Bureaucracies, Budgets and Decision-Making David Bell

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Bureaucracies, Budgets and Decision-MakingDavid
Bell Khurram Butt

• Bureaucracy as a polity politicization of
  bureaucracy
• Development, Development Planning Policy
• Budgeting
• Privatization

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Bureaucracies, Budgets, and Decision Making

• By Michael Siciliano
• Clayton Wukich

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Golden Oldies

• Rethinking Institutional Analysis and Development
  by Ostrom, Feeny, and Picht (1988)
• Essence of Decision Explaining the Cuban Missile
  Crisis by Graham Allison (1971)
• Classic Readings in Organizational Behavior by J.
  Stephen Ott (1989)
• The Complete Yes Minister by Lynn and Jay (1988)

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Rethinking Institutional AnalysisChapter 1
The State of the Art by Norman Nicholson

• Concerned with how economic forces interact with
  political and institutional arrangements to
  affect economic development.
• Author sees the fundamental goal of development
  as expanding human choice through economic
  growth, human capital improvements (education,
  technology, health) and enhanced institutional
  structures.
• Institutions affect human choice by influencing
  the availability of information and resources, by
  shaping incentives, and by establishing the basic
  rules of social transactions.

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Rethinking Institutional Analysis cont

• A major role of institutional analysis in
  economic development concerns the problem of
  getting the prices right. He sees this for
  three reasons
• First, institutional development and design are
  part of the process of getting the prices right
  because the interaction of supply and demand is
  mediated through institutions.
• Second, bad policies will, over time,
  fundamentally corrupt and distort institutional
  performance.
• Third, policy reform and structural adjustment
  effects, by starting the process of getting the
  prices right are essential to the process of
  institutional change and economic development.

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Rethinking Institutional Analysis cont

• These interactions between prices, institutions,
  and economic development can be illustrated in
  three areas
• Policy and Institutions Distributive policies
  (social services, subsidies, infrastructure) are
  common source of price distortion in developing
  countries.
• The Character of Goods and Institutions
  Distortions can also arise via pricing problems
  within the public sector in terms of pricing
  public goods.
• Institutional Innovation The role of technology
  and especially technological innovation has been
  added to traditional models and discussions of
  economic growth.

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Essence of Decision

• Three models of decisionmaking
• Model I Rationale Actor
• Model II Organizational Processes
• Model III Government Politics

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Essence of Decision cont

• Model I Rational Actor
• Government is viewed as the primary actor, akin
  to an individual with values, purposes, and
  cost-benefit calculating capacities.
• Decisions are made based on viewing all of the
  alternatives and selecting the one with the
  highest payoff
• Under this theory the Soviets withdrew the
  missiles due to the mutually assured destruction
  of nuclear war.

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Essence of Decision cont

• Model II Organizational Processes
• Based on the work of March and Simon - Allison
  notes that existing government bureaucracy places
  limits on the range of government action and
  establishment of possible alternatives.
• Governments cannot analyze all possible courses
  of action. Problems are broken down into
  manageable parts and organizations operate on
  historical trends, existing patterns of action,
  and standard operating procedures.
• Simons notion of satisficing

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Essence of Decision cont

• Model III Government Politics
• Actions are best understood through the lens of
  politics and negotiation.
• Leaders power is mitigated by the need for
  consensus the final actions are in part
  determined by the men surrounding the leader (Yes
  Men).
• Issues of groupthink.

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Groupthink The Desperate Drive for Consensus at
Any Cost, by Irving L. Janus in Otts Classic
Readings in Organizational Behavior (1989, p.
223-232)

• Janus is studying how the US gets ourselves into
  such blunders as the Bay of Pigs, Korean War
  stalemate, Vietnam, and being unprepared for the
  Pearl Harbor attacks.
• He looks at fiascos from the standpoint of group
  dynamics
• Each case study showed that (1) phenomena of
  social conformity and pressures of the cohesive
  group against a dissidents objections and (2)
  the bolstering of morale at the expense of
  critical thinking of staying loyal to the group
  by sticking with failed policies policies that
  are even disturbing to the psyche.
• Groupthink is defined as the deterioration in
  mental efficiency, reality testing, and moral
  judgments as a result of group pressures. The
  primary danger Janus says, is that a group will
  member will think a proposal is a good one
  without attempting to carry out a careful,
  critical scrutiny of the pros and cons of the
  alternatives.

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Groupthink cont

• Janus identifies 8 symptoms of groupthink
• Invulnerability
• Rationale
• Morality
• Stereotypes
• Pressure
• Self-censorship
• Unanimity
• Mindguards

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Groupthink cont

• A detailed study of groups which display these
  symptoms would likely reveal a number of
  immediate consequences which are products of poor
  decision making
• View only a few (usually 2) alternatives
• Do not reexamine course of action
• No discussion of non-obvious gains or losses they
  may have overlooked
• Little or no attempt to obtain info from experts
  even within their own organization who might be
  able to supply better estimates of potential
  gains and losses
• Tenency to ignore facts and opinions that do not
  support their preferred policy
• Spend little time deliberating about how a chosen
  policy might be hindered by bureaucratic inertia,
  sabotaged by political opponents, or derailed by
  common accidents

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Groupthink cont

• Recommendations to prevent groupthink include the
  following.
• Assign a role of critical evaluator sets tone
  for acceptance of criticism and encourages
  diverse opinions.
• Key members must adapt an impartial stance at the
  beginning stages of deliberation to allow for a
  wider range of alternatives to arise and be
  discussed.
• Routinely set up outside policy evaluation groups
  to work on the same question and operating under
  a different leader.
• Invite and seek outside expertise
• Have at least one member play devils advocate
  during group meetings.
• After an initial decision has been reached a
  meeting should be held solely to discuss peoples
  doubts about that policy.

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The Complete Yes Minister (p. 171-200)

• The running of a hospital without patients
• Despite an increase in 40,000 health service
  administrators, the number of hospital beds had
  gone down by 60,000 and the annual cost of the
  health service had gone up 1.5 billion pounds.
  Humphrey commended such growth and disagreed with
  Hackers comment that the money should actually
  be used to make sick people better. Humphrey
  stated it makes everyone better better for
  having shown the extent of their care and
  compassion. When money is allocated to Health
  and Social Services, Parliament and the country
  feel cleansed. Absolved. Purified. Its a
  sacrifice (page 189).

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The Compete Yes Minister cont

• Hacker wanted to shut down the hospital and use
  the money to open closed wards in other
  departments. Humphrey said that it is not as if
  the staff has nothing to do simply because there
  are no patients there. He then hands him a list
  of 10 ridiculous duties being performed by the
  administrators with no patients.
• This list included contingency planning for air
  raids, projecting accounts and balance for when
  they have patients, catering, as well as
  administrators to administrate other
  administrators. Humphrey claims that these are
  vital tasks that must be carried on with or
  without patients, when Hacker asks why Humphrey
  responds by saying should we get rid of the army
  simply because there is no war?

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Bureaucracy as Polity in The Bureaucratic
Experience A critique of Life in the Modern
Organization by Ralph P. Hummel

• In a world of bureaucracy, administration
  replaces politics
• Bureaucratization of politics having to jump
  through many hoops before decision is made
• Bureaucracies with their centralized command
  structures are structurally superior to
  fragmented political institutions that make a
  democracy
• Citizens view bureaucracies as more stable than
  emotionally upsetting politics

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Bureaucracy as Polity in The Bureaucratic
Experience A critique of Life in the Modern
Organization by Ralph P. Hummel

• Yet, bureaucracies have high politization
  internally bureaucratic power arises from inside
  unlike political power (external)
• Max Webers sources of power within
• Division of labor
• Hierarchy as a source of power
• Bureaucracies create the illusion that all
  problems, including political ones, can be
  translated into administrative and technical ones
• Bureaucracy produces its own truncated politics
  (encouraging different behaviors for managers and
  rank and file

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Bureaucracy as Polity in The Bureaucratic
Experience A critique of Life in the Modern
Organization by Ralph P. Hummel

• Post-bureaucratic politics emergence of process
  politics
• Process politics emerges when a facilitator
  used to overcoming structural hurdles (division
  of labor / hierarchy) and overcoming petty
  personal politics enters the policy arena
• Process politics problem-shaping mode
• Gets participants away from a mode of assuming
  that choices are already brought ready made to
  the table
• Participants first define what the problem is

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Overview of Bureaucracies and Political systems
by Ferrel Heady in Public Administration A
Comparative Perspective, 6th eds. Edited by
Ferrel Heady

• There is common agreement that bureaucracy should
  be instrumental and serve as agent not master
• Respond willingly and effectively to policy
  leadership from outside its own ranks
• Much of the last 50 years reflects a tendency for
  bureaucratic elite regimes to become more
  prevalent
• Gives rise to concerns of usurpative behavior as
  power-wielders

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Overview of Bureaucracies and Political systems
by Ferrel Heady in Public Administration A
Comparative Perspective, 6th eds. Edited by
Ferrel Heady

• 1980s bureaucracy characterized as in danger of
  being out of control
• The global shift of the 1990s to devolution from
  central authorities
• Form governing to governancenew public
  management movement
• Presents various divergent opinions at strategic
  approaches for achieving balanced political
  development
• Focuses on the role of external intervening
  approaches
• Aidgrant strategy

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Development and its Administration in
Governance, Administration and Development by
Turner and Hulme

• Development
• Contested definitions modernization theory,
  dependency theory were early points of view
• Today its usually the neo-populist and
  neo-classicist views that dominate
• State, dominant social classes, world bank and
  their allies in the West seen as the villains
• Defining development today
• Economic component
• Social ingredient (health, education, housing)
• Political dimension (human rights, pol. freedom)
• Cultural dimension (self-identity and worth)
• Full-life paradigm (meaning of life)
• Ecologically sound and sustainable

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Development and its Administration in
Governance, Administration and Development by
Turner and Hulme

• Rise of development administration (1960s)
• US-led movement seen as an attack on colonialism
• Primary obstacles of development are
  administrative rather than economic, Donald
  Stone 1965
• Practical application of modernization theory
• Development admin Public Admin Bureaucracy
• Elitist bias modernization task of an elite
  minority
• Addressing lack of administrative capacity for
  implementing programs
• Foreign aid was seen as a way to transfer
  missing tools of public administration
• Culture seen as an obstacle to be overcome

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Development and its Administration in
Governance, Administration and Development by
Turner and Hulme

• Challenges to development administration (1970s)
• Shift towards more complex and more economically
  oriented problem perspectives
• The assumption that big govt was the route to
  development was questioned
• Administrative technology transfer aimed more at
  maintenance rather than development
• Class-interests of bureaucrats in developing
  countries hinder innovation
• Neo-classical approach (less govt) rose to
  prominence
• NPM started being exported to developing
  countries
• From development admin. to development policy

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The Policy Process in Governance,
Administration and Development by Turner and Hulme

• What is policy
• Process about decisions purposive behavior of
  human agents
• Models of policy change (Grindle Thomas)
• Society-centered explains policy process in
  terms of power relations b/w social groups
  (interplay of social classes and interest groups)
• State-centered focuses on the mechanics of
  decision making, decision-maker seen as having
  considerably more capacity for choice
• Politics and power permeate the entire policy
  process understand the political context!

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Development Planning in Bureaucracy Its Role
in Third World Development by Malcolm Wallis

• Development planning
• Involves actors other than just the state
• Requires technical expertise to collect and
  interpret data and information
• Political factors make it further complex
• Varied experience across different countries
• Problems of planning
• Lack of political commitment
• Isolation of planners (from other govt machinery)
• Administrative (HR, financial) obstacles
• Over-centralized planning (disregard for local
  conditions)

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The State of the Art by Norman Nicholson in
Rethinking Institutional Analysis and
Development, Ostrom et al.

• Development
• Expanding human choice through economic growth,
  human capital investments and enhanced
  institutional structures
• Two schools of thought
• Localized control vs. State control
• Problematic institutional context
• Lacks broad-based participation of the population
• Lacks resource allocation in socially efficient
  ways that facilitate development
• Economic forces interact with political and
  institutional arrangements to affect economic
  development

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Organizational Aspects of a Development Model in
The World Bank and Non-Governmental Organizations
by Paul Nelson

• An organizational analysis of the World Banks
  (WB) role in the global economy
• WB promotes a capital-driven development model
  (mandate) and investment strategy
• Reflects internal organizational factors
• Also, interests of powerful actors in the WB
  political economy
• Mandate is resulted in a pattern staffing,
  operations, and performance measurement that
  contradict social and poverty-related objectives

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Organizational Culture and Participation in
Development in The World Bank and
Non-Governmental Organizations by Paul Nelson

• WBs organizational culture sharply limited
  popular participation and NGO involvement in
  operations
• Constrains WBs ability to learn from experience
• Hierarchical and technocratic culture
• Dominates attitudes and procedures
• Renders WB policies almost impervious to critique
  that does not begin accepted premises

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Groupthink The Desperate Drive for Consensus at
Any Cost by Irving Janus in Otts Classic
Readings in Org. Behavior

• Groupthink
• Deterioration in mental efficiency, reality
  testing and moral judgments as a result of group
  pressure
• Groups that commit fiascos fall victim to
• Social conformity and pressures for cohesion
  against dissident objections
• Bolstering of morale at the expense of critical
  thinking
• Precautions encourage diversity in opinion seek
  outsider expertise play devils advocate and
  invite doubts

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Financial Management in Bureaucracy Its Role
in Third World Development by Malcolm Wallis

• Financial mgmt is an important, but not
  necessarily an effective, tool for govts to
  direct their economies
• Financial mgmt
• Pre-expenditure Budgeting
• Post-expenditure Auditing
• Need for dev. planning financial mgmt to gel
• Donor finance leverage for donors blueprint
  approach

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Paying for Government The Budgetary Process
inThe Politics of Bureaucracy by B. Guy Peters

• Public Budgetboth plan and expression of
  political power
• Moneymeans of bureaucratic demonstration to
  remainder of political system
• political clout
• Importance

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Paying for Government The Budgetary Process
inThe Politics of Bureaucracy by B. Guy Peters

• What is included in the budget?
• What is a deficit?
• Lack of control of government expenses
• Entitlements
• Private citizens and organizations
• Constant political pressure to spend more

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Paying for Government The Budgetary Process
inThe Politics of Bureaucracy by B. Guy Peters

• Spending agencies interested in monetary
  extraction
• Agencies coalesce to oppose control of
  expenditures
• Incrementalismdescriptive of all countries
• Even in environments when decrementalism seems
  appropriate

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Paying for Government The Budgetary Process
inThe Politics of Bureaucracy by B. Guy Peters

• Mechanisms have been devised to break the grip of
  incremental approaches to resource allocation
• The common evaluations
• Institutions and procedures are important
• Still need determination and competence by those
  in the structure of government

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The Management of Public Budgeting by Naomi
Caiden in Comparative Public Management ed. By
Randall Baker

• Reviews the 1980s efforts of
• Canada, Britain, Australia, New Zealand, Sweden
• Explain the public management movement in
  budgeting
• Identifiable pattern of budgetary management
• Works to combine accountability with efficient
  resource mobilization and allocation
• Also, dissolving traditional bureaucratic control
  systems

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The Management of Public Budgeting by Naomi
Caiden in Comparative Public Management ed. By
Randall Baker

• Pre-budgeting system dominant for hundreds of
  years
• Continuity
• Decentralization
• Privatization
• flexibility

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The Management of Public Budgeting by Naomi
Caiden in Comparative Public Management ed. By
Randall Baker

• Budgeting was introduced with incredible
  persistency for over 150 years
• Accountability against secrecy
• Democratic decision making against autocracy
• Regularity and control against opportunism and
  improvisation
• Public norms against institutional corruption
• Also useful for planning, policy-making and
  management

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The Management of Public Budgeting by Naomi
Caiden in Comparative Public Management ed. By
Randall Baker

• The 1970s persistent deficits, taxpayer
  revolts, sluggish and volatile economies,
  increase of claims on budgeting
• Resulted in reform of the 1980s
• New and improved version of pre-budgeting system

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Challenging Financial Paradigms in Breaking
Through Bureaucracy by Michael Barzelay

• Two examples where existing financial paradigms
  were challenged as part of the reform process
  related to Depts. Of Admin and Finance
• Bonding authority and the biennial budget
• Use financial systems to hold line agencies more
  accountable for serving their customers, managing
  resources and complying with statewide norms
• Bonding authority
• State agencies had few disincentives to seek as
  much bonding authority as they could for capital
  spending authority they did not bear the debt
  servicing charges

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Challenging Financial Paradigms in Breaking
Through Bureaucracy by Michael Barzelay

• Bonding authority
• Target the sector of state govt making the
  largest request higher education systems
• Recommendation to make them responsible for its
  entirety negotiated to bear 1/3rd of the charge
• Biennial Budget
• Changing existing budget instructions to
  eliminate room for incremental budgeting
• Countered arguments against this political
  fallout and perceived underfunding
• Purchase results rather than fund costs!
• Budget allocation based on what the public was
  willing to pay (tax and other revenue)

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Toward Successful Privatization in
Privatization The Key to Better Government by E.
S. Savas

• Strategies for privatization
• Load shedding
• Partial or complete withdrawal of govt from an
  activity divestiture, denationalization
• Devolution
• Making greater use of the private sector
  vouchers, franchises and contracts
• Levying user charges
• Charging full cost of service identifies true
  cost
• Introduce competition
• Break up govt monopolies deregulation

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Toward Successful Privatization in
Privatization The Key to Better Government by E.
S. Savas

• Problems with privatization
• Privatization as a means can be employed by a
  welfare state, but as an end it is inimical to
  the welfare state
• Decision about what goods to supply at collective
  expense is quite separate from the decision about
  what arrangement to use to deliver the goods
• Implementation problems
• Political, bureaucratic and employee resistance
• Sale, pricing and distribution of shares when
  denationalizing SOEs legal impediments
• Cream skimming private sector only handles easy
  low-cost work