Title: Strategic Management and the Performance of Public Organizations: Testing Venerable Ideas against Recent Theories
Authors: Meier, Kenneth J., O"Toole Jr., Laurence J., Boyne, George A., Walker, Richard M
Subject: Strategic Management
Publish: 2007
Status: full text
Source: Journal of Public Administration Research & Theory; Jul2007, Vol. 17 Issue 3, p357-377
Preparation: Scientific Database Management Journal Articles www.SYSTEM.parsiblog.com
Abstract: Miles and Snow, among others, argue that strategy content is an important influence on organizational performance. Their typology, applied recently to public organizations in the United Kingdom, divides strategic actors into four general types: prospectors, defenders, analyzers, and reactors. This article begins by integrating work on strategy content or strategic management into the O"Toole-Meier formal theory of public management. This study shows that strategy content is a subset of generally accepted management functions in public organizations. The article then proceeds to test the strategic management concepts in a large, multiyear sample of public organizations. The results show that strategy can be separated out from other elements of management for a distinguishable assessment of its impact on organizational performance. Unlike the predictions of Miles and Snow and the empirical findings of Boyne and Walker, however, we find that the defender strategy is the most effective for the primary mission of the organization and that the prospector and reactor strategies work best in regard to the goals of the more politically powerful elements of the organization"s environment.  --Download Article

Introduction: Systematic evidence has accumulated in recent years that public management makes a difference in a variety of ways when programs are implemented (for recent coverage, see Ingraham and Lynn 2004; also Lynn et al. 2001). Particularly salient in this regard have been the performance-related impacts of public management, which have now begun to receive substantial attention (Andrews et al. 2005; Brewer 2005; Chun and Rainey 2005; Donahue et al. 2004; Martin and Smith 2005; Meier and O’Toole 2001, 2003; O’Toole and Meier 2003, 2004a, 2004b). Management appears to shape performance when conducted from multiple levels, directed internally at operations, targeted at various parts of the program’s environment, and executed with particular skill or adroitness.
Although myriad managerial influences on performance have been identified and some have been estimated, existing research constitutes only the initial efforts of what must be a broader and more ambitious analytical and empirical argosy. A considerable portion of the work completed thus far, for example, relies on reports of managerial behaviors in fairly specific, time-bound snapshots. These studies are useful but tend, of necessity, to tap tactical managerial moves rather than the broader and more elusive strategic elements of management (with certain exceptions, to be noted shortly). Management theory, however, offers a powerful rationale for considering the strategic dimension, suggesting that multiple elements of public management (including strategic stance) must be considered in any comprehensive examination of the management-and-performance question. This article adds to the earlier analyses of several aspects of managerial effort, particularly tactical moves and managerial quality, a systematic treatment of ‘‘strategy content’’ and its performance-related results. The argument proceeds in five parts. First, we discuss the importance of organizational Strategy for the study of public management. Second, based on our contention that strategy content is a discretionary managerial function, we introduce a general management model that has been used productively in a variety of studies of public management.
Third, strategy content is incorporated into the general model to illustrate that this venerable idea is consistent with most contemporary approaches to public management. Fourth, strategy content is operationalized and tested using a data set of several hundred public organizations over a 6-year time period. Finally, we discuss the meaning of our findings for public management theory and its empirical study.

THE VENERABLE IDEA: STRATEGY CONTENT AND ORGANIZATIONAL PERFORMANCE
The idea that strategy content influences organizational performance is a central element of
generic management theory. Strategy content can be defined broadly as the way an organization
seeks to align itself with the environment (Donaldson 1995; Miles and Snow
1978). Strategy can be characterized as senior managers’ response to the constraints and
opportunities that they face. The better the fit that an organization achieves with external
circumstances, the more likely it is to win financial and political support and thereby
improve its performance. In the 1960s and 1970s, the view that private organizations were
prisoners of market forces and thereby ‘‘compelled’’ to adopt the single strategy that fit
their economic circumstances began to erode. Major management theories such as those of
Chandler (1962) and Child (1972) emphasized that private firms can exercise strategic
choice, even in the face of external constraints. They can, for example, specialize in a single
market or operate in a variety of markets, seek a competitive edge through low cost or high
quality, and attempt to protect or enhance their share of the market.
This line of reasoning culminated in Miles and Snow (1978), one of the seminal works
in the field of strategic management. They consolidated existing research by developing a
typology of strategy content that contained four ‘‘ideal types.’’ Prospectors are organizations that ‘‘almost continually search for market opportunities, and . . . regularly experiment
with potential responses to emerging environmental trends’’ (29). These organizations
often pioneer the development of new products and services. Defenders are organizations
that take a conservative view of new products’ development. They typically compete
on price and quality rather than on new products or markets and ‘‘devote primary
attention to improving the efficiency of their existing operations’’ (29); in short, they
seek better performance on a limited number of core products and services. Analyzers
represent an intermediate category, sharing elements of both prospector and defender.
Analyzers are rarely ‘‘first movers’’ but, instead, ‘‘watch their competitors closely for
new ideas, and . . . rapidly adopt those which appear to be most promising’’ (29).
Reactors are organizations in which top managers frequently perceive change and uncertainty
in their organizational environments but typically lack an actual strategy. A
reactor ‘‘seldom makes adjustment of any sort until forced to do so by environmental
pressures’’ (29). Miles and Snow argue that these strategic orientations are enduring,
likely to change only slowly and gradually, and distinct from short-term tactical moves.
The central contention of Miles and Snow (1978) is that prospectors, defenders, and
analyzers perform better than reactors, a finding supported in a number of private sector
studies (e.g., Conant et al. 1990; Hawes and Crittenden 1984; Shortell and Zajac 1990).
Some empirical evaluations of the Miles and Snow framework distinguish between the
performance of prospectors and defenders. The study by Evans and Green (2000) of
Chapter 11 bankruptcy notes that prospectors are more likely than defenders to achieve
business turnaround. Hambrick (1983) concludes that prospectors outperform defenders on
market share changes but that this pattern is reversed for return on investment. The analysis
of US hospitals by Zajac and Shortell (1989) found that the performance of defenders fell
behind other generic strategy types when the environment called for a more proactive
approach. Woodside et al. (1999) conclude that prospectors outperform defenders, who in
turn outperform reactors. The evidence on the private sector, thus, provides some clues that
the relative effectiveness of different strategies may be contingent on the environmental
context, the current level of performance, and the dimensions of performance that are
analyzed.
Boyne and Walker (2004) recently evaluated the relevance of the Miles and Snow
(1978) framework to public organizations. They criticize most prior research on strategy
content for placing organizations in mutually exclusive boxes and assuming that each
organization has only a single strategic stance, that is, for example, just a prospector or
a defender. Boyne and Walker (2004) argue that organizations’ strategies are messy and
complex rather than neat and simple. A mix of strategies is likely to be pursued at the same
time, so it is inappropriate to categorize organizations as belonging solely to a single type
(e.g., reactor or prospector). This logic also implies that the ‘‘analyzer’’ category is redundant
because all organizations are both prospectors and defenders to some extent
(although the balance will vary with the priority attached to these stances and that attached
to a reactor strategy).
This modified version of the Miles and Snow (1978) model of strategy content has
subsequently been tested on English local authorities. Andrews et al. (2006) examine the
relationship between strategy and organizational performance in a multivariate model that
also controls for external constraints (the prosperity of the local population and the diversity
of their service needs). Their measures of prospecting, defending, and reacting are
based on Likert scale survey responses from senior and middle managers in a sample of 120 organizations. The empirical results reveal a hierarchy of strategy types: the impact of
prospecting is positive, defending neutral, and reacting negative. Thus, controlling for the
presence of other strategic stances in an organization, prospecting is the best option and
reacting is the worst.
This evidence is consistent with the view that strategy matters not only in the private
sector but also in the public sector. Whether the prospectors-beat-defenders-beat-reactors
result can be generalized to other public organizations is less clear. Local authorities in
England have been strongly encouraged by their primary stakeholder (UK central government)
to pursue innovation in recent years. Perhaps, this policy context makes a difference
to the success of different strategic stances. Also, Andrews et al. (2006) examine only one
aggregate measure of performance. Perhaps, as the private sector evidence suggests, the
relative effectiveness of prospecting and defending varies across dimensions of performance.
Finally, strategy is the only aspect of public management that is included in the
Andrews et al. (2005) study. Does the ‘‘hierarchy of strategies’’ persist when other management
variables, such as leadership quality, stability and networking, are held constant?
This article presents new empirical evidence that illuminates these issues.

THE MODEL
Miles and Snow (1978, 29) contend that managers adopt one of four strategic stances on
the basis of which any number of specific organizational (tactical) decisions are to be
approached. As such, strategy is essentially a choice by management to establish a consistent
response to problems or environmental challenges. Because they represent consistent
management decisions, the various strategy content patterns can be incorporated into more
general models of management, including the O’Toole-Meier management model.
In their research agenda focusing on understanding the relationship among public
management, institutional arrangements, and public program performance, O’Toole and
Meier (1999) begin with the following:
 
where O is some measure of outcome; S is a measure of stability; M denotes management,
which can be divided into three parts; M1 is management’s contribution to organizational
stability through additions to hierarchy/structure as well as regular operations; M3 is
management’s efforts to exploit the environment of the organization; M4 is management’s
effort to buffer the unit from environmental shocks; X is a vector of environmental forces;
e is an error term; the other subs denote time periods; and b1 and b2 are estimable
parameters.
The model incorporates three basic principles in regard to public management and
organizations. First, organizations are autoregressive systems. Because organizations create
processes and operating procedures that are designed to reproduce the same outputs
over time, the best predictor of what an organization will do tomorrow is what it does
today. The autoregressive component is captured by the lagged dependent variable, thus
requiring time series or panel data for estimation purposes. The autoregressive estimation
means that the impact of any variables including management is dynamic and distributed
over time. Small management actions, as a result, can have a dramatic impact over a period
of years. Empirical studies consistently demonstrate the importance of the inertial nature of
organizations; past performance is always the most significant factor in any of the models
in which it appears (see Meier and O’Toole 2003; O’Toole and Meier 2003).
Second, the model is nonlinear rather than strictly additive. At times, factors interact
in a multiplicative manner; at times, the interaction is with a reciprocal function; and
at other times, terms add together and then interact with another factor to generate their
overall impact on organization performance. These hypothesized reciprocal effects were
derived from the massive case study literature but generally had not been tested empirically
before this research agenda began several years ago.
Third, the model is contingent to reflect the view that what works regarding management
is dependent on a variety of other factors. Among the most interesting contingencies
are those involving stability. The stability term can be considered one end of a continuum,
with fluid arrays on the opposite pole. Structurally, this parallels the distinction between
stable hierarchies and more fluid institutional arrangements, such as networks of interdependent
units. As the stability variable moves toward zero, the model estimates how management
affects programs in settings marked by great and unpredictable changes over time.
In the model, S can be considered a composite of the various kinds of stability in an
organizational setting. Stability means constancy in the design, functioning, and direction
of an administrative system over time. Five types of stability were identified in an earlier
study: structural stability, mission stability, production or technology stability, procedural
stability, and personnel stability (O’Toole and Meier 2003). That analysis investigated the
impact of personnel stability on the performance of administrative systems and developed
empirical evidence of its positive contribution.
The model contains three broad functions of management. They are efforts to manage
the internal operations of the organization (M1), efforts to exploit opportunities in the
environment (M3), and efforts to limit the negative impact of environmental changes
(M4). The latter two functions in the second, environmental, portion of the model are often
combined as M2—defined as the ratio of M3 to M4.1
The ive in presenting the original formal model, and the impetus behind this
research agenda, is the idea that it is crucial to be precise about exactly how management
might relate to performance and how it might interact with other factors to affect performance.
For any theoretical endeavor, it is less important to be correct in the initial arguments
than to be precise in what is being said (O’Toole and Meier 1999). An unfalsifiable
theory is of little use in a scientific effort to understand phenomena, including such a
complex and important phenomenon as public management.

INCORPORATING STRATEGY CONTENT INTO THE MODEL
The base model conceptualizes management broadly; within each of the managerial terms,
a number of more concrete managerial subfunctions and behaviors can be encompassed.
In earlier works aimed at testing parts of the model, certain measures were developed to
tap aspects of these terms, and these are carried forward into the current investigation. In
addition, here we develop a dimension that is evident in the model but thus far has been
unexplored in this research program through empirical work: the strategic aspect.
Each of the three types of strategy content depicted earlier can be incorporated into
the base model with relative ease. Defending (symbolically: SCd) is the decision of the organization
to focus on efficiency in its core tasks. Such a strategy might include withdrawing from activities unrelated to the core task and stressing to the organizational members the
need to become more effective or efficient on a small number (perhaps only one) of clearly
expressed goals (Miles and Snow 1978, 48). Because many public organizations have their
core tasks defined by political sovereigns (Wilson 1989), the ‘‘goals and efficiency’’–related
aspects of defending are likely to be more important than any actual repositioning.2 A large
aspect of defending, then, is part of M1, internal management. By stressing efficiency in core
tasks, management signals to organizational employees the types of activities and results that
are valued (see Barnard 1938). Although defending might also enter into the environmental
portion of the model, either by buffering the environment to avoid challenges to the core
tasks or seeking opportunities to exploit that involve the core task, its primary emphasis can
be expected to emerge in internal management and will be treated as such here.
Prospectors (SCp), in contrast, are focused on the environment; they seek new opportunities
that can be used to good advantage by the organization (Miles and Snow 1978,
66). Prospecting quite logically fits into M2; specifically, a prospector is likely to have
a large M3 term—that is, an orientation to exploiting environmental opportunities. Reactors
(SCr), in contrast, do not seek to either defend core processes or exploit opportunities;
instead, they simply react after events transpire. Reacting is also clearly an environmental
management strategy; however, it is one that seeks neither to exploit nor to buffer as an
emphasis, but rather to respond to exploitative or buffering moves by external parties
themselves. Accordingly, reacting can be associated with an M3/M4 ratio near unity. An
M3/M4 ratio of 1 does not mean the reactor has no priorities in terms of environmental
initiatives. Reactors in many cases cede their environmental strategy to regulators (or
organizations that create rules and procedures for the reacting organization) who then
set the organization’s priorities.
This discussion of strategy content illustrates that the strategies are not mutually
exclusive; and indeed, empirical efforts have generally found an overlap among the strategies
(for evidence from private organizations, see Conant et al. 1990, and for public
organizations, Andrews et al. 2005, 2006; see below as well). Prospectors seek opportunities,
but they will certainly not avoid some of these merely because they fall into their
core goal set; hence, prospecting can contain an element of defending. Similarly, defenders
might be quite innovative in pursuing their core goals (i.e., in prospecting of a certain type)
while ignoring other types of opportunities. Even reactors might mimic prospectors or
defenders in some situations, depending on the cues from their regulator. By ceding control
over their agenda to the regulator, managers adopting this strategy might look like defenders
and perhaps even prospectors—if that is what the regulator is currently demanding.
They may, however, lack the skills and values to switch successfully to one of these other
strategic stances (Boyne and Walker 2004).

SAMPLE AND MEASURES
The theoretical approach we are using places heavy demands on a data set, especially when
strategy content is to be incorporated into an existing framework. Our task is facilitated by
using the Texas school district data set, an empirical source with a significant number of
well-developed managerial concepts that has been used by a large number of public management scholars (Fernandez 2005; Goerdel 2006; Gonzalez Juenke 2005; Hicklin
2004; Hill 2005; Pitts 2005).
Our data are drawn from two sources. In 2000 and 2002, Meier and O’Toole surveyed
the 1,000? Texas school district superintendents on management styles, goals, and time
allocations. Their return rates were 55% in 2000 and 60% in 2002.3 Pooling 6 years (2000–
2005) of data on performance and control variables produces a total of 3,041 cases for
analysis. Missing data on individual items reduce this number somewhat in individual
equations. All nonsurvey data were from the Texas Education Agency.
All management studies need to be set in context to permit comparisons across
investigations. Although schools and school districts are the most common public organizations
in the United States, they have some distinct characteristics. School districts are
highly professionalized with elaborate certification processes for various occupations. The
organizations themselves are decentralized with substantial discretion vested at the street
(classroom) level. Despite this common structure, districts themselves are highly diverse.
They range from urban to rural, rich to poor, and homogeneous to heterogeneous, as one
would expect given that Texas contains 8% of all school districts in the United States.
School districts in the United States are generally independent4 local governments
with their own taxing powers; all districts in the sample are organized in this way. The state
of Texas, the locus from which our sample is drawn, operates a relatively decentralized
system, with most authority residing with the local school districts. Each district determines
its own curriculum and makes all its own personnel decisions.

Management Measures
Strategy Content
We tap the strategy content of school districts by asking the districts’ top managers about
their perspectives on the crucial distinguishing features of the types. The measures used are
designed to capture an important portion of top managers’ strategic approaches. They are
not perfect but do provide reasonable operational meanings for the complex perspectives
apparent in managerial and organizational decision making.
A defender (SCd) is a manager who focuses the organization on its key tasks and seeks
to be more efficient/effective in those tasks. The superintendents were asked to rate the
priority given to five different tasks (improving Texas Assessment of Academic Skills
[TAAS] scores, focusing on college-bound students, emphasizing vocational education,
improving bilingual education, and supporting extracurricular activities). Although all
these goals have some support, the primary method of assessing school district performance
and the most salient of the goals is performance on the TAAS, a standardized
academic skills test.5 Superintendents were also asked to rate seven factors in terms of their influence on decisions, including efficiency. We created a measure of defender
strategy with a scale that taps the importance of TAAS and also the stress on efficiency.6
Reactors (SCr) essentially have no strategy in regard to the environment but rather
wait until something happens. In many cases, both cues from the environment and decisions
about what to do in response to these cues can be taken from regulatory agencies, in
this case the Texas Education Agency. Superintendents were asked to rank seven factors in
regard to their influence on policies adopted by the district (parents, the school board,
desire for efficiency, etc.) including the Texas Education Agency. The actual measure was
the ranking given the Texas Education Agency with highest ranking assigned a value of 7.7
Prospectors (SCp) are managers who seek opportunities to exploit the environment.
We expect prospectors to both value change and to take action. To tap the change orientation,
we use the superintendent’s agreement (four-point scale) with the statement ‘‘A
superintendent should advocate major changes in school policies.’’ To incorporate the
action component, we use additional information about our M2 measure, discussed below,
which deals with the frequency that superintendents interact with key stakeholders in the
environment. Prospectors are expected to be more aggressive in these environmental
efforts, so we asked the superintendents which party—the top manager or the external
actor—initiated the most recent contact involving the specific environmental actor in
question. Managers were queried in this fashion regarding each of seven different environmental
actors—local business leaders, parent groups, teachers’ associations, other
superintendents, state legislators, the Texas Education Agency, and federal education
officials. Prospectors are more likely to initiate contacts as they aggressively seek opportunities
to exploit. The prospector measure is an index that combines the number of times
the interaction was initiated by the superintendent (for an alternative interpretation see
Goerdel 2006) with the superintendent’s endorsement of change.8 Such behavior should be
considered initiating behavior rather than reacting behavior because the superintendent
does not wait for stakeholders to contact him or her but rather takes the initiative in such
interactions. By including a behavior element in this measure, it also ties the measure to
activities by the superintendent rather than simply tapping an attitudinal preference that
may or may not result in any activity.

Managerial Networking
This measure (M2) is intended to get at the reported behavior of school district top managers
as they interact with the important parties in the district’s environment. Because
school districts operate within a network of other organizations and actors who influence
their students, resources, programs, goals, and reputation, the extent towhich a superintendent manages in the school district’s interdependent environment is related to school district
performance (Meier and O’Toole 2001, 2003).
To measure the behavioral networking activity of school superintendents, Meier and
O’Toole (2001) selected four sets of actors from the organization’s environment: local
business leaders, other school superintendents, state legislators, and the Texas Education
Agency. In their mail survey, they asked each superintendent how often he or she interacted
with each actor, on a six-point scale ranging from daily to never. Assuming that
superintendents with a networking managerial approach should interact more frequently
with all four actors than would a superintendent with an approach focused on internal
management, a composite network management–style scale was created via factor analysis.
All four items loaded positively on the first factor, producing an eigenvalue of 1.82; no
other factors were statistically significant. Factor scores from this analysis were then used
as a measure of managerial networking, with higher scores indicating a greater networking
orientation.9
Managerial quality (Mq) is a notoriously difficult concept to measure. Meier and
O’Toole (2002) validated a measure based on the residual from a model explaining salaries
of district superintendents. The salary-setting process in Texas school districts approximates
a competitive labor market with full information. As a result, management skills
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