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