Title: Strategic management tools and public sector managemen
Authors: Williams, Wil., Lewis, Duncan
Subject: Strategic Management
Publish: 2008
Status: full text
Source: Public Management Review; Sep2008, Vol. 10 Issue 5, p653-671
Preparation: Scientific Database Management Journal Articles www.SYSTEM.parsiblog.com
Abstract: This article highlights the applicability and effectiveness of two well established strategic management tools, value chain and stakeholder analyses, in the context of seven public sector strategic consultancy projects. The article provides a strong justification for the use of both models, when used independently, but particularly in conjunction, as powerful strategic analytical frameworks that can significantly encourage and illuminate strategic discourses in public sector organizations. The article establishes that strategic tools such as value chain analysis, when applied in the public sector context, require significant adaptation to maximize their contribution to understanding a given situation. This study proposes that the strategic analysis of relationships that build or contribute to concepts of organizational value are of limited importance if the complex web of interdependent relationships themselves are not clearly demonstrated. This work therefore makes a clear case for applying two strategic models, value chain analysis and stakeholder analysis, in an analogous way to demonstrate how strategic understanding in the public sector is enhanced as a result of such symbiosis. Download Article

Introduction: The purpose of this article is to demonstrate the applicability and effectiveness of two
classic strategic management tools in the domain of public sector management. There is
significant history of the use of strategic tools in the private sector that illustrates their
usefulness in aiding strategic dialogue (Langley 1988; Webster et al. 1989; Dyson 1990;
Clark 1997; Ambrosini 1998; Liedtka 1998; Hussey 2002; Orndoff 2002; Worren et al.
2002; Frost 2003). It is proposed that selected strategic frameworks are equally
applicable to the public sector although the differing imperatives within private and
public sectors will result in contextual adaptation in order to be useful and applicable.
New public management (NPM) principles are now well embedded in public sector
management thinking (Hood 1991; Boyne 2002; Maesschalk 2004; Rasmussen 2004)
although it remains questionable whether private sector models are easily implanted or
indeed helpful in public management practice. This study gives a justification for the
applicability and effectiveness of two established strategic management frameworks,
namely, stakeholder mapping and value chain analysis, in public management contexts.
The article also highlights lessons to be learned for the context specificity of such tools
and their migration from the private to the public sector. The necessity for the careful
adaptation of standardized private sector models when applied in the public sector is
demonstrated in this work. The application of private sector tools in public sector
activities is required for effective strategic management within the UK public sector,
which is often measured against target outcomes. This article presents two strategic
management analytical frameworks that could prove to be extremely helpful to public
sector strategists charged with meeting stakeholder expectations as well as providing
added value in service provision.
This study uses the practical experience of several strategic management consultancy
projects within a range of public sector activities to illustrate how stakeholder analysis
and value chain analysis were applied in order to evaluate their usefulness on two
fronts: first, analysis of strategic situations; and second, engaging in strategic dialogue
with public sector managers and other stakeholders. The application of these
standardized strategic management techniques borrowed from the private sector
brought an additional benefit in that, although they were not readily familiar to public
sector managers, their applications were perceived to assist in the communication of
strategic imperatives to key stakeholders. This outcome was ultimately to prove of
significant value to the clients regardless of the operating environment of each project.
The article begins by setting the context of new public management (NPM) and the
use of strategic management frameworks that might be used to meet the NPM challenge.
Utilizing stakeholder and value chain analyses, the article demonstrates their applicability
to public sector managers and strategists by emphasizing the importance of context
specificity in the use of such strategic frameworks. The empirical studies and methods
employed in this article establish the significance and effectiveness of applying normative
private sector frameworks in improving strategic dialogue in public sector organizations. The article demonstrates that improved strategic understanding is achieved by the
adaptation of strategic frameworks and that these are essential in the context of NPM.
However, the complexity of public service provision is not simply best served by
blanket-application of private sector frameworks. The intrusion and adoption of private
sector strategic tools such as the Balanced Scorecard, Kaizen or Six Sigma frameworks
for example, might prove to be more damaging than beneficial without careful
consideration of the context of the public sector. This study therefore makes a strong
case for caution and the need for adaptability in the use of such frameworks.

BACKGROUND
The modernization of the public services seen in the 1980s and 1990s in many OECD
countries (Maesschalk 2004) has been awarded the nomenclature ‘new public
management’ (Hood 1991). A key feature of NPM is manifest in the professionalization
and accountability of management (Butterfield et al. 2004; Rasmussen 2004). Chief
executive officers of public sector organizations are progressively turning to, or are
being steered towards, business concepts and frameworks such as ‘benchmarking’,
‘total quality management’, ‘balanced scorecard’, Kaizen and ‘Six Sigma’ frameworks
as potential weapons to assist in the struggle for attainment of quality and value
standards set by others (see, for example, Laraia et al. 1999; McAdam and Walker
2003; Spees 2003; Boyne et al. 2004). Secondary drivers for the adoption of these tools
and techniques are partially the result of increasing competition for limited resources,
changing external demands from government directives, performance benchmarks for
quality awards and standards. They are also the result of a fear of increasing litigious
action, particularly in health and education but also more generally in society (see, for
example, Amaratunga et al. 2001; Radnor and McGuire 2004; Harris 2005).
The very nature of public sector organizations is made more complex by the
multiplicity of stakeholders to be satisfied. This can often result in complexity of
demands and overly bureaucratic systems and processes to gather and report data. Two
strategic tools, value chain analysis, and stakeholder analysis are introduced in this work
as potentially effective analytical techniques. It is proposed that the two strategic
frameworks offer public sector managers the additional means by which to understand
and communicate the complexity of the situations in which they operate. These
frameworks might therefore allow decision makers to take an enhanced and holistic
view of strategic issues as they affect them directly.

STRATEGIC MANAGEMENT FRAMEWORKS
There has been some discussion regarding the applicability of traditional strategic
frameworks in the context of the public sector (McKevit and Lawson 1994; Bryson 1995; Scholes and Johnson 2000; Bryson 2004, 2005; Stacey and Griffin 2005).
However, NPM has seen an increasing adoption by the public sector of private sector
models, tools and frameworks. We argue here that the public sector should not only be
selective in its use of strategic frameworks, but more importantly, that normative
models applied with little or no contextual adaptation are unlikely to succeed. This is
because strategic frameworks often require significant amendment to fit the strategic
contexts found in the public sector. Time and resources spent on training, application
and implementation without appropriate adaptation is likely to lead to frustration and
failure. While strategic management tools such as the balanced scorecard have been
purposely introduced into some sectors of public service delivery, for example health,
by the UK Cabinet Office in 2001, they have a largely internal locus. It is suggested
here that alternative frameworks, such as stakeholder and value chain analyses, offer
more rounded, holistic and fundamentally strategic perspectives on organizational
situations and ultimately to strategy itself.

STRATEGIC ORIGINS AND THE MULTIPLICITY OF CONTEXT
Writers such as McAdam and Walker (2003) have advocated a multiple stakeholder
perspective to public sector performance management and Radnor and McGuire (2004)
articulate that such an approach is necessary to move performance management beyond
a diagnostic tool to one of proper strategic interaction. We would add to this by
suggesting a multiple stakeholder approach positively enhances organizational
reputation.
Organizational reputation is as much, if not more, about the perception of delivery
of public services, as it is about the actual delivery. Yang et al. (2001) highlight the
importance of process visibility on the interactions between organizations and their
stakeholders. A relationship between an organization and its stakeholders will involve
both visible and invisible processes. We would argue that organizations can manage the
level of visibility of processes and thereby manage the perceived value offering to
stakeholders, but this requires the use of relatively sophisticated frameworks such as
value chain analysis and stakeholder mapping.

MEASURING VALUE: VALUE-WEBS THROUGH COLLABORATION AND ALLIANCES
Various quantitative and qualitative tools have been applied to identifying and
measuring value activities, including economic value analysis and strategic value analysis
(Fine et al. 2002) balanced scorecards, triple bottom line reporting and key
performance indicators (Dowling 2004). A tool of strategy with a long history of usage
in the commercial sector is the ‘value chain’ model. Originally drawn from the corporate auditing tools utilized by accountants, Harvard Business School Professor
Michael Porter (1985) brought the concept of the value chain into the mainstream
strategists’ repertoire of analytical tools (also see Kogut 1984). Porter builds on the
work of Coase (1937) and Williamson (1975) emphasizing both internal and external
linkages in the creation of value in organizations. Initially, interest in the value chain
framework was from operations and supply chain management perspectives. However,
the framework has increasingly been applied from a strategic standpoint focusing on
customer and stakeholder value creation. Meeting stakeholders’ perception of value in
part, leads Porter to identify a generic value chain as having both ‘primary’ and
‘support’ activity components (Porter 1985).
The generic value chain model in Figure 1 identifies interconnected activities in an
organization. Typically, the primary activities will include: inbound logistics; operations
(production); outbound logistics; marketing, sales; and service. Support activities
incorporate an organization’s: infrastructure; human resource management; technology
development; and procurement. Support activities are essential to allow the primary
activities to function properly, but importantly, they can also add value, particularly in
service based industries or where service is a key component. Existing literature on the
value chain has increasingly focused on the benefits of collaboration within a value
network (or web of activities) outweighing the transaction costs of the network’s
performance (Barley et al. 1992; Brooks and Reast 1996; Collins and Belcher 1999;
Harland et al. 1999; Hinterhuber 2002).
We would assert that it is likely to be more significant that public sector
organizations maximize actual and perceived efficiency and effectiveness in service
delivery by understanding the linkages between value activities within the value
network or web. The complexity of multiple stakeholder groups facing public sector
organizations is likely to be greater than those facing private sector organizations.
By taking a value network approach, management emphasis can move away from
functions to processes and towards developing communication and co-operation across
the network (Walters and Jones 2001). Using a value network perspective will focus
public sector strategists so that they consider their key, often multiple, stakeholders and
how these groups themselves perceive value. This is important within the context of
traditional public sector approaches to performance management as a network
perspective on organizational value adding activities focuses management on their
stakeholders.
A network approach allows the total system of value creation to be analysed (Payne
and Holt 2001). As Brooks and Reast (1996) suggest, the management of collaborative
relationships within the value system requires flexible management where ‘softer’
management issues are frequently overlooked. The traditions of the balance scorecard,
TQM, benchmarking and other analytical techniques are deeply rooted in the praxis of
numerical measurement and not in the holistic application of dialogue and auditory
awareness. As will be shown, the value chain framework is a useful starting point for
any analysis of how organizations gain, or lose value…Download Article