In search of creative government
IRI is currently in the final stage of preparation of a major transnational comparative study of public and private knowledge-based organizations. A need for such a study is, in our view, pronounced – for three reasons. First, today’s global challenges require ever higher levels of coordination – the trend that puts to rest a ‘small-government’ postulate to solve problems of the underperforming public sector by limiting its scope. Second, the idea of fundamental reinvention of public organizations by ‘running them (more) like a business’ – an important overtone of the enormously influential New Public Management (NPM) movement – has failed to deliver expected results. Third, the NPM disappointment emboldened administrative traditionalists, who lure us into believing that hopes for radical governmental redesign are unrealistic and that we should instead focus our efforts on marginal improvements in the time-honored Weberian model.
For the last two decades, studies of public administration have been dominated by a debate between proponents of the traditional Weberian framework codified in national or transnational legal-administrative systems and revisionists from the New Public Management (NPM) school. At those moments when the two camps do not pretend to ignore each other, they try to convince us that the basic question at hand is whether we want our administration to be more productive or more democratically accountable.
Initially, it looked like the revisionists would carry the day. The Reinventing Government exercise introduced by the US vice-president Al Gore or the ambitious Kinnock Reforms agenda undertaken by the European Commission in early 2000s, promised what we all want: a public sector that delivers more for less.
Time has passed since the NPM heyday and it is difficult not to feel a sense of disappointment. The expected productivity gains proved elusive at best. Indeed, the first decade of the 21st century witnessed a number of monumental governance failures. In the US, this included a failure to detect and prevent the 9/11 attacks, the military and humanitarian fiasco of the wars in Afghanistan and Iraq, the disastrous response to the Hurricane Katrina, and the massive debacle of the system of financial regulation. Yet failures of the European governance have been equally disturbing. The European Union did not even come close to its heralded Lisbon Strategy goal of becoming “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion” by the year 2010. Instead, it seems increasingly clear that a number of European governments have engaged in budgetary mismanagement of such proportions that the result threatens the foundations of the common European currency.
As the failure of New Public Management becomes increasingly clear, public administration scholars seem to be divided in their views on where to go next. Some commentators have attempted to introduce a new paradigm, such as the Digital-Era Governance; such proposals are yet to gain traction, however, especially in the world of administrative practice. An important group of authors argues for revisiting the traditional Weberian framework. Another group claims that the problem lies not in a deficiency of the NPM prescriptions, but in their poor application. In general, a sense of deadlock in our thinking about public administration seems to be omnipresent.
We believe that the reason why the study of public administration reached this seeming dead-end is that the very problem we try to address – how to best structure and manage public organizations – is conceptualized in the wrong way. Specifically, this traditional framing overlooks a growing divergence between the traditional ‘industrial-era’ organizations and what – based on extensive literature on the topic – we call the knowledge-based organizations (KBOs).
What do we mean by KBOs? While traditional organizations employ large stocks of physical capital to produce tangible and usually standardized outputs, KBOs are engaged in producing complex and intangible goods based not on physical input, but on intellectual value-added generated by their employees.
Under the influence of scholars such as Michael Porter and Robert Kaplan, the study of general management has long appreciated the significance of the distinction between traditional and knowledge-based organizations. Managerial scholars understand that the KBOs require different structures, processes and performance measurement systems to function effectively. But the same distinction has not been given adequate attention in the study of public administration. Indeed, both proponents and detractors of an idea of ‘running governments like businesses’ – an important overtone of the NPM movement – seem to harbor a very old-fashioned view as to how business organizations actually operate. Both sides of the NPM debate seem to agree, in particular, that private organizations benefit from clearly definable goals that can be easily linked with company-wide performance indicators and then cascaded into divisional and ultimately individual objectives. The goal of private organizations is, furthermore, one-dimensional, as it is exclusively profit maximization. This allows private managers to avoid value conflicts and impossible choices between incommensurable objectives.
Public organizations are, in turn, described as the opposite of private businesses, virtually along each of the above-mentioned dimensions. Their goals are many and often in tension with one another. Success is difficult to define, which in turn makes performance difficult to measure.
Clearly, the dominant analytical strategy of putting all public organizations into one basket has fallen short of producing positive and prescriptive insights that triggered satisfactory improvement in administrative performance. For this reason, our project attempts to alter our thinking about public and private sectors by adding a new dimension to our analytical toolkit. In particular, our goal is to focus on the knowledge-based subset of public and private organizations. We believe that many arguments about inherent differences between business and public administration lose much of their validity when the comparison is made within this KBO subset of both sectors.
Our project consists of a structured empirical investigation of a sample of 18 KBOs from public and private sectors, in selected Central European countries: Czech Republic, Hungary, Poland, Romania, and Slovakia. Our main goal is to determine whether functional similarities between public and private KBOs translate into structural similarities, and if so, to what extent. We are also keenly interested in whether the observed structural differences are likely to influence overall KBO effectiveness.
Our exploration focuses on a number of structural dimensions of organizations under our study. In particular, we examine and compare areas such as strategic awareness, organizational culture and climate, communication systems, physical environment as well as performance management and personnel development systems. Our research toolkit incorporates both quantitative and qualitative methods, including validated surveys, in-depth interviews, expert assessment, as well as analyses of financial and other data obtained from our subject organizations.
Focus on Central Europe
Research exploring new governance paradigms is almost never based on empirical findings from countries such as Poland. Most often, an implicit ‘innovation hierarchy’ is assumed: New paradigms, such as NPM, are introduced by scholars from highly developed countries, while researchers in nations like Poland are tacitly assumed to limit their ambitions to more narrow questions of application and adaptation of what has been designed in the ‘West.’
We reject this ‘division of labor,’ and submit that younger democracies and market economies may in many cases be better testing grounds for cutting-edge paradigms of good governance than their older counterparts from Western Europe and North America. Notice, for instance, that although Czech Republic, Hungary, Poland, Romania, and Slovakia have put significant effort into modernizing their administration during the last decades, none have implemented NPM-style reforms. In effect, Central Europe represents one of the best remaining examples of ‘pure’ Weberian administration. Studying such a traditional public sector will allow us to sidestep discussions about failures of the NPM revolution and focus on the traditional administrative model – the model that is now increasingly back in fashion.
In addition, given our aim of understanding how effective different organizational structures are in dealing with internal and external challenges faced by KBOs, certain national characteristics of our subject countries become important. More specifically, Czech Republic, Hungary, Poland, Romania, and Slovakia have been found to be highly group-oriented, with traditionally dominant and hierarchical managerial practices, and relatively high levels of power distance. KBOs, in turn, are often thought to require high levels of coordination and information exchange between employees. If that is the case, then Central European culture is likely to elevate challenges faced by both private and public KBOs. We believe that the presence of these more acute cultural challenges will make it easier to identify the types of structures that facilitate productivity in a KBO context, by overcoming cultural and other pressures that impair creation of intellectual value added.
The relatively weak intensity of empirical research in the area of public and private management brings one additional, practical advantage. Our research depends critically on high levels of openness and time commitment from organizations under our study. It will thereby be helpful that our project will compete for time and managerial attention with fewer other similar requests.
Finally, Central Europe seems attractive in view of normative aspirations of our project. Working in a professional school of the famously ‘activist’ university, we do not pretend to treat this project as a purely academic exercise. We believe that our exploration will bring a number of concrete insights and best practices for a more effective management of KBOs – especially the ones in the public sector. Our long-term goal is to monitor our partnering public organizations over time and help them implement some of the lessons learned from the earlier stages of our research. Through these, those organizations will transform into true testing grounds for public-sector managerial innovation. With their young administrative structures accustomed to frequent internal and external changes, countries of Central Europe seem perfectly suited for playing the role of such a testing ground.
Professors Maciej Kisilowski & Bernadett Koles
Budapest, April 2011
 Dunleavy, Patrick, Helen Margetts, Simon Bastow, and Jane Tinkler. 2006. New Public Management is dead: Long life digital-era governance. Journal of Public Administration Research and Theory 16 (3):467.
 Radin, Beryl. 2006. Challenging the performance movement : accountability, complexity, and democratic values, Public management and change series. Washington, D.C.: Georgetown University Press.
 See especially Zack, Michael H. 2003. Rethinking the knowledge-based organization. Sloan Management Review; Starbuck, William H. 1992. Learning by knowledge-intensive firms. Journal of Management Studies 29:6
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