Management
Management
Management
State Management offers a comprehensive yet concise introduction to the new field
of state management, presenting an analysis of basic questions within the theories of
bureaucracy, policy-making, principal–agent modelling and policy networks.
Focussing upon recent state transformation, it illuminates public sector reform
strategies such as New Public Management as well as incorporation, tendering and
bidding, decentralisation, team production and privatisation.
This book argues that we should look upon the variety of models or approaches to
public management or public administration as all belonging under state management.
The so-called “working state” in a well-ordered society involves government
delivering services, paying for social security and respecting the rule of law. In this
text, Jan-Erik Lane systematically examines the key approaches to the study of how
government attempts to achieve these goals, discussing the pros and cons of alternative
frameworks of analysis and exploring the relevance of the principal–agent approach.
Each chapter discusses a different issue within state management that is integral to
the broader debate, including:
• Public regulation
• The relationship between the law and the state
• Combining ecology and policy-making
• Multi-level governance
• The virtues and vices of public–private partnerships
• Policy implementation.
Presenting a clear overview of how the state operates when government sets out to
deliver public services, and generating questions to encourage new research, State
Management is a valuable new text for both undergraduate and postgraduate courses
in political science, public administration and public management.
Jan-Erik Lane has taught as a professor in several universities around the globe. He
has published numerous books and articles on many topics in political science. He
was professor at the University of Geneva between 1996 and 2008 and is now
Mercator visiting professor at the University of Heidelberg.
“Jan-Erik Lane has once again produced a timely and provocative book – this time
upon the distinctive challenges of public management in the twenty-first century. It is
sure to become a classic text for researchers and students in the field alike”.
Stephen P. Osborne, Professor of International Public Management,
University of Edinburgh Business School, Scotland
“Jan-Erik Lane has yet again produced a fresh lens for viewing the public sector and
how it operates. State Management focuses on theories and models of public man-
agement and administration that provide distinctive means for delivering public serv-
ices. He works systematically through the gamut of design options and issues in short,
crisp chapters organized around a lucid and logical presentation of ideas. The book is
strongly recommended for its ability to engage students and scholars of public man-
agement and administration”.
John Halligan, Professor, School of Business and Government,
University of Canberra, Australia
“A pioneer in the contemporary study of public management shows that state man-
agement is distinctly different from ‘running government like a business’. Lane
points out the consequences for theory and research. He demonstrates the contempo-
rary relevance of classical core questions of public administration by treating con-
temporary management of the public sector from his profound knowledge and broad
overview of the field: from bureaucracy theory to the importance of multilevel gover-
nance, sustainability policy and the rule of law in modern public management. The
result is an inspiring achievement. The book provides a great stepping stone for fac-
ulty and students to address the many wicked issues the management of contemporary
government – in its many component parts – is facing from a theoretically grounded
and research perspective”.
Jan-Erik Lane
For Dean Beat Bürgenmeier – a great admirer
of Max Weber in the University of Geneva
Preface vii
14 The developmental state: from the Third World to the First World 149
Index 180
Preface
While management is the academic discipline that models how private firms
operate, public management or public administration targets the public sec-
tor in an encompassing fashion, covering government at all levels, independ-
ent regulatory boards as well as public enterprises. This book suggests that
we look upon the variety of models or approaches to public management or
public administration as all belonging under state management. A key issue
in state management is whether private management is entirely different
from public management, given the distinction between the market and the
state, the public and the private or economics and politics.
How do governments get the job done in providing services to their popu-
lations? This is the core question in theories of state management, i.e. organ-
isation of the delivery of services in the public sector. It has received many
different answers that will be surveyed in this book, subsuming them under a
parsimonious set of models. The purpose is to identify the different models of
the so-called output side of government, i.e. how the units that deliver public
services operate.
Since the emergence of New Public Management (NPM) in the 1980s,
there has been a tension between NPM and traditional public administration
as academic disciplines, meaning that we perceive a split between two sets
of approaches to be employed when organising the public sector. The time
has come to bridge this gap by showing that state management hosts a
diversity of models with which one may analyse government outputs and
outcomes.
This book surveys the main theories of state management, enquiring into
the different modes of organising the state from the perspective of public
services delivery. It summarises my teaching of public administration and
NPM since the late 1970s, from my teaching at Umea University, Sweden
to my courses in China: Chinese University of Hong Kong, Hong Kong
University, Fudan University, and in Beijing. Economist Bürgenmeier
viii Preface
suggested the title of this book, being an expert on private management. In
the Conclusion, I have drawn upon the article “Strategic Management in the
Public Sector: More than an Algorithm” published in The British Journal of
Leadership in Public Services (2008), Volume 2, Issue 3.
Jan-Erik Lane
Heidelberg, March 2009
Introduction
Is public management different
from private sector
management?
Introduction
Management is a major field of study in economics and the social sciences. It
forms an integral part of business administration as well as in organisational
analysis. During the post-Second World War period thousands of articles and
books have been published in this area under the labels of “Strategy”,
“Organisational Behaviour” or “Culture and Leadership in Organisation”.
Given such an effort to understand how private firms operate, their goals,
structures and results, one cannot avoid the question of the relevance of man-
agement for the analysis of the public sector and how government functions.
Management deals with how people are motivated to participate in teams
with a definitive structure and leadership in order to produce goods and serv-
ices. The theories of management were developed in relation to the modern
enterprise, often having thousands of employees, working under a specific
private law institution, namely, the Limited Liability Company or aktienge-
sellschaft. Given that management modelled the internal operations of large
private enterprises, it is not astonishing that it identified formal organisation
as a characteristic feature of private sector management. This was a basic
similarity with the study of bureaucracy in government. Yet, one must pose
in an explicit manner the question of whether public management tends to be
more different than similar compared with private management.
In this chapter, I will argue for the difference thesis, claiming that politics
and the public sector make for several differences between public and private
management. Although public management can learn from the many insights
in private management, one should not equate them and bypass how different
public management tends to be compared with private management.
Objectives
Public management is the accomplishment of social objectives, whereas pri-
vate management is the maximisation of profit for a set of owners. One may
express this difference between social objectives and private objectives in
various ways, but however it is expressed, it is still valid. Government typi-
cally delivers goods and services that are in the common interest of a nation
or community. Private enterprises are in the business to make money. Politics
enters public management in a decisive manner when the basic goals of the
organisations are defined and decided upon.
Insisting upon the separation between governance towards national or
community goals on the one hand and profit maximisation on the other does
not entail that private enterprises cannot have a multiplicity of objectives and
that making money is not an incentive in public management. Of course pub-
lic enterprises and organisations with user fees are concerned with making
money. The huge modern corporation states time and again that it also cares
about its employees and the environment besides its profits. On a few occa-
sions, we will have reason to discuss the public choice school which argues
that incentives in politics and markets tend to be the same, i.e. the maximisa-
tion of selfish motives, including making money. Yet, even if it is true that
New Public Management (NPM) underlined the relevance of buying and sell-
ing in government operations to an extent not seen before, it remains true that
public management has a different goal function from private management.
A number of concepts in political science, sociology and economics have
been devised to describe the typical goals of government: the public interest,
national interests, collective interests, public goods, externalities, common
pool goods, economies of scale, etc. I will employ the term “social objec-
tives” in order to emphasise that public management delivers goods and
services to a group that can be as large as a country or even smaller units of
the country. The delivery of goods and services for social objectives implies
that community considerations that are uniform, tax financed, obligatory,
Introduction 3
encompassing, etc. play a major role. This is what makes the following list of
services public: (1) law and order; (2) infrastructure; (3) education and health
care; (4) social security.
One is well reminded of the distinction between provision and production
in relation to public services, as it is not necessary to employ a public agency
to deliver such services. It can be done through contracting with a private
supplier. Actually, this is where models of public management may make a
difference as some favour public supply while others allow for contracting
out.
Setting
Private management is orientated towards the market, as the market is the
final arbiter of a private enterprise. It shapes its destiny in many ways, deter-
mining its profitability prospects, at least to a considerable extent. The setting
of public management is an entirely different one, comprising politics, power
and the chief public institutions of a country. Whether the government is a
national, regional or local one, they are the principals of public management,
meaning that it is up to them to instruct, fund and monitor public management
operations. And they are not “owners” in the same way as shareholders
own private corporations, being at the same time the principals of private
management.
Whereas individual share owners have full property rights in the corpora-
tion in question within the limits of limited liability rules, the members of
government have no ownership rights. They manage a trust – the state – in the
interests of a group: a nation or a community. Through the political process it
is decided what goals this trust should promote. The achievement of these
goals may be positive for the members of government, but in itself it gives
them no right to share the gains of the community. Individual people deliver-
ing public services will demand private compensation for their efforts – the
incentive question in public management being extremely important – but
they cannot claim ownership.
Many public services are allocated outside of the market, as it is difficult to
reveal their value in a correct manner. Thus, public services always come
with a cost, but their price is not fully known. The problem of designing ways
and methods to reveal consumer preferences for public services has been
debated for a long time without arriving at a solution that would be easy to
apply. This means that the value of public services tends to reflect the politi-
cal preferences forthcoming in the democratic election process. The diffi-
culty with the paradoxes in private supply of public services – free rider,
preference distortion – is so large that government will employ the political
channel to supply these goods and services.
4 Introduction
Thus, public management is entrenched in a setting where political bodies
– ministries, parliaments, courts – play a major role. The same applies to
services provided in the regional or local contexts. The close link between
public management and politics shows up in two distinctive features of
public management:
1 tax financing
2 public law regulation.
Although user fees are common in public management, taxes constitute the
largest income source, especially when obligatory social security charges are
classified, as they should be, as taxes. Most taxes are levied without ear-
marked funding purposes, which is true of income taxes, corporate taxes and
inheritance taxes. They are used to cover the costs of providing public serv-
ices, despite the fact that the value of these services is not revealed simulta-
neously. Public services are considered valuable when politicians vote
appropriations covering their costs of provision.
The provision of public services being handled outside of the market
setting, their regulation in terms of access, quality and quantity tends to be
regulated by public law instructions. Thus, each and every public service
has its legal framework, stating goals, means, funding, etc. This reliance
upon general and special administrative law is typical of public management,
and accounts for its heavy reliance upon formal organisation and bureau-
cracy. Private management is basically regulated through private law
such as contract law and company law. As a matter of fact, each area of
public management – education, fire protection, health care, police, etc. – has
its own special administrative law. There is nothing comparable in
private law.
While it is true that private management also faces a set of norms of account-
ability and responsibility, it is the case that in the public sector, rule of law
requirements go further and are more demanding, especially in terms of pro-
cedures and documentation.
Public sector reform tends to bypass the implication of rule of law for state
management, with the only exception of reforms of human rights. Thus, it has
been argued against the NPM philosophy that its emphasis upon efficiency
and marketisation squares badly with the requirements for rule of law.
Rule of law is a sine qua non in democracies, as it constitutes the basic ele-
ments in constitutional democracies besides political participation. Even
when a country does not fully adhere to the democratic regime, it often pays
respect to some of the rule of law requirements (Lane, 2007).
6 Introduction
The problematics of state management
A theory of state management that would be comparable in size and depth to
the theory of management in the private sector would have to confront a set
of thorny issues that crop up in public organisation and the governance of the
public sector:
1 How relevant is the use of the bureaucracy model? The reply to this
question depends upon how one evaluates the model, positively or neg-
atively, and for which context it is to be employed.
2 How rational is public policy-making? The answer to this problem
depends upon the meaning of rationality in the social sciences as well as
upon whether one targets individual behaviour or group behaviour.
3 Is successful implementation possible, and if so how? Different replies
to the implementation gap have been rendered, but there is, as yet, no
conclusive answer about how to achieve implementation.
4 Can the implementation deficit be bridged? Once this riddle in public
sector management was uncovered, many replies deserve discussion:
agencies, networks or public–private partnerships, internal markets,
public joint-stock companies.
5 Can one say something about the most profound problems in public
management? Weber suggested the risk of appropriation of the public
resources, but more recent research has focussed upon notions taken
from game theory, especially the theory of asymmetric information as
well as the idea of principal–agent interaction. How much can they
explain the puzzles of public administration and public management?
6 How is the recent emerging phenomena of multi-level governance
analysed? It seems that understanding this requires not only theories of
decentralisation or regionalisation but also network concepts.
7 What is the place of law in state management? An answer to this ques-
tion requires reflection upon the rules-based nature of public organisa-
tion and governance as well as some insights into basic concepts in
jurisprudence, such as rights, duties and competences.
8 Today the hottest topic is how to combine ecology and policy. A reply to
this problem leads one to ponder over both empirical matters, i.e. how
policy leads to pollution, and normative matters, i.e. what environmental
principles should policies be based upon?
9 Finally, alternative country-specific models of effecting state manage-
ment provide an interesting area for new research, posing questions as to
why some countries have structured their public organisation in this way
and not another, like other countries. Do outcomes differ with institu-
tional set-ups?
Introduction 7
This book offers an introduction to the research on these problematics. It is
hoped that students may choose one or another theme in order to pursue more
profound analyses than what can be done in this introductory text.
Conclusion
State management is very different from private sector management.
Examining the classical models of public administration, one would wish to
insist upon the fact that public management is sui generis, meaning that it is
not reducible to general management and its models of strategy, for instance.
I would like to state a clear adherence to the difference hypothesis concern-
ing public management. Its distinctive features set public management
off from private management, including the dominant role of politics, the
lack of proper ownership, the omnipresence of some kind of tax funding and
the unmistakable format in the form of public law (Hood and Margetts,
2007).
There are a few major approaches to state management. They are so dif-
ferent that they should be analysed in comparison. They come down differ-
ently on the politics/administration divide that is so typical for public
management in contradistinction to private management. In public adminis-
tration for instance, politics has the upper hand with the call for neutral
bureaucrats not to question policy. In public management as quangos or policy
networks, managerialism prevails, as government is to be located at arm’s
length. In the policy framework, implementation becomes the missing link
between legislation and outcomes. When public management is seen as mar-
ketisation, or tendering/bidding, then only the final responsibility for making
sure that public services are forthcoming rests with government. Thus, even
Introduction 9
when the emphasis is strictly put upon getting the job done, politics is always
present in public management somehow.
I firmly believe that the difference hypothesis is the correct one, stating that
public management is different from private management. This entails that
any direct transfer of managerialism from the private sector to the public sec-
tor is bound to fail, because managerialism does not pay enough attention to
the aspects that derive from public organisation: laws, rule of law, budgeting
and taxation, complaint and redress institutions (March and Olsen, 1989).
A theory of state management would do what the theory of management
accomplishes for teaching in business schools around the world, namely,
offer a comprehensive approach to how people are organised for the delivery
of services to the population. It would comprise an assessment of the variety
of models that the state can employ to get the job done. It outlines a distinct
perspective upon government and its organisations.
Essential summary
1 A theory of state management would outline the key issues or problem-
atics in the provision of public services.
2 State management differs from private sector management in several
aspects, such as the role of taxation. One major difference is the strong
rule of law requirement upon public management.
3 State management is intimately linked with public or administrative
law, the implications of which used to be the major concern in the disci-
pline of public administration.
4 State management theory faces a number of challenges, as the problem-
atics in modelling public services provisions are numerous: degree of
rationality, implementation gap or strategy, public–private partnerships
or networks, New Public Management – outsourcing, incorporation,
contracting in, the role of bureaucracies or other principal–agent mech-
anisms, the place of law and the role of regulation in governing the pri-
vate sector, etc.
5 State management is fundamentally different from private firm manage-
ment. This difference hypothesis may be supported in several ways.
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