The study of management and organizations

The historical overview in Chapter Two was intended to make clear
why organizational environment became one of the most important
concepts in the study of management and organizations. The early contributors to the study of organizations concentrated on the middle parts
of the framework in Figure 1.1 —on structures, mainly, with limited attention to certain aspects of tasks, processes, incentives, and people. They
placed little emphasis on an organization ’s environments or its managers’
responses to them. Contemporary researchers and experts now regard
organizational environments, and the challenges of dealing with them, as
absolutely crucial to analyzing and leading organizations. This is certainly
true for public organizations, because they are often more open than other
organizations to certain types of environmental pressures and constraints.
Public organizations tend to be subject to more directions and interventions from political actors and authorities who seek to control them.
Management experts now exhort managers to monitor and analyze
their environments, and consultants regularly lead executives and task forces
through such analyses as part of strategic planning sessions (described further in Chapter Seven). In spite of all the attention to organizational environments, however, the management fi eld provides no exact science for
analyzing them, in part because the concept is complex and diffi cult in various ways. Public organizations are often embedded in larger governmental
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Analyzing the Environment of Public Organizations 87
structures. The Food and Drug Administration, for example, operates as a
subunit of the U.S. Department of Health and Human Services, which in
turn is a component of the U.S. federal government. The larger units of
government impose system-wide rules on all agencies in the government,
covering such administrative processes as human resources management,
purchasing and procurement, and the budgeting process. In many agencies,
different subunits operate in very different policy areas and often have stronger alliances with legislators and interest groups than with the agency director (Kaufman, 1979; Radin, 2002, p. 35; Seidman and Gilmour, 1986). All
this can make it hard to say where an agency ’s environment begins and ends.
In addition, members of an organization often enact its environment
(Scott, 2003, p. 141; Weick, 1979, p. 169). They consciously or unconsciously
choose which matters to pay attention to and what to try to change. They
make choices about the organization ’s domain, or field of operations,
including the geographic areas, markets, clients, products, and services on
which the organization will focus. Decisions about an organization ’s domain
determine the nature of its environment. For example, some years ago leaders of the Ohio Bureau of Mental Retardation adopted a “deinstitutionalization” policy, moving patients out of the large treatment facilities operated
by the agency and into smaller, private sector facilities. This changed the
boundaries of the agency, its relations with its clients, and the set of organizations with which the agency worked. Organizations can sometimes create
or shape their environments as much as they simply react to them. This complicates the analysis of environments, but it makes it all the more important.
These complications about the concept of an organization ’s environment may explain the rather surprising disappearance of this concept from
the work of some major organization theorists. Authors who developed and
championed the concept (Aldrich, 1979) have more recently produced
books that mention the term sparingly and do not treat it as a primary concept, with no explanation of its demise (Aldrich, 1999; Baum and McKelvey,
1999). The term organizational environment appears much less frequently in
the titles of articles in prominent journals. In fact, as described shortly, most
of the contemporary analyses of organizations and management employ
concepts relevant to organizations’ relations with their operating contexts
or environments. Authors may increasingly feel that new concepts—such
as networks, stakeholders, and boundaries—discussed in this chapter have
more value than the concept of an organizational environment. In addition,
prominent authors still employ the concept of organizational environment
in important ways (Daft, 2013, chap. 4, 5, and 6; Hall and Tolbert, 2004;
Kalleberg, Knoke, Marsden, and Spaeth, 1996, chap. 6; Scott, 2003, chap. 6).
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88 Understanding and Managing Public Organizations
General Dimensions of Organizational Environments
One typical approach to working through some of the complexity of environmental analysis is simply to lay out the general sectors or clusters of
conditions, such as those in Exhibit 4.1 , that an organization encounters. Consultants and experts often use such frameworks to lead groups
in organizations through an environmental scan (described in Chapter
Seven) as part of a strategic planning project or in a general assessment
of the organization. For example, the U.S. Social Security Administration
(2000) used an environmental scan in their efforts to develop a major
vision statement.
General Environmental Conditions
• Technological conditions: The general level of knowledge and capability in science,
engineering, medicine, and other substantive areas; general capacities for
communication, transportation, information processing, medical services, military
weaponry, environmental analysis, production and manufacturing processes, and
agricultural production
• Legal conditions: Laws, regulations, legal procedures, court decisions; characteristics
of legal institutions and values, such as provisions for individual rights and jury trials
as well as the general institutionalization and stability of legal processes
• Political conditions: Characteristics of the political processes and institutions in a
society, such as the general form of government (socialism, communism, capitalism,
and so on, or the degree of centralization, fragmentation, or federalism); the degree
of political stability (Carroll, Delacroix, and Goodstein, 1988); and more direct and
specifi c conditions such as electoral outcomes, political party alignments and success,
and policy initiatives within regimes
• Economic conditions: Levels of prosperity, infl ation, interest rates, and tax rates;
characteristics of labor, capital, and economic markets within and between nations
• Demographic conditions: Characteristics of the population such as age, gender, race,
religion, and ethnic categories
• Ecological conditions: Characteristics of the physical environment, including climate,
geographical characteristics, pollution, natural resources, and the nature and density
of organizational populations
• Cultural conditions: Predominant values, attitudes, beliefs, social customs, and
socialization processes concerning such things as sex roles, family structure, work
orientation, and religious and political practices
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Analyzing the Environment of Public Organizations 89
Anyone can provide examples of ways in which such conditions infl uence organizations. Technological and scientifi c developments gave birth
to many government agencies, such as the Environmental Protection
Agency and the Nuclear Regulatory Commission. Technological developments continually infl uence the operation of government agencies;
these agencies must struggle to keep up with advances in computer technology, communications, and other areas. Congress passed legislation
mandating vast changes at the U.S. Internal Revenue Service largely as a
result of diffi culties the agency had in developing and adapting to new
information technologies for processing tax returns (Bozeman, 2002b).
Demographic trends currently receive much attention, as analysts project
increasing percentages of women and minorities in government employment. This raises the challenge of managing diversity in the workplace
(Ospina, 1996; Selden, 1997). Mainly due to the increasing size of the
population of retired Americans, the Social Security Administration
(SSA) projected that between 1999 and 2010 the benefi ciaries of its main
programs will increase from about fi fty million people to more than sixty
million. Due to this increase and changes in laws about Social Security,
such as legislation requiring more services to benefi ciaries with disabilities, the agency projected the need for an increase of fi fteen thousand
to twenty thousand work years of employee effort during this period if
the agency continued to use its current procedures (U.S. Social Security
Administration, 2000, p. 6). Public administrators attend to legal developments, such as changes in public offi cials’ legal liability for their decisions (Cooper, 2000; Koenig and O ’Leary, 1996; Rosenbloom, Kravchuck,
and Rosenbloom, 2001; Rosenbloom and O ’Leary, 1997). As for the
political dimensions of organizational environments, much of the rest
of this book, but especially this chapter and the next, pertains to such
infl uences.
Another common approach to analyzing environments is to list specifi c elements of an organization ’s environment, such as important stakeholders, or organizations and groups that have an important interest
in the organization (Harrison and Freeman, 1999). A typical depiction
of such elements of the environment might include competitors, customers, suppliers, regulators, unions, and associates. Similarly, Porter
(1998) analyzed the major infl uences on competition within an industry: industry competitors, buyers, suppliers, new entrants, and substitutes. Consultants working with organizations on strategy formulation
sometimes use such frameworks in a stakeholder analysis, to identify key
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90 Understanding and Managing Public Organizations
stakeholders of the organization and their particular claims and roles
(Bryson, 1995).
Research on Environmental Variations
Organizational researchers have also produced more specifi c evidence
about the effects of environments. Selznick (1966; see also Hall and
Tolbert, 2004) helped lead this trend with a study of a government corporation, the Tennessee Valley Authority (TVA). He found that environmental infl uences play a crucial role in institutionalization processes in
organizations. Values, goals, and procedures become strongly established,
not necessarily because managers choose them as the most efficient
means of production, but in large part as a result of environmental infl uences and exchanges. The TVA, for example, engaged in co-optation,
absorbing new elements into its leadership to avert threats to its viability.
The U.S. government established the TVA during the New Deal years
to develop electric power and foster economic development along the
Tennessee River. TVA offi cials involved local organizations and groups in
decisions. This gained support for the TVA, but it also brought in these
groups as strong infl uences on the organization ’s values and priorities.
In some cases, these groups shut out rival groups, putting the TVA in
confl ict with other New Deal programs with which it should have been
allied. Thus an organization ’s needs for external support and its consequent exchanges with outside entities can heavily infl uence its primary
values and goals.
Later research made the importance of the external environment
increasingly clear. Prominent studies that led to the emergence of contingency theory found more and more evidence of the impact of environmental uncertainty and complexity (Donaldson, 2001). Burns and Stalker
(1961), for example, studied a set of English fi rms and classifi ed them into
two categories. Mechanistic fi rms emphasized a clear hierarchy of authority, with (1) direction and communication dependent on the chain of command and (2) specialized, formally defi ned individual tasks. Other fi rms
were more organic, with less emphasis on hierarchy and more lateral communication and networking. Tasks were less clearly defi ned and changed
more frequently. Managers in these fi rms sometimes spurned organizational charts as too confi ning or even dangerous. The mechanistic fi rms
succeeded in stable environments—those with relative stability in products,
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Analyzing the Environment of Public Organizations 91
technology, competitors, and demand for their products. In such a setting, they could take advantage of the effi ciencies of their more traditional
structures. Other fi rms, such as electronics manufacturers, faced less stable
environmental conditions, with rapid fl uctuations in technology, products,
competitors, and demand. The more organic fi rms, which were more fl exible and adaptive, succeeded in this setting.
Lawrence and Lorsch (1967) studied fi rms in three industries whose
environments exhibited different degrees of uncertainty as a result of more
or less rapid changes and greater or lesser complexity. As changes in the
environment became more rapid and frequent, and as the environment
became more complex, these conditions imposed more uncertainty on
decision makers in the organizations. The most successful fi rms had structures with a degree of complexity matching that of the environment. Firms
in more stable environments could manage with relatively traditional,
hierarchical structures. Firms in more unstable, uncertain environments
could not.
In addition, different subunits of these fi rms faced different environments. As these different environments imposed more uncertainty on
the subunits’ managers, the successful fi rms became more differentiated;
that is, the subunits differed more and more from one another in their
goals, the time frames for their work, and the formality of their structure.
However, this increased the potential for confl ict and disorganization.
Successful fi rms in more uncertain environments responded with higher
levels of integration. They had more methods for coordinating the highly
differentiated units, such as liaison positions, coordinating teams, and
confl ict-resolution processes. This combination of differentiation and
integration made the successful fi rms in more uncertain environments
more internally complex. The authors’ general conclusion advanced
one of the prominent components of the contingency idea: organizations must adopt structures that are as complex as the environments they
As many studies of this sort accumulated, James Thompson (1967)
synthesized the growing body of research in a way that provided additional
insights. Organizations, he said, must contend with the demands of their
tasks and their environments. They do so by trying to isolate the technical core—their primary work processes—so that their work can proceed
smoothly. They use buffering methods to try to provide stable conditions
for the technical core. For example, they use boundary-spanning units—
such as inventory, personnel recruitment, and research and development
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92 Understanding and Managing Public Organizations
units—to try to create smooth flows of information and resources. Yet
environmental conditions can strain this process. In more complex
environments—with more geographical areas, product markets, competitors, and other factors—organizations must become more internally complex. They do so by establishing different subunits to attend to the different
environmental segments. More unstable environments create a need for
greater decentralization of authority to these subunits and a less formal
structure. The shifting environment requires rapid decisions and changes,
and it takes too long for information and decisions to travel up and down
a strict hierarchy.
Researchers have debated the adequacy of contingency theory (Hall
and Tolbert, 2004), and many have moved off in other directions. Yet recent
books still emphasize the importance and implications of contingency theory perspectives on organizational environments (Daft, 2013; Donaldson,
2001). An organization ’s structure must be adapted to environmental contingencies as well as other contingencies. In simple, homogeneous, stable
environments, organizations can successfully adopt mechanistic and centralized structures. In more complex and unstable environments, successful
organizations must be organic and decentralized, partitioned into many
departments with correspondingly elaborate integrating processes and
processes for managing the organization ’s boundaries and relation with
the environment.
Scholars have also further developed contingency-theory concepts
into carefully conceived environmental dimensions. Exhibit 4.2illustrates
prominent examples that researchers still use (Berman, Wicks, Kotha,
and Jones, 1999). Clearly these dimensions apply to public organizations.
Tax resentment and pressures to cut government spending in recent
decades show the importance of environmental capacity (munifi cence or
resource scarcity) for public organizations. The federal government has
a regionalized structure, refl ecting the infl uence of environmental heterogeneity and dispersion. Even organization theorists who attach little
signifi cance to the public-private distinction agree that public organizations face particular complications in domain consensus and choice (Hall
and Tolbert, 2004; Meyer, 1979; Miles, 1980; Van de Ven and Ferry, 1980).
Jurisdictional boundaries and numerous authorities, laws, and political
interests complicate decisions about where, when, and how a public organization operates. Research strongly supports the observation that public
status infl uences strategic domain choices (Mascarenhas, 1989), although
later chapters show how public managers often gain considerable leeway
to maneuver.
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Analyzing the Environment of Public Organizations 93
Turbulence and interconnectedness characterize the environments of
most public organizations. Studies of public policy implementation provide
numerous accounts of policy initiatives that had many unanticipated consequences and implications for other groups. Public managers commonly
encounter situations in which a decision touches off a furor, arousing opposition from groups that they would never have anticipated reacting (Chase
and Reveal, 1983; Cohen and Eimicke, 1998). Similarly, environmental
stability, dynamism, and change rates have major implications for public
organizations. Rapid turnover of political appointees at the tops of agencies and rapid external shifts in political priorities have major infl uences
on public organizations and the people in them. For example, researchers
fi nd evidence that turbulence and instability in the environments of public
Descriptive and Analytical Dimensions of
Organizational Environments
Capacity: the extent to which the environment affords a rich or lean supply of
necessary resources
Homogeneity-heterogeneity: the degree to which important components of the
environment are similar or dissimilar
Stability-instability: the degree and rapidity of change in the important components
or processes in the environment
Concentration-dispersion: the degree to which important components of the
environment are separated or close together, geographically or in terms of
communication or logistics
Domain consensus-dissensus: the degree to which the organization ’s domain (its
operating locations, major functions and activities, and clients and customers served)
is generally accepted or disputed and contested
Turbulence: the degree to which changes in one part or aspect of the environment in
turn create changes in another; the tendency of changes to reverberate and spread
Source: Aldrich, 1979.
Munifi cence: the availability of needed resources
Complexity: the homogeneity and concentration of the environment
Dynamism: the stability and turbulence of the environment
Source: Dess and Beard, 1984.
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94 Understanding and Managing Public Organizations
agencies affect the morale of their managers and infl uence their acceptance of reforms (Golden, 2000; Rubin, 1985).
These environmental concepts are useful for enhancing our understanding of public organizations. As this discussion shows, however, no conclusive, coherent theory of organizations explains how these dimensions
are related to one another and to organizations. In addition, organization
theorists have defi ned these concepts at a very general level. Certainly they
apply to public organizations, but to really understand public organizations
we need to add more specifi c content to the environmental dimensions.
There is a body of useful research and writing on public bureaucracies
that can help in this task, to which this discussion will turn after a review of
recent trends in research by organizational theorists relevant to the analysis
of organizational environments.
Recent Trends in Research on Organizational Environments
Some of the most prominent recent research in organization theory
concentrates on organizational environments and moves beyond contingency theory (Aldrich, 1999, chap. 3; Hall and Tolbert, 2004, chap. 12).
Population ecology theorists, for example, analyze the origin, development, and decline of populations of organizations using biological concepts (Hannan and Freeman, 1989). Just as biologists analyze how certain
populations of organisms develop to take advantage of a particular ecological niche, population ecologists analyze the development of populations of
organizations within certain niches (characterized by their unique combinations of available resources and constraints).
Some population ecology theorists reject the contingency-theory depiction of organizations as rational, speedy adapters to environmental change.
Indeed, they see environments as selecting organizational populations in a
Darwinian fashion (Hannan and Freeman, 1989). The population ecology
perspective analyzes how populations of organizations go through processes
of variation, selection, and retention. Variation involves the continuing
appearance of new forms of organization, both planned and unplanned.
Then the selection process determines which forms of organization will
survive and prosper, on the basis of their fi t with the environment or their
capacity to fi ll an environmental niche. A niche is a distinct combination of
resources and constraints that supports the particular form of organization.
Retention processes serve to continue the form through such environmental infl uences as pressures on the organizations to maintain past practices,
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Analyzing the Environment of Public Organizations 95
and through such internal processes as employees developing common
outlooks. Critics have raised questions about this perspective, arguing, for
example, that its broad biological analogies devote no attention to human
strategic decisions and motives in organizations (Van de Ven, 1979), and
that its proponents have applied it mostly to populations of small organizations, leaving open questions about how it applies to huge government
agencies and business fi rms.
Aldrich (1999) advanced an evolutionary perspective on populations
of organizations that he described as more general and overarching than
the population ecology perspective but that obviously draw upon it. He
said that the approach also has important connections to the perspectives described later in this chapter. It includes the processes of variation,
selection, and retention, with elaborations. All three of these processes
can operate on organizations from external or internal sources. Variations
in routines, procedures, and organizational forms can be intentional, as
individuals seek solutions to problems, or blind, as a result of mistakes or
surprises. In addition, there is a fourth process, struggle, in which individuals, organizations, and populations of organizations contend with each
other over scarce resources and confl icting incentives and goals. Aldrich
did not undertake to describe specifi c implications or offer advice for managers, but his perspective goes even further than the population ecology
approach, providing insights about ways in which organizational populations (1) are integral to processes of social change; (2) show much more
diversity of form than some research, such as the contingency approaches,
has recognized; and (3) continually emerge and evolve. Both the population-ecology and the evolutionary perspectives, however, offer insights
about historical and environmental forces that infl uence organizational
change and survival, reminding us that any model for organizational analysis should remain sensitive to growth, decline, or other variations in organizational forms. For example, observers of very innovative public executives
have argued that these executives appeared to engage in an “uncommon
rationality” in which they “see new possibilities offered by an evolving historical situation” and take advantage of political and technological developments that offer such possibilities (Doig and Hargrove, 1990, pp. 10–11).
Resource-dependence theories analyze how organizational managers try to obtain crucial resources from their environment, such as materials, money, people, support services, and technological knowledge.
Organizations can adapt their structures in response to their environment,
or they can change their niches. They can try to change the environment
by creating demand or seeking government actions that can help them.
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96 Understanding and Managing Public Organizations
They can try to manipulate the way the environment is perceived by the
people in the organization and those outside it. In these and other ways,
they can pursue essential resources. These theorists stress the importance
of internal and external political processes in the quest for resources.
Chapter Six discusses how their analysis of resources in connection with
internal power relationships applies to public organizations (Daft, 2013;
Pfeffer and Salancik, 1978, pp. 277–278).
Transaction-costs theories analyze managerial decisions to purchase a
needed good or service from outside, as opposed to producing it within the
organization (Williamson, 1975, 1981). Transactions with other organizations and people become more costly as contracts become harder to write
and supervise. The organization may need a service particular to itself, or
it may have problems supervising contractors. Managers may try to hold
down such costs under certain conditions by merging with another organization or permanently hiring a person with whom they had been contracting. These theories, which are much more elaborate than summarized
here, have received much attention in business management research and
have implications for government contracting and other governmental
issues (Aldrich, 1999; Bryson, 1995). Yet they usually assume that managers in fi rms strive to hold down costs to maximize profi ts. Governmental
contracting involves more political criteria and accountability, and different or nonexistent profi t motives, to the point that Williamson (1981)
expressed uncertainty as to whether transaction-cost economics applies to
nonmarket organizations. Later, however, he examined public bureaucracy
from the perspective of transaction cost economics (Williamson, 1999).
He concluded that the public bureaucracy, like other alternative modes
of governance (such as markets, fi rms, and hybrids), is well suited to some
transactions and poorly suited to others. Williamson argued that public
bureaucracy handles “sovereign transactions,” such as foreign affairs, more
effectively and effi ciently than other modes, such as fi rms and markets.
Studies of institutionalization processes hark back to the work of
Selznick (1966). They analyze how certain values, structures, and procedures become institutionalized (that is, widely accepted as the proper way
of doing things) in and among organizations. Tolbert and Zucker (1983)
showed that many local governments reformed their civil service systems by
adopting merit systems, because merit systems had become widely accepted
as the proper form of personnel system for such governments. In addition,
the federal government applied pressures for the adoption of merit systems. Meyer and Rowan (1983) argued that organizations such as schools
often adopt structures on the basis of “myth and ceremony.” They do things
according to prevailing beliefs and not because the practices are clearly the
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Analyzing the Environment of Public Organizations 97
means to effi ciency or effectiveness. DiMaggio and Powell (1983) showed
that organizations in the same fi eld come to look like one another as a
result of shared ideas about how that type of organization should look.
Dobbin and his colleagues (1988) found that public organizations have
more provisions for due process, such as affi rmative action programs, than
do private organizations. These studies have obvious relevance for public
organizations. Pfeffer (1982) suggested that this approach is particularly
applicable to the public sector, where performance criteria are often less
clear. There, beliefs about proper procedures may be more readily substituted for fi rmly validated procedures linked to clear outcomes and objectives. Public and nonprofi t managers encounter many instances in which
new procedures or schemes, such as a new budgeting technique, become
widely implemented as the latest, best approach—whether or not anyone
can prove that they are. In addition, some of the research mentioned earlier shows how external institutions such as government impose structures
and procedures on organizations. Some of these theorists disagreed among
themselves over these different views of institutionalization—whether it
results from the spread of beliefs and myths or from the infl uence of external institutions such as government (Scott, 1987).
Partly to resolve such divergence in concepts of institutionalism,
researchers drew distinctions between types of institutionalization processes
that lead to institutional isomorphism—a wonderfully tortured bit of jargon
that refers to organizations and other institutions becoming similar or identical to each other in form (Dimaggio and Powell, 1983; Scott, 2003, pp.
134–141). This institutionalization of similar forms can come from coercive
isomorphism, in which they have to comply with similar laws and regulations. Normative isomorphism comes from compliance with professional
and moral norms such as those imposed through accreditation or certifi cation processes by professional associations. Mimetic isomorphism occurs
when organizations and other entities imitate each other, on the basis of
a prevailing orthodoxy or culturally supported beliefs about the proper
structures and procedures. Frumkin and Galaskiewicz (2004) used the data
from the National Organizations Survey, a nationally represented sample of
organizations, to examine whether public, private, and nonprofi t organizations tended to differ in the incidence of these types of institutionalization
processes. They found that coercive, normative, and mimetic effects were
stronger for government establishments than for business establishments.
These developments show how elaborate and diverse the work on organizational environments has become, and each one provides insights. In
fact, scholars are currently arguing more and more frequently that there
is a need to bring these models together rather than argue about which
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98 Understanding and Managing Public Organizations
is the best one (Aldrich, 1999; Hall and Tolbert, 2004). Obviously they all
deal with processes that infl uence organizations in some combination, and
all are true to some degree.
The Political and Institutional Environments
of Public Organizations
The work on organizational environments provides a number of insights,
many of them applicable to public organizations. The preceding review
of the literature on organizational environments also shows, however, why
people interested in public organizations call for more complete attention to public sector environments. The contingency-theory researchers
express environmental dimensions very generally. They pay little attention
to whether government ownership makes a difference or whether it matters if an organization sells its outputs in economic markets. They depict
organizations, usually business fi rms, as autonomously adapting to environmental contingencies. Political scientists, however, have for a long time
deemed it obvious that external political authorities often directly mandate
the structures of public agencies, regardless of environmental uncertainty
(Pitt and Smith, 1981; Warwick, 1975). The most current perspectives on
organizational environments bring government into the picture, but they
also express their concepts very generally, subsuming governmental infl uences under broader concepts.
Major Components and Dimensions
Public executives commenting on public management and political scientists and economists writing about public organizations typically depict
organizational environments in ways similar to the conceptual framework
shown in Exhibit 4.3(Brudney, Hebert, and Wright, 1999; Downs, 1967;
Dunn, 1997; Dunn and Legge, 2002; Hood and Dunsire, 1981; Lynn,
Heinrich, and Hill, 2000; Meier and Bothe, 2007; Pitt and Smith, 1981;
Stillman, 2004; Wamsley and Zald, 1973; Warwick, 1975; Wilson, 1989).
One also needs to recognize that the environmental pressures on public organizations, as with all organizations, are becoming more global in
nature (Welch and Wong, 2001a, 2001b). The rest of this chapter discusses
the top part of the exhibit, concerned with general values and institutions.
The next chapter covers the bottom portion, dealing with institutions, entities, and actors.
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Analyzing the Environment of Public Organizations 99
Major Environmental Components
for Public Organizations
General Values and Institutions of the Political Economy
Political and economic traditions
Constitutional provisions and their legislative and judicial development
Due process
Equal protection of the laws
Democratic elections and representation (republican form)
Federal system
Separation of powers
Free-enterprise system (economic markets relatively free of government controls)
Values and Performance Criteria for Government Organizations
Effi ciency
Accountability, legality, responsiveness to rule of law and governmental authorities,
responsiveness to public demands
Adherence to ethical standards
Fairness, equal treatment, impartiality
Openness to external scrutiny and criticism
Institutions, Entities, and Actors with Political Authority and Infl uence
Chief executives
Executive staff and staff offi ces
Legislative committees
Individual legislators
Legislative staff (continued )
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100 Understanding and Managing Public Organizations
General Institutions and Values of the Political Economy
Chapter Two defi ned public agencies as organizations owned and funded by
government. They operate under political authority and without economic
markets for their outputs. The political system of the nation and its traditions, institutions, and values heavily infl uence the exercise of this political
authority. The U.S. Constitution formally states some of these values and
establishes some of the nation ’s primary public institutions and rules of
governance. Legislation and court cases have further defi ned and applied
them. Rosenbloom and O ’Leary (1997) observed that the personnel systems
in government are “law-bound.” That observation applies to many other
aspects of management and organization in government agencies as well.
Other values and rules receive less formal codifi cation but still have
great influence. For example, Americans traditionally have demanded
Other government agencies
Oversight and management agencies (GAO, OMB, OPM, GSA)
Agencies or governmental units with joint programs
Other levels of government
“Higher” and “lower” levels
Intergovernmental agreements and districts
Interest groups
Client groups
Constituency groups
Professional associations
Policy subsystems
Issue networks
Interorganizational policy networks
Implementation structure
News media
General public opinion
Individual citizens with requests for services, complaints, and other contacts
EXHIBIT 4.3 (Continued )
Rainey, Hal G.. Understanding and Managing Public Organizations, John Wiley & Sons, Incorporated, 2014. ProQuest Ebook Central,
Created from pensu on 2019-01-09 09:57:40. Copyright © 2014. John Wiley & Sons, Incorporated. All rights reserved.
Analyzing the Environment of Public Organizations 101
that government agencies operate with businesslike standards of effi ciency,
although the Constitution nowhere explicitly expresses this criterion
(Waldo, [1947] 1984). Relatedly, the nation maintains a free-enterprise
system that affords considerable autonomy to businesses and considerable respect for business values (Lindblom, 1977; Waldo, [1947] 1984).
These values are not clearly and specifi cally codifi ed in the Constitution.
According to MacDonald (1987), the Constitution actually lacks some of
the provisions necessary for a free-enterprise system, in part because some
of the framers considered certain economic activities, such as trading debt
instruments, to be immoral. Full development of the necessary governmental basis for a free-enterprise system required the actions of Alexander
Hamilton, the fi rst secretary of the treasury. Among other steps, he established provisions for the use of government debt as a source of capital for
corporations. MacDonald, a conservative, would almost certainly disavow
the conclusion that the private enterprise system in the United States was
created largely through the efforts of a government bureaucrat, using government funding. More generally, however, these examples illustrate the
existence, through formally codifi ed instruments and less formally codifi ed
conditions, of general values and institutional arrangements that shape the
operation of public authority.
These general values and institutional arrangements in turn infl uence
the values, constraints, and performance criteria of public organizations.
They sound abstract, but they link directly to practical challenges and
responsibilities for public organizations and managers.
Constitutional Provisions
The Constitution places limits on the government and guarantees certain
rights to citizens. These include provisions for freedom of expression and
the press, equal protection under the law, and protections against the
denial of life, liberty, or property without due process of law. The provisions for freedom of association and expression and freedom of the press
empower media representatives, political parties, and interest groups to
assess, criticize, and seek to infl uence the performance of government
agencies, in ways discussed in the next chapter.
Such provisions as those for equal protection and due process also have
major implications for the operations of public organizations. The equal
protection provisions, for example, provided some of the underlying principles and precedents for affi rmative action requirements. The requirement for legal due process requires administrative due process as well and
Rainey, Hal G.. Understanding and Managing Public Organizations, John Wiley & Sons, Incorporated, 2014. ProQuest Ebook Central,
Created from pensu on 2019-01-09 09:57:40. Copyright © 2014. John Wiley & Sons, Incorporated. All rights reserved.
102 Understanding and Managing Public Organizations
acts as one major form of control over public bureaucracies and bureaucrats (West, 1995, chap. 2). Agencies are often required to give notice of
certain actions and to adhere to disclosure rules, to hold open hearings
about their decisions, and to establish procedures for appealing agency
decisions. For example, the Administrative Procedures Act requires federal
agencies to adhere to certain procedures in rule making (and other legislation has established similar requirements at other levels of government).
When the Department of Education makes rules about student loans or the
SSA makes rules about claims for coverage under its disability programs,
the agencies have to adhere to such rule-making procedures. If the SSA
denies or revokes an applicant ’s disability coverage, the applicant has the
right to adjudication procedures, which may involve a hearing conducted
by an administrative law judge. These requirements strongly infl uence the
agency ’s management of disability cases and the work of individual caseworkers. In general, the requirement for all the appeals and hearings confl icts with the agency ’s goal of minimizing costs and maximizing effi ciency
of operations. More subtly, it raises complex issues about how effi ciency
relates to the fair handling of individual cases by individual caseworkers
(Mashaw, 1983). Chapters Eight and Ten show evidence that rules and
procedures for disciplining and fi ring employees in the public service,
based in part on due process principles, create one of the sharpest differences between public and private organizations confi rmed by research.
These examples illustrate how general constitutional principles that seem
abstract actually translate into a set of immediate challenges in organizational behavior and management.
Democratic elections are another feature of the political system in the
United States and other countries that has direct implications for organization and management. The electoral process produces regular, or at least
frequent, changes in chief executives, legislative offi cials, and the political
appointees who come and go with them. These changes in leadership often
mean frequent changes in the top-level leadership of public agencies—
every two years, for many agencies—and often bring with them shifts in priorities that mean changes in agencies’ focus and sometimes in their power,
their infl uence, and the resources available for their people and subunits.
The Constitution also establishes a federal system that allocates authority to different levels of government in ways that infl uence the organization and management of public agencies. State governments require that
local governments establish certain offi ces and offi cers, such as sheriffs and
judges, thereby specifying major features of the organizational structure
of those governments. State legislation may mandate a formula to be used
Rainey, Hal G.. Understanding and Managing Public Organizations, John Wiley & Sons, Incorporated, 2014. ProQuest Ebook Central,
Created from pensu on 2019-01-09 09:57:40. Copyright © 2014. John Wiley & Sons, Incorporated. All rights reserved.
Analyzing the Environment of Public Organizations 103
in setting the salaries of those offi cials. Many federal programs operate
by granting or channeling funds to states and localities, often with various specifi cations about the structure and operations of the programs at
those levels.
A particularly dramatic example of the way societal values and institutions can infl uence public organizations comes from the provision in
the Constitution for separation of powers. As indicated in Exhibit 4.3and
discussed shortly, government agencies face various pressures to provide
effi cient, effective operations. Separation of powers, however, represents a
system that is explicitly designed with less emphasis on effi ciency than on
constraining the power of government authorities (Wilson, 1989). In the
Federalist Papers, James Madison discussed the constitutional provision for
dividing power among the branches of government as a way of constraining power. He pointed out that a strong central executive authority might
be the most effi cient organizational arrangement. But the government of
the United States, he wrote, was instead being purposefully designed to
constrain authority by dividing it among institutions. In one of the great
exercises of applied psychology in history, he pointed out that if humans
were angels, no such arrangements would be necessary. But because they
are not, and because power can corrupt some people and oppress others, the new government would set ambition against ambition, dividing
authority among the branches of government so that they would keep one
another in check. Lower levels of government in the United States are
designed with similar patterns of divided authority. For the organization
and management of agencies, these arrangements have dramatic implications, because they subject the organizations and their managers to multiple authorities and sources of direction that are in part designed to confl ict
with one another. From its inception, the American political system has
thus embodied a dynamic tension among confl icting values, principles,
and authorities.
The controversy over whether this system works as intended never
ends. Nevertheless, the political authorities and actors representing these
broader values and principles impose on public organizations numerous
performance criteria, such as those listed in Exhibit 4.3 . Authors use various
terms to express the diversity of these criteria. Fried (1976), for example,
referred to democracy, effi ciency, and legality as the major performance
criteria for the public bureaucracy in the United States. Rosenbloom,
Kravchuk, and Rosenbloom (2008) consider law, management, and politics to be the three dominant sources of administrative criteria. Putnam
(1993) sought to evaluate the performance of government according to
Rainey, Hal G.. Understanding and Managing Public Organizations, John Wiley & Sons, Incorporated, 2014. ProQuest Ebook Central,
Created from pensu on 2019-01-09 09:57:40. Copyright © 2014. John Wiley & Sons, Incorporated. All rights reserved.
104 Understanding and Managing Public Organizations
its responsiveness to its constituents and its effi ciency in conducting the
public ’s business. Exhibit 4.3uses Meier and Bothe ’s (2007) distinction
between competence and responsiveness criteria.
Competence Values
Public organizations operate under pressure to perform competently.
Demands for effi ciency come from all corners. Newspapers and television
news departments doggedly pursue indications of wasteful uses of public
funds at all levels of government. Political candidates and elected offi cials
attack examples of waste, such as apparently excessive costs for components of military weaponry. The U.S. General Accounting Offi ce (GAO),
auditors general at the state and local levels, and other oversight agencies
conduct audits of government programs, with an emphasis on effi ciency.
Special commissions, such as the Grace Commission (organized under
the Reagan administration), investigate wasteful or ineffi cient practices in
government. Similar commissions have been appointed in many states to
examine state government operations and attack ineffi ciency. The Clinton
administration ’s National Performance Review (described more fully in
Chapter Fourteen) emphasized streamlining federal operations and, as
noted previously in Chapter Three, reduced federal employment by over
324,000 jobs. Ineffi ciency in federal operations served as one of the justifi –
cations for its formation.
But effi ciency was not necessarily the highest priority in the design of
the U.S. government, as just described. External authorities, the media,
interest groups, and citizens also demand effectiveness, timeliness, reliability, and reasonableness, even though these criteria may confl ict with
effi ciency. Effi ciency means producing a good or service at the lowest cost
possible while maintaining a constant level of quality. These additional
criteria are concerned with whether a function is performed well, on time,
dependably, and in a logical, sensible way. Government often performs
services crucial to individuals or to an entire jurisdiction. People want the
job done; effi ciency is often a secondary concern. Also, in government the
connection between a service and the cost of providing it is often diffi cult
to see and analyze. Evidence that police, fi refi ghters, emergency medical
personnel, and the military lack effectiveness or reliability draws sharp
responses that may relegate effi ciency to a lesser status. In the aftermath
of the September 11, 2001, attacks, federal spending for military action in
Afghanistan and Iraq, and for homeland security, increased sharply even
though a federal budget surplus turned into a defi cit during this period.
Rainey, Hal G.. Understanding and Managing Public Organizations, John Wiley & Sons, Incorporated, 2014. ProQuest Ebook Central,
Created from pensu on 2019-01-09 09:57:40. Copyright © 2014. John Wiley & Sons, Incorporated. All rights reserved.
Analyzing the Environment of Public Organizations 105
Clearly the imperative of security against terrorism outweighed considerations of frugality and effi ciency.
Sometimes one element of the political system stresses some of
these criteria more vigorously than others (Pitt and Smith, 1981). This
can increase confl icts for public managers, because different authorities
emphasize different criteria. For example, the judiciary often appears to
emphasize effectiveness over administrative effi ciency because of its responsibility to uphold legal standards and constitutional rights. Judges rule that
certain criteria must be met in a timely, effective way, virtually regardless of
cost and effi ciency. The courts have ordered that prisons and jails and affi rmative action programs must meet certain standards by certain dates. They
protect the right to due process guaranteed to clients of public programs
in decisions about whether they can be denied benefi ts. This increases
the burden on public agencies, forcing them to conduct costly hearings
and reviews and to maintain extensive documentation. The courts in effect
leave the agencies to worry about effi ciency and cost considerations. The
press and legislators, meanwhile, criticize agencies for slow procedures and
expensive operations.
Casework by members of Congress, state legislators, and city council
members can also exert pressure for results other than effi ciency. (In this
context, casework means action by an elected offi cial to plead the case of
an individual citizen or group who makes a demand of an agency.) A congressional representative or staff member may call about a constituent ’s late
Social Security check. A city council member may call a city agency about
a complaint from a citizen about garbage collection services. Although
these requests can promote effective, reasonable responses by an agency,
responding to sporadic, unpredictable demands of this sort can tax both
the agency ’s effi ciency and its effectiveness.
Responsiveness Values
The responsiveness criteria in Exhibit 4.3often confl ict sharply with competence criteria and also with each other. Public managers and organizations remain accountable to various authorities and interests and to
the rule of law in general (Radin, 2002; Rosen, 1998; West, 1995). They
must comply with laws, rules, and directives issued by government authorities and provide accounts of their compliance as required. Rosen (1998)
described a long list of different mechanisms, procedures, and institutions
for accountability. In addition, Romzek and Dubnick (1987; also Romzek,
2000) pointed out that public managers and organizations are subject to
Rainey, Hal G.. Understanding and Managing Public Organizations, John Wiley & Sons, Incorporated, 2014. ProQuest Ebook Central,
Created from pensu on 2019-01-09 09:57:40. Copyright © 2014. John Wiley & Sons, Incorporated. All rights reserved.
106 Understanding and Managing Public Organizations
different types of accountability that have different sources and that exert
different levels of direct control over administrators. Hierarchical and legal
accountability exert high degrees of control. The hierarchical form involves
imposition of rules, procedures, scrutiny, and other controls from within an
agency. Legal accountability, in Romzek and Dubnick ’s defi nitions, involves
high levels of control from external sources, in the form of oversight and
monitoring by external authority. Professional and political accountability involve lower degrees of direct control over individual administrators.
Professional accountability involves internal controls in an organization
by granting administrators considerable discretion and expecting them
to be guided by the norms of their profession. Political accountability also
involves a lot of individual leeway to decide how to respond; that is, to
external political sources such as legislators or other political stakeholders. The administrator decides whether or not to respond to an infl uence
attempt by such a person or group. Obviously these forms of accountability can overlap and work in combinations, and the relative emphasis they
receive can have dramatic consequences. Romzek and Dubnick attributed
one of the worst disasters to befall the U.S. space program, the Challenger
explosion, to a shift away from professional accountability in NASA to more
emphasis on political and hierarchical accountability.
Public organizations and their managers are often expected to remain
open and responsive in various ways. Saltzstein (1992) pointed out that
bureaucratic responsiveness can be defi ned in at least two ways—as responsiveness to the public ’s wishes or as responsiveness to the interests of the
government—and that much of the discourse on the topic takes one or
the other of these perspectives. These confl icting pressures sometimes
coincide with accountability, in the sense of responding to directives and
requests for information from government authorities. Yet public agencies also receive requests for helpful, reasonable, and fl exible responses to
the needs of clients, interest groups, and the general public. Because they
are public organizations, their activities are public business, and citizens
and the media demand relative openness to scrutiny (IBM Endowment
for the Business of Government, 2002; Wamsley and Zald, 1973). For some
programs, the enabling legislation requires citizen advisory panels or commissions to represent community groups, interest groups, and citizens.
Administrative procedures at different levels of government require public notice of proposed changes in government agencies’ rules and policies,
often with provisions for public hearings at which citizens can attempt to
infl uence the changes. The courts, legislatures, and legal precedent also
require that agencies treat citizens fairly and impartially by adhering to
Rainey, Hal G.. Understanding and Managing Public Organizations, John Wiley & Sons, Incorporated, 2014. ProQuest Ebook Central,
Created from pensu on 2019-01-09 09:57:40. Copyright © 2014. John Wiley & Sons, Incorporated. All rights reserved.
Analyzing the Environment of Public Organizations 107
principles of due process through appeals and hearings. The Freedom of
Information Act and similar legislation at all levels of government require
public agencies to make records and information available on request
under certain circumstances. Other legislation mandates the privacy of
clients’ records under certain circumstances.
A related criterion, representativeness, pertains to various ways in
which officials should represent the people and to another means of
making government bureaucracy responsive to the needs of citizens.
Representativeness is a classic issue in government and public administration, with discourse about the topic dating back centuries. The topic has
taken on even more momentum recently, because of the rise of such issues
as equal employment opportunity, affi rmative action, and diversity. One
view of representativeness holds that identifi able ethnic and demographic
groups should be represented in government roughly in proportion to
their presence in the population. The advisory groups mentioned previously also refl ect representativeness criteria in another sense. One important and currently lively line of inquiry pursues the distinction between
passive representation—which simply refers to whether members of different groups are present in governmental entities and agencies—and
active representation. Active representation occurs when the members
of a group actually serve as advocates for the group in decisions about
programs and policies. Selden (1997, p. 139; see also Selden, Brudney,
and Kellough, 1998) reported evidence that where districts of the Farmers
Home Administration had higher percentages of minority supervisors,
more rural housing loans went to minorities. Keiser, Wilkins, Meier, and
Holland (2002) point out that passive representation has been found to
lead to active representation for race but not for gender. They then report
evidence of conditions under which passive representation will lead to
active representation for gender in educational contexts. For example, in
schools with more female administrators, female teachers were associated
with more educational success for girls. Similarly, Dolan (2000) reports
evidence that female federal executives express attitudes more supportive
of women ’s issues when they work in agencies with high percentages of
women in leadership positions. Brudney, Hebert, and Wright (2000) report
evidence that among agency heads in the fi fty states, the administrators’
values and perceived organizational role sets infl uence their tendency to
display active representation. Other researchers examined representativeness issues at local government levels as well (Miller, Kerr, and Reid, 1999;
Schumann and Fox, 1999). These criteria add to the complex set of objectives and values that public managers and organizations must pursue and
Rainey, Hal G.. Understanding and Managing Public Organizations, John Wiley & Sons, Incorporated, 2014. ProQuest Ebook Central,
Created from pensu on 2019-01-09 09:57:40. Copyright © 2014. John Wiley & Sons, Incorporated. All rights reserved.
108 Understanding and Managing Public Organizations
seek to balance. In federal agencies and many state and local government
organizations, support for diversity is a criterion in the performance evaluations of many executives and managers, so representativeness in this sense
joins the list of values and goals they need to pursue.
Later chapters describe additional examples and evidence of how
confl icting values and criteria such as those just discussed infl uence public organizations and pose very practical challenges for public managers.
External authorities and political actors intervene in management decisions in pursuit of responsiveness and accountability, and they impose
structures and constraints in pursuit of equity, effi ciency, and effectiveness.
Sharp confl icts over which values should predominate—professional effectiveness or political accountability, for example—lead to major transformations of organizational operations and culture (Maynard-Moody, Stull, and
Mitchell, 1986; Romzek, 2000). Before examining these effects on major
dimensions of organization and management, however, Chapter Five considers in more depth the elements in the lower portion of Exhibit 4.3 : the
institutions, entities, and actors that seek to impose these values and criteria, and their exchanges of infl uence with public organizations.
Instructor ’s Guide Resources for Chapter Four
• Key terms
• Discussion questions
• Topics for writing assignments or reports
Available at .
Rainey, Hal G.. Understanding and Managing Public Organizations, John Wiley & Sons, Incorporated, 2014. ProQuest Ebook Central,
Created from pensu on 2019-01-09 09:57:40. Copyright © 2014. John Wiley & Sons, Incorporated. All rights reserved.

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