Kay 235: Introduction to Management Lecture 2 Subject: The public & private (business) administration difference Reading: Graham Allison Article

Public and Business Administration: The Links Last week: Links between public and private (business) administration A generic view of administration No real difference between PA & BA- Wilson Universal principles of (scientific) management- Taylor PA is a multidisciplinary field Includes political science, management & law There are many BA courses in PA programs

Beginning Point for Allison Wallace Sayre`s often quoted law/hypothesis: Based not on scientific analysis, but on years of personal observation of governments. Public and private management are fundamentally alike in all unimportant respects.

Allison`s objective Answer Sayre`s invitation to research And write an article to examine and discuss how PA & BA are similar and different. Central question: In what ways are the jobs & responsibilities of a public manager similar to and different from those of a private manager?

FRAMING THE ISSUE How is `management` different (broader, narrower…) from administration? Management: Organization and direction of resources to achieve a desired result. What is public management? Minimal government PA borrowing from management strategies Detailed answer: Laurence Lynn`s article next week

ANATOMY OF PA What? Activities found in govt. and non-profits Who? People who at all levels of government Elected Presidents, members of the Parliament, mayors… Appointed Many levels of bureaucrats like office directors, judges… Contracted

Definition of PA Daily personnel management Workforce Planning Collective bargaining & labor-management relations Productivity & performance management Organization/ reorganization Financial management Program and management audit

Similarity: General Functions How are public and private management alike? 1. A set of general management functions: Famous acronym: POSDCORB Planning Organizing Staffing Directing Coordinating Reporting Budgeting Similar lists can be found in the management literature

Similarity: General Functions A general manager is expected to integrate these general functions to achieve results. In real life situations, significant differences may emerge More difficult execution in PM The two sectors are interdependent

Differences How are public and private management different? Identical labels take on different meanings in public and private settings People, who worked in both sectors judge that the two are different and public management is harder.

Difference 1: Time Perspective Public managers have relatively shorter time horizons dictated by Political necessities Political calendar (e.g. elections) Private managers have a longer time perspective oriented toward Market developments, Technological innovation and investment, Organization building

Example to Time Horizon Difference The US President looks forward four years at most The fourth, even the third year is dominated by the reelection issues and the campaign President of a company usually looks forward a decade (Ten years)

Difference 2: Duration The length of service of politically appointed top public managers is relatively short Averaging no more than 18 months Private managers have a longer tenure

Difference 3: Successors In private management, a successor and even several possible candidates are trained before leaving the job In public management, fostering a successor can be perceived even dangerous

Difference 4: Performance Measurement There is little agreement on the standards and measurement of performance in the public sector This has changed since late 1970s Public management discussion in Lynn article Various tests of performance is available in the private sector Financial return Market share Performance measures for executive pay

Difference 5: Personnel Constraints Legal constraints complicate the hiring, transfer, and layoff of personnel in the public sector Private managers have greater latitude in hiring, transfer and firing of employees Other important personnel issues: Can government employees join unions? Can they strike and collectively bargain?

Difference 6: Equity & Efficiency In public management the main emphasis is on providing equity among different constituencies Private management places greater stress upon efficiency and competitive performance

Difference 7: Public vs. Private Processes Public management tends to be exposed more to public scrutiny and claims of open government Private management tends to be relatively more `private` and its processes are less exposed to public review

Difference 8: Role of Press & the Media Public management must meet regularly with the press & the media Its decisions are often anticipated by the press Private sector decisions are reported less The press has a much smaller impact on the substance and the timing of the decisions

Example to Press Relations A CEO of a private firm rarely deals with the press Except for public relations purposes The US President is routinely on display Continuously dealing with the White House press, and with the wider circle of reporters, commentators and columnists

Difference 9: Persuasion & Direction Public managers often seek to mediate decisions in response to various pressures They have to form coalitions of inside & outside groups to survive By contrast, private managers risk little contradiction And thus seek less consent

Difference 10: Number of Superiors Public managers tend to regard themselves as responsive to many superiors This is a constitutional difference Separation of powers Private managers look more to one high authority

Difference 11: Legislative & Judicial Impact Public managers are often subject to close scrutiny by Legislative oversight groups Judicial orders Such scrutiny is much less common in private management

Difference 12: Bottom Line Public managers rarely have a clear bottom line Social usefulness and public interest are many times vague concepts, which are hard to define The bottom line is very clear for private managers To maximize profits brings legitimacy To increase market performance and survive

Issues that Complicate Things Blurring of differences between public and private management There are hybrid organizations Government agencies that seek profits Private firms that seek to promote the public interests A new category Public-private partnerships

How to extend the discussion? The article only provides One comparative example Several quotes from managers, who worked in both sectors More systematic comparisons are needed More case study research in PA to examine similarities and differences with BA