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SUSS POL 201 Study Unit 2: Organisational Management and Budgeting…
SUSS POL 201 Study Unit 2: Organisational Management and Budgeting
Explain the evolution of organisational theory through the classical, neoclassical, human resources and contemporary organisational theories
Organisational Theory
Classical Management Theories
the traditional model of public administration can be characterised as being
under formal
control
of the political leadership
based on strictly
hierarchical
model of bureaucracy
staffed by
permanent
neutral
and anonymous officials, motivated only by the public interest
serving any governing party equally
and
not contributing to policy
but merely administering those policies decided by the politicians
Weber’s theory of bureaucracy
Weber campaigned for a bureaucratic model that relied on
hierarchy
technical expertise
merit-based appointments
and following uniform rules
to aid better organisational output.
He defined bureaucracy as having the following characteristics:
Jurisdictional boundaries
, which are typically prescribed by laws or administrative regulations;
Reliance on written
documents
(or the preservation of files)
Expertly
trained managers
Hierarchy
, which ensures an ordered system where superiors monitor subordinates;
The management of the organisation subscribes to general
rules
, which can be learned and
applied more or less uniformly
Woodrow Wilson dichotomy theory
Woodrow Wilson argued that there should be a strict
separation of politics from administration
His writing on the politics and administration dichotomy also
led to
the eventual development of a
distinct field of study on public administration
Frederick Taylor's Scientific management theory
Taylor advocated for a fundamental shift where ad-hoc decision-making would be replaced by science and efficiency.
The core aspects of his theory are work standardization and the maintenance of the standards.
Taylor’s four principles of scientific management called for the
identification of more efficient ways to complete a task
Taylor's our principle
Special training
- The second principle advocates finding the strengths and limitations of workers and offering them
special training to improve their capabilities
Assimilation
- The third principle advocates bringing together work procedures and specialized training, which the management is responsible for.
Incentivize pay
- He advocated
paying workers on a piece-rate basis
instead of a standard for all to incentivize them to produce more.
Equality
- The final principle calls for an
equal division of labour
between managers and workers so that management is better able to supervise workers and their adherence to procedures
POSDCORB
The scientific management principles were further developed to improve workplace efficiency.
Gulick and Urwick developed a set of organisational processes for executives through the notion of POSDCORB:
planning
organising
staffing
directing
coordinating
reporting
budgeting
Neo-Classical Management Theories
Herbert Simon (1946) challenged the widely accepted
classical management
principles by saying that they were
not grounded in scientific research
effectiveness of classical principles
depended upon the context
Dahl's refutation
Dahl disagreed with the notion that public administration is akin to science, arguing that
values were important
to the study of public administration.
He stated
three main reasons
that explain why it will never be a science:
Normative values remain unclear (i.e. subjective and contextual)
human nature is not easily predictable
principles that may work for one area may not be applicable to other areas in the same way (i.e. low external validity)
Institutional theory
Philip Selznik founded institutional theory.
He wrote that i
nformal organisations
embedded within formal ones
can either bolster
the formal organisation’s goals and efforts
or
they can serve as tools of resistance,
hindering
the organisation’s overall output
These informal groups can be seen as cliques based on personal relationships and can cut across the formal organisational hierarchy.
He saw individuals within organisations as independent
agents who can hold dichotomous goals
that may differ from the organisation’s objectives.
Chester Bernard incentive theory
Bernard made a departure from classical management principles by stressing the
importance
of
both monetary and non-monetary work incentives
for enhanced worker cooperation.
Bernard wrote about eight types of worker incentives, including
material inducements
such as money,
personal
nonmaterial opportunities
such as power and prestige at work,
desirable physical conditions
of work such as safe-working environment
ideal benefactions
such as the belief that your work makes a difference
habit and attitude
conformity as a core set of beliefs
opportunity for participation
including the belief that one’s voice is being heard
associational attractiveness, and
condition of communion referring to interpersonal dynamics at work in an organisation
In doing so, Bernard introduced a
humanistic perspective
to organisational theory.
Human Side of Organisational
Theories Human relations theories have their roots in social psychology.
Hawthorne experiment
Elton Mayo conducted a series of experiments in the 1930s, called the “Hawthorne experiments” by examining the impact of light amplification difference on worker productivity
Contemporary Organisational Theories
Systems Theory
Systems Theory sees the coordinated workings of the different parts of the organisation makes it work.
It assumes that the
organisation is made of several interconnected parts, each of which has different goals
and the different parts together can achieve broader organisational objectives.
It is
important to understand the interrelatedness of all the parts of an organization
and to see how
changes in one area can have multiplier effects on the other parts
.
Systems may not always interact in the same manner, which explains why sometimes small changes in one part of the organisation may
Organisational Economic Theory
Organisational Economic Theory attempts to ensure that
worker interests overlap with the organisation’s interests
, and thus the organisation’s owners’ interest.
As both the principal (owner) and the agent (worker) are motivated by their own self-interest, it becomes necessary to ensure they are working towards the same goals.
The principalagent theory
The principalagent theory deals with the inherent challenges related to motivating workers and controlling their co-operative actions (Laffont and Martimort 2002).
As the principals are at a significant disadvantage in terms of information on what the agents do, they attempt to manage the conflict of interest by monetary compensation to the agents to influence their interests and by implementing oversight mechanisms to make sure they are performing as expected.
Structural Theory
Structural Theory assumes
organisations to be rational
that work towards accomplishing specific goals and objectives.
The structure of the organisation is thought to be essential where a best structure for every organisation exists and if there are any
problems
, it
can be corrected through structural changes
(Pfeffer 1991).
Principles of
efficiency, effectiveness and productivity are important for structural theory
.
Burns and Stalker (1961) identified two different but complimentary organisational management systems:
mechanistic and
organic systems.
organisations should try to incorporate the best of both systems
organic systems
are better suited when instability and changes are frequent.
Mechanistic systems
are Weberian in nature and are ideally suited for stable environments
Describe the changes in public sector human resource management from traditional public administration to contemporary times.
Managing Human Resources
People are the most important resource
in an organisation and strongly affect the performance of an organisation – something that applies to public agencies as well
Human Resource Management
Traditional Human resource practice
The traditional practice for aspiring administrators was to
sit for a civil service examination
directly after completing the educational requirements so that they could be
appointed at the bottom
of the hierarchy and
work their way through
the years and gain regular promotions to reach a more senior managerial position
the
reward
for a long and loyal service in the public sector would be a
distinctive retirement and pension system
Criticism
This system provided stability, but the
rigid hierarchy
also made it
difficult to cope with rapid change
.
There were also criticisms that it allowed for a
stifling conformity
in the work place and didn’t give any room for innovative practices in the public sector.
This resulted in a
slow moving bureaucratic process
.
New Public Management Human resource practice
Emphasis on work performaces and goals were enhanced to introduce a
more flexible and less hierarchical structure
in the public sector
Contracts were often used
as it
provided flexibility
for quickly hiring people giving them different conditions of employment, which also meant that workers who were not performing could be removed
Another important aspect for bureaucracy was that
people could now start government positions at mid or senior levels
, instead of only at the bottom and moving their way up.
For example, the US Pendleton Civil Service Reform Act of 1978, introduced systems for merit pay, performance appraisal and performance pay and for senior managers to be able to be appointed and transferred between positions under a new Senior Executive Service
Human resource managment: Contemporary model
Contemporary public management models, in contrast, were
focused more on human resource management
, in addition to meeting the organisational aims and improving overall performance so that
both managers and employers are able to better serve the public.
Functions of Human resource management
Productive HR management is important, in order to:
Attract and recruit people
who fit with the job, team and organisation
Motivate staff
to perform and stay on
Equip
staff with updated
skills and knowledge
to cope with changes in job
Balance
between
needs
of staff
and goals
of organisation
Create an organisational environment that
promotes loyalty and cooperation
Method
To achieve this, it entails:
the
identification and hiring
of right people,
systematic preparation
of staff for their roles
management of staff needs
and concerns,
use of suitable
motivational techniques
and
fair evaluation
of staff performance.
Staff needs
High-performing organisations often show the ability to detect and manage staff needs
Types of inherent needs of staff (which can be link to Maslow's model) include:
Safety
Affection/Love
and belonging
Esteem
Self-actualisation
Distinguish between the main categories of leadership theories and their focus.
Public Sector Leadership
The essence of leadership are as follow:
Followship
: People are willing to follow you
Influence
: People are influenced by you to work on a collective goal
Bloom
: People work and produce better under you than on their own
Leadership ability affected by
nature or nurture
?
Great man thesis (Nature)
The great man thesis assumes that great
leaders are born
not made.
It is assumed that great leaders are unique people who are born to be
exceptional
heroes and rise to leadership, due to their
characteristics destined at birth
Trait theory (Nature)
This theory assumes that Leaders are
born with certain innate leadership traits
(e.g. physical build, confidence, intelligence, sociability, tenacity)
As such, it is assumed that
some people are better suited for leadership
because of their inherent traits and qualities
Skills theory (Nurture)
Assumes that Leaders possess certain skills necessary for leadership.
Skills include:
technical skills
such as
knowledge necessary to complete a task
interpersonal skills
which are soft-skills for human engagement.
critical thinking skills
which includes dynamic-conceptual skills which allows for strategic planning.
Behavioural theory (Nurture)
Assumes that People
can learn to become better leaders
through education, observation and experience
Leaders can be
assessed and distinguished by their actions
(how they behave with followers and how they make decisions), beyond their inborn traits and skills
Leadership style affected by
situation/ environment
Situational theory
Leaders should change leadership styles according to circumstances
(e.g. type of operations, subordinates, workplace layouts)
Emphasis is on situation
.
situational variables determine the best course of action that can be taken by a leader
Contingency theory
Assumes
that different leaders have
different leadership styles
, and certain leaders and leadership styles
are suited for certain situations
, environments and organisational settings
Path-goal theory
Leaders should
guide subordinates to visualise goals and paths
for achieving such goals, as well as to follow such paths
Leaders should embrace behaviours that
address motivational needs
of subordinates
and nature of tasks
e.g. Leaders should be dynamic enough to know when to apply the following styles of leadership:
directive leadership
- Provide guidance and psychological structure
supportive leadership
- Provide nurturance and encouragement
achievement- oriented leadership
- Provide challenges
participative leadership
- Provide avenues for involvement and opinion
Leadership style affected by
followers
Transformational leadership
This theory assumes that
Leaders are charismatic and serve as role models
who inspire and nurture subordinates on a personal level
Leaders
pay attention to altruistic factors of values
, ethics, ideals, aspirations, ownership, common good, etc and
bring individual interests and organisational interests together
As a result, leaders and followers raise one another to higher levels
Life cycle theory
Leaders should
change leadership style according to maturity level
of subordinates (e.g. staff motivation to achieve, ability to handle responsibility, level of education and expertise, depth of experience)
Leadership style in
non-traditional environment
Complexity leadership theory
Leaders need to
traverse
across the
dynamism and unpredictability
arisen from complex feedback networks, organisational environments and relations, onsite situations, etc
To achieve optimal performance in organisations, organisational structure cannot be designed with simple, rationalised
structures
as they
need to function and adapt to given complex situations.
Cross-cultural leadership
Leaders need to
manage subordinates of different backgrounds
, origins, cultures and locations, making them work together and create synergy
E-leadership
Leaders need to manage subordinates of different offices/locations/countries
remotely via electronic means
Describe how government raises revenue and distinguish between the different types of budget
Government Resources and Budgeting
governments, as sovereign authorities,
have the authority to tax
.
Governments raise most of their revenue through taxation of income, wealth and consumption.
The
government’s spending
significantly
contributes to the country’s economy and employment
and it also allows the government to fill the gap in the provision of services, which might occur if left only to the private sector.
Example of gov expenditure includes, financing public sector and public services.
Public Budgeting
Budgeting is the
process of allocating
scarce or relatively fixed
resources
among multiple,
and sometimes competing, line items and
for future programs
Singapore public budgeting
In Singapore, the
government first approves the budget
after which the Minister of Finance presents the budget to the Parliament.
The
committee of supply then debates on the budget
where members of parliament can ask the government on the expenditure information on the previous or next fiscal year.
The
President
has the role of a fiscal guardian so his or her
assent is sought
before the parliament can pass the Supply Bill.
Once the President’s assent is given,
the Supply Bill is then enacted as law
, known as the Supply Act, which
controls the government’s spending for the following fiscal year.
Types of budget
Public budget
There are two types of public budgets:
operating budget and
capital budget
Operating budget
An operating budget is the
year-to-year budget
, which plans how resources will be allocated to different programs and agencies
This type of budget is
for the immediate future
.
Capital budget
A capital budget deals with the
financing of longer term
capital projects such as investments for buildings and bridges, which are usually financed through borrowing, usually from bonds issued by different governmental entities such as states, counties or municipalities
Line-Item Budget
A line-item budget is simply
a form of budget presentation
, which shows how money will be spent, item-by-item.
State how much is spent
on each projected expenditure,
item by item.
Advantage
Simplicity
in creation and use
Clear
delineation hence accountability of each amount spent
Ease
of capturing data
Disadvantage
Not useful for planning
and management, although useful for control and tracking
Little information
on outputs and outcomes,
weak relation
with outputs and outcomes
Expenditure
not tied to performance
Performance budgeting
Illustrate how projected
expenditures are tied to performance
of the department
Use certain
performance indicators to measure performance
of the department
May allocate more
budget to better-performing departments
Advantage
Incentive
for departments to perform well
More
clarity
in the purpose of expenditure
result-driven
Disadvantage
Counterintuitive way to drive performance (i.e.
do not help a struggling department
so it can
perform better, but reduce its budget and make matters worse for it)
Subjectivity
in designing performance indicators
Neglect
of social principles such as
equity
Creates extrinsic motivation
instead of workers being motivated to do their job for a higher broader purpose.
Zero-based budgeting
Stringent and rigorous approach to budgetting
Zero-Based Budgeting (ZBB) is a method where all
expenses need to be justified
every year instead of making incremental increases over previous.
Requires a presentation on the
impact of budget
on programmes for several given scenarios – such as impact when
budget is maintained, reduced, increased and eliminated
Rank
the importance of
areas of expenses
, so that lower-ranked areas may be cancelled by approvers if budget requested has to be cut
Advantage
Easier for decision-makers
to visualise and understand where budget cuts are more acceptable and where budget increases would be desirable
Useful for
reducing
budget slack and
wastage
Prevention of inflated budgets
and creeping budgets (i.e. budget needed rises gradually and unconsciously during course of operations, to a level way beyond original budget decided)
Disadvantage
Labour-intensive and
time-consuming process
Subjectivity
in ranking priorities and decisions
Necessity to have
highly trained manager
s who can understand and administer budget
Planning programme budgeting
Weigh projected expenditures against potential benefits in monetary terms, and present them in the form of
benefit-cost ratio
May
allocate
more
budget to expenditures
and programmes
that have higher projected benefit-cost ratio
Use principles of
rational decision-making
Advantage
Use of
rational decision-making
principles as the basis of decisions
Consideration of long-term factors
and changing needs that affect objectives and plans
Use of budget as
an instrument to express policies and activities
of the department
Disadvantage
Maticulous
paperwork and analysis
Data intensive
(High levels of information to catalogue and compare)
Difficulty in
attaching a monetary value to intangible
costs and benefits