a number of these studies were conducted by the authors along with George Boyne and associates at Cardiff University. Walker and Andrews set out to systematically analyze nearly ninety such studies, most examining American and British local governments, to assess the effects of various management practices and approaches on local government performance. Their analysis focused on seven management factors that have been widely studied, including organization size, strategy content, planning, managerial networking, staff quality, personnel stability, and representative bureaucracy. All of these factors, except organization size, are found to have moderate to strong positive effects on local government performance.

Many of the empirical studies focused on the effect of strategic management, including strategy content – the prospector, defender, and reactor strategic postures described by Miles and Snow (1978) – and processes. Walker and Andrews found that a prospector strategy characterized by proactive innovativeness seems to work well for improving performance. Rational planning involving environmental scanning, goal setting, and monitoring was positively related to local government performance. Like O'Toole and Meier, Walker and Andrews found that managerial networking leads to higher performance by enabling managers to secure vital resources, enhance legitimacy, gain knowledge and feedback from the external environment, and buffer the organization from external shocks. Their review also echoed previously cited research on managing for high performance in the public sector, concluding that efforts to recruit, select, and retain talent and reduce turnover are linked to high performance. Finally, Walker's and Andrews' analysis produced evidence of how having a workforce that is representative of the population improves responsiveness and performance. The empirical evidence regarding representative bureaucracy is presented in greater detail in Chapter 10.

Synthesizing Research on High-Performance Management

Fernandez and Kim (2018) reviewed the various streams of research on managing for high performance in search of commonalities and points of divergence. They noted that the research findings coalesce around three general facets of management that are critical for achieving high levels of performance, regardless of sector: (1) selecting, developing, and retaining high-quality employees; (2) sharing power, authority, and information with employees; and (3) offering intrinsic and extrinsic rewards to motivate employees (see Table 6.3). High-performing organizations tend to carefully and selectively hire employees with values, attitudes, skills, and abilities that are consistent with organizational needs and job requirements. They also invest in human capital by providing extensive opportunities for learning and growth. This not only enables employees to achieve at high levels, it helps with employee retention and promotes personnel stability within the organization. Another important set of practices entails sharing power and authority with lower-level employees, granting them autonomy in decision making, and ensuring that they have ready access to relevant information about goals and performance that can be used to innovate and make organizational improvements. Finally, high-performing organizations strive to motivate employees, both intrinsically and extrinsically, by redesigning jobs to be more interesting and satisfying and by providing tangible, high-powered rewards and compensation.

TABLE 6.3 RESEARCH PROGRAMS FOCUSING ON MANAGING FOR HIGH PERFORMANCE

Research Program Management Practices and Approaches Related to High Performance
Lawler's Organizing for High Performance
  • Sharing of power and employee involvement in decision making
  • Sharing performance-related information (e.g., goals, plans, feedback)
  • Employee training and development
  • Rewards for self-improvement and performance
  • Practicing Total Quality Management
  • Process reengineering
  • Knowledge management
Pfeffer's High-Performance Management Practices
  • Job security
  • Selective recruitment
  • Self-managed work teams
  • Compensating good performance
  • Training and development
  • Reducing status distinctions
  • Sharing performance-related information (goals, strategy and feedback)
Rainey's and Steinbauer's Theory of Effective Government Organizations
  • Favorable and supportive external relationships
  • Employee autonomy
  • High mission valence
  • Strong organizational culture linked to mission
  • Leadership to promote stability and commitment, set effective goals and strategies, and cope with administrative and political constraints
  • Job design
  • Information technology
  • Effective recruitment, selection, placement, training, and development
  • Professionalization of workforce
  • Motivating employees intrinsically and extrinsically
Meier and O'Toole's Model of Public Management and Performance
  • Managerial networking with external actors
  • Mission, personnel, technological, and procedural stability
  • Recruitment, training, and development of human capital
  • Effective allocation of resources during times of uncertainty and scarcity
Management and Performance in Local Governments
  • More proactive strategic stance (e.g., prospecting or defending strategy)
  • Rational planning, including strategic management, benchmarking, and performance management
  • Managerial networking with external actors
  • Employee attraction and retention
  • Personnel stability, including low turnover
  • Fostering representative bureaucracy

Despite these similarities, Fernandez and Kim (2018) find that studies of managing for high performance diverge in several respects, most of all in regard to the importance of managing the external environment in the public sector. Studies of managing for high performance in public organizations highlight the need to network in order to build supportive relationships with external stakeholders, as well as to adopt proactive strategies to foresee and address threats and capitalize on opportunities in the external environment. This is consistent with findings presented in Chapter 3 about the higher levels of environmental uncertainty and turbulence encountered by public managers. Studies focusing primarily on private sector firms, on the other hand, place less emphasis on networking and managing external relationships and focus more on internal management, like redesigning and improving processes, psychologically empowering employees, and fostering a safe and supportive work environment.

Instructor's Guide Resources for Chapter Six

  • Key terms
  • Discussion questions
  • Topics for writing assignments or reports
  • Exercises
  • Case Studies: See Something Say Something; Confusing Performance Metrics with Strategy

Available at www.wiley.com/go/college/rainey.

Notes

  1. 1.  Decades ago, Rainey, Backoff, and Levine (1976) cited a dozen authors who advanced such observations.
  2. 2.  For example, the rules-to-law ratio correlated with a similar ratio of agency budget size to number of pages for the agency budget size in the Budget of the United States Government. The evaluative goal ambiguity indicator correlated with goal clarity assessments by the Government Accountability Office and the Mercatus Center. The priority goal ambiguity measure correlated with the number of subunits that directly report to the agency head.
  3. 3.  Note that attracting more highly educated police officers would almost certainly require higher salaries, which would require higher expenditures for police departments. Protestors during this period were calling for reforms that included “defunding the police.” City officials would be faced with the challenge of funding such reforms, among many other funding needs.
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