TOPIC 2
Strategic Management in Public Sector

Benefit of Strategic Management (Why Strategic Management crucial?)

Reason why some firms do not have Strategic Management.

Pitfalls in Strategic Management

Guidelines for effective Strategic Management

The need of Strategic Management in Public Sector

New Public Management

Understanding strategic management in Public Sector

  • Communication is a key to successful strategic management


  • Through dialogue and participation, managers and employees become committed to supporting the organization


Financial Benefit

  • Businesses using strategic-management concepts show significant improvement in sales, profitability, and productivity compared to firms without systematic planning activities


  • High-performing firms seem to make more informed decisions with good anticipation of both short- and long-term consequences



Nonfinancial Benefit

  • It allows for identification, prioritization, and exploitation of opportunities
  • It provides an objective view of management problems
  • It represents a framework for improved coordination and control of activities
  • It minimizes the effects of adverse conditions and changes

Lack of knowledge in strategic planning

Poor reward structures

Firefighting

Waste of time

Too expensive

Laziness

Content with success

  • Using strategic planning to gain control over decisions and resources
  • Doing strategic planning only to satisfy accreditation or regulatory requirements
  • Too hastily moving from mission development to strategy formulation
  • Failing to communicate the plan to employees, who continue working in the dark
  • Top managers making many intuitive decisions that conflict with the formal plan

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  • To deal with the complexities, new methods and approaches are needed and, over time, these have been called ‘strategic management’ @ SM.


  • A strong SM capability is essential because it provides both a short-term and long-term sense of direction for a governmental agency relative to its internal and external environments, which could be shifting continually.


  • The present practice of management tools consumed by public managers which are based on an older mechanistic school of strategic management and which are in line with laymen’s concept of management ignore the active, context-dependent nature of learning and makes it is an impediment to collaborative knowledge creation, learning and change (Marika Vanttinen, Kirsi Pyhalto, 2009).


  • Modern concepts of strategy and strategy process offer a more formalize manner of strategic management activities.


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  • Recent, more systematic efforts to make public administrations more accountable, efficient, and responsive.


  • The core techniques borrow from the managerial methods of the private sector are:


Core Techniques of NPM


Privatization.

Quasi-market competition (and contractualization).

A quasi-market is a public sector institutional structure that is designed to reap the supposed efficiency gains of free markets without losing the equity benefits of traditional systems of public administration and financing.

Management, relational, and personnel contracts; competition between public agencies; inter-agency fee charging; out-sourcing.

Performance orientation: changing the accountability relationship from an emphasis on inputs and legal compliance to one on outputs.

Results-oriented budgeting, full-costing of products.