Third Edition Dr. Wasim Al-Habil. Chapter Strategic Management in the Public Sector

2 Chapter Eight Strategic Management in the Public Sector

3 Key Topics What is Strategic Management? What is Strategic Management? Strategic Management Process. Strategic Management Process. Four Factors Affect Strategic Management in PS. Four Factors Affect Strategic Management in PS. Strategic Challenges Faced by Public Managers. Strategic Challenges Faced by Public Managers.

4 Strategic Management is “ a philosophy of management that links strategic planning with day-to-day decision making. Strategic management seeks a fit between an organization ’ s external and internal environment. ”

5 What is Strategic Management? Strategy: It is the employment of, the management of, overall resources to gain an objective. Strategy: It is the employment of, the management of, overall resources to gain an objective. Strategic management is the modern application of this ancient art to contemporary business and public administration. Strategic management is the modern application of this ancient art to contemporary business and public administration. An objectives of private sector might include doubling annual dividends to stakeholders or expanding investment. An objectives of private sector might include doubling annual dividends to stakeholders or expanding investment. Objectives of public sector include reduction in the crime rate or an increase in the high school graduation rate. Objectives of public sector include reduction in the crime rate or an increase in the high school graduation rate.

6 Features of Strategic Management Six features identify a strategic management: Six features identify a strategic management: 1. The identification of objectives to be achieved in the future. 2. The adoption of time frame (planning horizon) in which these objectives are to be achieved. 3. A systematic analysis of the current circumstances of an organization. 4. An assessment of the environment surrounding the organization. 5. The selection of a strategy for the achievement of desired objectives by a future date, often comparing various alternatives. 6. The integration of organizational efforts around this strategy.

7 Strategic Management Process Strategic Management process includes: Strategic Management process includes: 1. Define the organizational process and announce it in a mission statement. 2. Identify organizational objectives and announce them in the vision statement. 3. Establish a time frame for the achievement of objectives. 4. Review organizational capabilities via a SWOT analysis. 5. Assess organizational environment both now and in future. 6. Identify strategic alternatives, select a strategy, and promulgate it in a strategic plan. 7. Implement strategy by marshalling organizational resources. 8. Create control and evaluation system for continuing feedback.

8 The Management by Objectives Process Peter Drucker ’ s 1954 work, The Practice of Management, was the pioneer of MBO. Peter Drucker ’ s 1954 work, The Practice of Management, was the pioneer of MBO. The management by objectives process passes through the following stages: The management by objectives process passes through the following stages: 1. Reaching mutual agreement on ultimate goals. 2. Establishing measurable objectives to be met over a set of time. 3. Assessing performance: to what extent have goals and objectives been met?

9 Characteristics of Objectives Objective: A short-term goal; something that must be achieved on the way to a larger overall achievement. Objective: A short-term goal; something that must be achieved on the way to a larger overall achievement. A statement of objectives should be: A statement of objectives should be: 1. Succinct, and limited to the organization ’ s sphere of influence. 2. Directional, with specific future states to be achieved. 3. Time limited, with indications when each objective is to be achieved. 4. Measurable, so that achievement or progress can be evaluated.

10 The Planning Horizon Strategic Planning: The set of processes used by an organization to assess the strategic situation and develop a strategy for the future. Strategic Planning: The set of processes used by an organization to assess the strategic situation and develop a strategy for the future. Planning Horizon: The time frame during which the objectives of strategic plan are to be achieved. Planning Horizon: The time frame during which the objectives of strategic plan are to be achieved. The essence of planning is founded on: The essence of planning is founded on: 1. Assessing present situation. 2. Deciding what the future situation should be. 3. Determining what must be done to get there.

11 SWOT Analysis SWOT Analysis: The overall conduct of a major enterprise to achieve long-term goals; the pattern to be found in a series of organizational decisions. SWOT Analysis: The overall conduct of a major enterprise to achieve long-term goals; the pattern to be found in a series of organizational decisions. Analyze the organization and its environment: This step is also known as a SWOT analysis (strengths, weaknesses, opportunities, and threats). Analyze the organization and its environment: This step is also known as a SWOT analysis (strengths, weaknesses, opportunities, and threats). The starting point is organizational analysis: What are the strengths and weaknesses of the organization itself? The starting point is organizational analysis: What are the strengths and weaknesses of the organization itself? Next, the organization must examine the opportunities and threats in its external environment. Next, the organization must examine the opportunities and threats in its external environment.

12 Four Strategic Factors Four important factors affect the use of strategic management concepts in the public sector: Four important factors affect the use of strategic management concepts in the public sector: 1. The public-private paradox. 2. The importance of being close to the center. 3. Organizational language and culture. 4. Organizational place.

13 1. The public-private paradox Business and government are ultimately different. Business and government are ultimately different. Business administration and public administration have very much in common. Business administration and public administration have very much in common. The paradox lies at the heart of public administration as a discipline. The paradox lies at the heart of public administration as a discipline. Work of government: Work of government: 1. Has political legitimacy and formulated by politics. 2. Is embodied in law and implemented by force. 3. Is responsible to all. 4. Must be equitable. 5. Does measure its success by profit.

14 1. The public-private paradox Business lives in a world ruled by different fundamental principles. Business lives in a world ruled by different fundamental principles. Business aims at: Business aims at: 1. Pursuing the interest of their shareholders, not those of the public as a whole. 2. Pursuing a private interest. 3. Focusing on specific target groups. 4. Having leaders through board of directors. 5. Having greater autonomy and capability ti make strategy.

15 2.The importance of being close to the center At the center, the predominant form taken by the machinery of government is the bureau or department. At the center, the predominant form taken by the machinery of government is the bureau or department. There are four key reasons why it may be difficult to adopt strategic management in public organization: There are four key reasons why it may be difficult to adopt strategic management in public organization: 1. Bureau managers must share power with other important actors as they seek to make decisions. 2. Because bureaus function in a political as opposed to a rational environment, they often do not occur as to measures of adequate performance. 3. Public managers have far less overall autonomy and control than their private sector counterparts. 4. Because of the above factors, strategic decision in government is far more complex and difficult than in the private one.

16 3. Organizational language and culture Strategic management entails in culture and language. Strategic management entails in culture and language. It is easier to adopt this language and develop this culture in environment where: It is easier to adopt this language and develop this culture in environment where: 1. There is continuous training for staff members. 2. There are various experiences of executives who worked in various organizational sectors. 3. There is a successful culture of change.

17 4. Organizational Place Strategic management approaches in public sector can more rapidly be adopted under these conditions: Strategic management approaches in public sector can more rapidly be adopted under these conditions: 1. The further the public organization is from the heart of political leadership in its state, nation, or local government. 2. The more the organization is autonomous as to its funding, personnel decisions, and overall destiny. 3. The smaller it is providing that it has the minimum critical mass. 4. The greater the proportion of its income is raised directly from its customers.

18 Strategic Challenges Faced by Public Managers There are six strategic challenges faced by public sector managers: There are six strategic challenges faced by public sector managers: 1. The challenge of mandate. 2. The challenge of efficiency. 3. The challenge of competitiveness. 4. The challenge of boundaries. 5. The challenge of service. 6. The challenge of public interest.