The Rise and Fall of Bureaucracy:
WHY A NEW PUBLIC
MANAGEMENT; WHY NOW?
http://www.willamette.edu/~fthompso/MgmtCon/Fordism_%26_Postfordism.html
Transaction Cost Analysis
• Markets and organizations are alternative
venues for exchange
• That the choice of venue boils down to a
question of information costs
– search costs
– negotiation costs
– monitoring and enforcement costs
• Reducing information costs can radically
affect organizational designs and market
structures
Economic Revolutions of the
20th Century
• Bureaucratic revolution -- turn of the
century
• Managerialism -- mid-century
• Information revolution -- NOW
Bureaucratic Revolution
• The efficacy of government provision and control
increased relative to the market, decreasing the payoffs to
free markets, secure property rights, and minimal
government intervention;
• The efficacy of hierarchically coordinated systems
increased relative to the market and other self-organizing
systems, increasing the payoff to hierarchy and vertical
integration;
• The efficacy of centralized allocation and ex-ante control
increased relative to decentralized allocation of resources
and ex-post control, increasing the payoff to scale; and
• The efficacy of functional structures increased relative to
process-oriented structures, increasing the payoff to scope.
BASIC ELEMENTS OF BUREAUCRATIC
ORGANIZATIONS
• Centralized materials requirements and
logistical planning,
• Coordination by rules and standard
operating procedures
• The merit principle
• Functional design
• Decomposition of tasks
• Sequential processing
Figure 1
1950
Figure 2
1950
Progressive Movement in US
•
•
•
•
War Department under Root
USDA Forest Service
Municipal Reform
Contracting out of services replaced by
in-house production
For example: NYC Dept. of Sanitation
Elements:
Bureaucracy/hierarchy/managerialism
• Professionalization, expertise,
• Regimentation/task specialization
• Functional specialization
• Divisionalization
• Differentiation of staff from line functions-planning and control
• Specialization of clerical functions--planning
and control
• Accrual accounting (annualization)
• Cost accounting
• Donaldson Brown’s system of corporate
control
• Internal allocation of capitol
Impact of the Information
Revolution on Business and
Government
The market restored?
Versus hierarchy -- virtual organizations
Versus government -- deregulation &
privatization
Organizations transformed
Radical downsizing, decentralization, and despecialization
Time-based structures, process focused designs,
Networked organizational structures
EVENTS THAT TRIGGER INSTITUTIONAL
INNOVATION
Demographic changes
New knowledge
Gap between expected and actual events or outcomes
— i.e., unanticipated or surprising success or failure
Chronic dissatisfaction with actual outcomes
Mood or fashion changes
Exhibit A