Exam Flashcards
Why is Strategy important?
- Assessment of the current course of action
- Development of alternatives
- Review other strategic documents
- Understand and describe the dynamics of an organization
What is Strategy?
Interaction model between
the organization and its environment
Difference between Strategy and Plan
Planning is future-oriented, whereas Strategy is action-oriented. Planning takes assumptions, but Strategy is based on practical experiences. Planning can be for the short term or long term depending upon the circumstances. Unlike Strategy, which is for the long term. Planning is a part of strategizing, but a strategy is not simply a plan.
Previously, in very deterministic (meaning predictable) environments, strategies were basically just plans (what we need to do to reach our goals) so the two terms got confused.
Levels of Analysis
- Functional (IT strategy, Communication strategy, etc)
- Business (specific areas of intervention or competitive areas). Municipality making a strategy for its schools
- Corporate (organization-wide): the entire municipality
- Sector-wide (policies, reforms)
Why is strategizing difficult in the public sector organizations?
- Difficulties in the definition of the “mission” (legalistic interpretation of mandates)
- The belief that responsibility for strategy formulation lies with the political level
- Weakness and short-term orientation of the strategic apex (related to political cycles that makes it difficult to politicians to compromise long-term)
- Convergence of multiple (conflicting) interests and difficulty to understand the role of the different stakeholders
- Lack of shared measures of performance
- Trade-offs between “effective” corporate strategies and “effective” sector-wide strategies
The multi-faced concept of strategy (Mintzberg)
- Plan (or Ploy): Intended course of action targeted to a given result
- Pattern in a stream of actions: Behavioural model used consistently as a reference
- Position: Match between the organization and its environment
- Perspective: Ingrained way of perceiving the world
Different types of organization models
- Traditional bureaucratic model: managers are just implementing, no strategy for them
- New public management approach: managers expand their role and have the responsibility for strategic planning. Politicians write the electoral commitments (goal planning) and we take care of doing them
- Governance: strategy is done collectively, engaging of stakeholders -> different from the private sector. Bring onboard different players and see their reactions vis-a-vis your ideas and negotiating
Garbage can model (Incrementalism)
Organizations characterized by:
- problematic preferences. Preferences are not clear and not consistent over time.
- unclear technology. Many people have no idea how things work.
- fluid participation. People come and go. Political cycles, staff turnover, promotions, rotations.
We search for a problem for our solution: “in such environments, solutions do not necessarily stem from needs: players in the strategy game have a given solution ready, and try to highlight problems or trigger needs to which their preferred solution can be the answer.”
Example: NextGen EU. 75% increase of the EU budget during the pandemic. It was a perfect opportunity to use a solution that was already prepared by someone, most people who support a shift for a United States of Europe like administration. The crisis was a perfect opportunity to implement this idea. Moreover, the UK was out of the picture and Germany was the head of the EU during that period. The idea was already in the garbage can and they took it out of the garbage can due to these perfect conditions.
Tame vs Wicked Problems
Tame problems:
- relatively well-defined and stable problem statements
- definite stopping points, i.e. we know when a solution is reached
- solutions can be objectively evaluated as being right or wrong
- classes of similar problems can be solved in similar manners
- solutions can be tried and abandoned
- technically it is not a complex problem
Example: New-York ice rink, cleaning canal.
Wicked problems: ill-defined, ambiguous problems associated with strong moral, political and professional issues; since they are largely stakeholder-dependent, there is little consensus about what the problem is, let alone how to solve it.
Example: climate change, racism, crime, sexual discrimination, violence against women.
How to solve tame and wicked problems?
Solving a tame problem: sit around the table, discuss, fight, modify, better accountable for different components of the problem. We can optimize, do A, B or C options.
Solving a wicked problem: a mess, intrinsically very political. Using analytical tools on a wicked problem is not effective, because we are trying to use mechanical tools on something that is not properly defined.
What is the value added of strategy? (Starbuck)
Problems with formal strategizing:
1) Formalization undercuts formal strategizing’s potential value, there are 4 main problems: skilled competitors with the same information; high-profit strategies are impractical, illegal or immoral; emphasizes big issues in the long-term that are unlikely to fold out as predicted; used to bring strong consensus and commitments, but such things can be dangerous unless the strategies are very likely to produce wanted outcomes.
2) There are fundamental barriers to achieving measurable gains through forecasting and strategizing.
3) There is a high frequency of large errors in managers perceptions of their own firms and their market environments.
Realistic achievements from formal strategizing:
- Help identify and leverage distinctive competencies, entry barriers, proprietary information and first moves
- Use forecasts to motivate alertness
- Inject realism into managers’ perceptions
- Keep strategies flexible
How to plan for different surrounding environments (predictability and complexity)
+ P -C = day-to-day management
+P +C = Planning
-P -C = scenario development
-P +C = Learning process (more flexibility, shorter time frames)
Purposes of a Strategic Plan
Strategic plans formalize choices and become “contracts” with internal and external stakeholders; as such they serve
different purposes:
- symbols = signal the importance of certain issues, or the willingness of doing something in a “systematic” way (“announcement effect”)
- advertisements = attract consensus and/or mobilize resources and/or identify possible partners
- simulation games = test how internal and/or external stakeholders are going to react to the changes advocated by the plan
- excuses for interaction = induce interaction with or among internal and/or external stakeholders (change trigger)
Key requirements of a Strategic Plan
- have a structure and format coherent with the intended goal and target audience: if we are communicating, the effectiveness of the communication is not intrinsic to the document but also take into account who are we communicating to (is the target the citizens? or politicians? or civil servants with a technical background? if so we should introduce some technical details and jargon)
- be as much fact-based and objective as possible (it is not a sales pitch by itself)
- be clearly written and internally consistent
- not exceed 30 pages
Typical pitfalls of Strategic Plans (Rumelt)
- failure to face the problem: problem not defined, thus it is impossible to assess the quality of the strategy (example, in the previous business plan of Bocconi the problem, was clearly stated “being a more international university, especially bringing students from Indonesia, China, India and the USA”)
- mistaking goals for strategy: what is missing? how to get there. Understand where we are, where we want to go, how to get there and what is going to change. A strategy is not about where to go, but how
- fuzzy strategic objectives: scrambled mess of things to accomplish (examples: achieving quality, customer service, etc)
- fluff: a restatement of the obvious, combined with a sparkle of buzzwords
Kernel of a good strategy (Rumelt)
A good strategy, truly designed for implementation rather than other objectives, acknowledges the challenges and outlines a context-specific, viable approach to overcoming them.
Good strategies have a basic underlying structure:
- a diagnosis: an explanation of the nature of the challenge, identifying certain aspects of the situation as the critical ones
- a guiding policy: an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis
- coherent actions: realistic, adequately resourced steps that are coordinated with one another to support the accomplishment of the guiding policy
How to evaluate strategies?
- choice of priorities: is everything a priority or do we have real priorities? Trade-offs and difficult choices to align demand and capability
- Unique value: will it produce unique value?
- Unique set of activities: am I imagining some innovative interventions
- Consistency: when implemented, will the strategy produce consistent results
- System alignment: is my strategy consistent with other variables
In Search of Fit: Tools to Analyze the Broader Environment
We have the SWOT (or TOWS) analysis that concerns the entire environment (external and internal).
Lewin’s Force-Field analysis: driving-forces vs restraining-forces.
- Competitive System (Critical success factors) regard the external factors and encompass the Opportunities and Threats to the organization. These are divided into 3 levels, from the broadest one to the most specific, each one having a specific tool related to it:
1) Macro-Environment: PEST analysis
2) Competitive-Environment: Porter’s Five Forces
3) Task-Environment: Problem Tree Analysis - Product (Competitive advantages) regard the internal factors and encompass the Strengths and Weaknesses.
- Organizational Arrangements (Core competencies) also regard the internal factors and encompass the Strengths and Weaknesses.
SWOT analysis: Environmental assessment
SWOT analysis are often very superficial.
By starting with the Strengths, we are establishing a bias beforehand.
Non-clear if we are talking about the strength of the product or the organizational arrangments.
How to define is something is a strength if we are not focusing on a specific environment?
Instead implement an outside-in approach: TWOS analysis
PEST analysis: Environmental assessment (Macro-Environment)
Political (government policy and/or changes in legislation affect the economy, the specific industry, and the organization in question. Example: taxes, employment laws, environmental policies)
Economic (exchange rates, economic growth, supply and demand, inflation and recession)
Social (exchange rates, economic growth, supply and demand, inflation and recession.)
Technological (trends, and changes in technology, government investment)
PEST Analysis can assist an organization in recognizing and thereby capitalizing on opportunities offered by existing conditions in the business environment. It can also be used for identifying current or possible future challenges, allowing for effective planning of how to best manage these challenges.
PEST Analysis can be used in conjunction with other forms of strategic business analysis, such as the SWOT.
Porter’s five forces: Environmental assessment (Competitive Environment)
Competitors Suppliers Buyers Potential entrants Substitutes
Porter’s Five Forces is a framework for analyzing a company’s competitive environment.
Problem tree analysis: Environmental assessment (Task-Environment)
The Problem Tree Analysis method is a planning method based on needs. It should be followed by actual project planning, and it should analyse the capacity and intentions of stakeholders. With the PTA you can address the real needs of the beneficiaries.
A problem analysis identifies the main problems (negative aspects) of an existing situation and establishes the cause and effect relationships between such problems.
A shared problem analysis is especially valuable to address multi-stakeholder challenges: on the basis of available information, stakeholders discuss and agree on the key problems that exist in a given situation.
Three steps:
- definition of the framework and subject of analysis
- identification of the major problems to be addressed (A problem is a condition affecting negatively the relevant target group: it is not intended as the absence of a solution, but as a negative situation, and should be worded as such)
- development of a problem tree to establish causes and effects (causes -> problems - > effects or consequences)
After the problem tree, we can also develop a objective tree to tackle the problems.
Competitive advantage (Organizational assessment)
Competitive advantage discusses the “how” of strategy, i.e. the way in which the organization intends to achieve its goals based on the products or services, markets, locations, technologies and processes it focuses upon.
To create and capture value consistently, there must be something “special” about the organization; otherwise, a rival could replicate what the organization does, and competition would sharply limit the organization’s ability to capture value
Position: The position of the organization in the marketplace or stakeholders’ network.
Capabilities: The capabilities of the organization to meet demand or satisfy stakeholders’ expectations.
Generic Competitive Advanatges (Porter, based on the target and advantage)
Broad Market + Low Cost = Cost Leadership Strategy. Example: World Bank
Broad Market + Product Uniqueness = Differentiation Strategy. Example: World Health Organization
Narrow Market + Low Cost = Focus Strategy (low cost). Example: The Global Fund
Narrow Market + Product Uniqueness = Focus strategy (differentiation). Example: UNICEF
How to deliver superior value? (Treacy and Wiersema)
- “customer intimacy”: segmenting and targeting users precisely and tailoring supply to match the needs of those niches (e.g.: Trenitalia)
- “operational excellence”: providing users with reliable products or services on competitive terms and delivered with minimal difficulty or inconvenience (e.g.: Global Fund)
- “product leadership”: offering users leading-edge programmes that consistently enhance the use or application of the product or service, thereby making rivals’ programmes obsolete (e.g.: WHO)
What are core competences? (Coyne)
“A core competence is a combination of complementary skills and knowledge bases embedded in a group or team that results in the ability to execute one or more critical processes to a world-class standard”
- Insight / foresight competencies
- Frontline execution competences
Check if competence is: truly superior, sustainable, how much value it can generate and integral to our value proposition.
Sources of sustainable competitive advantage (Barney)
VRIO (evolves from disadvantage, parity, temporary advantage, sustained advantage) Valuable Rare Imitate (Costly to) Organized to capture value
Lewin’s Force-Field Analysis
Driving-forces vs Restraining-forces
Lewin’s “Force-field analysis” is a diagnostic technique meant to identify the variables involved in determining whether a strategic change will happen or not.
Helps to deal with confirmation bias and to explicitly address restraining forces
Strengthening driving forces is also going to increase restraining forces: current equilibrium doesn’t change, only tension increases -> work in softening opposition, i.e., restraining forces + incremental strategies.
Types of Stakeholders
Champions Allies Fence-sitters Mellow Opponents Hard-core Opponents
Why is stakeholder analysis important?
Stakeholder analysis is a tool suitable to shed light on the functioning of a system, by:
- Pinpointing the key actor in that system
- Identifying their relationships
- Assessing their respective interests
Logical steps in Stakeholder analysis
- Identification: who are the stakeholders and how are they involver
- Classification: interest and power
- Selection of engagement strategy: monitor, inform, satisfy, engage
- Implementation of the engagement strategy
Step 1 - Identification: who are the stakeholders?
Stakeholders are those individuals or collective entities which rely on the organization to have their goals met, and on which the organization relies to reach its goals.
Stakeholders are contingent to the issue at hand.
Step 2 - Classification of Stakeholders
“How important the decision at hand is for that specific stakeholder? To what extent he/she is ready and willing to fight for or against a given outcome?
Interest:
Collect information
Look at actual behaviours rather than statements
Be specific: WHAT aspects exactly they care about?
Power:
How much can the influence the process or outcome?
Be specific: what can they do for or against our agenda?
Analyse if they can facilitate or block a decision or its implementation
Step 3 - Selection of engagement strategies for Stakeholders
- P -I = Monitor
-P +I = Keep informed
+P -I = Keep satisfied
+P +I = Key Partner
Engagement is instrumental, not an end in itself. Engagement is a tool to reach policy objectives. Engage the ones who are going to help you solve the problem - key partners
-> need to be cynical and blunt
Truman’s pluralistic theory (Stakeholders Interplay)
Interest groups = source of counterweight and independence of civil society from the “State”
Coalitions are more or less similar in strength -> balance between mobilization and counter-mobilization. You represent one of the organised interests. If you start promoting aggressively your position you will get agressive too in their reaction, because the opponents are also organized.
The balance between mobilization and counter-mobilization makes decision-makers independent from vested interests
Olson’s paradox of collective action (Stakeholders Interplay)
Interest group mobilization is often limited and influenced by group size: small organised groups usually prevail over large, unorganised latent groups. Small group size makes it easier to reach an agreement and reduces free riding.
Colorado State Hospital Case in Stakeholder Engagement
Dr. Kort put serious focus and effort into the engagement of many of the most important Pueblo stakeholders. This made it so that those actors that previously were opponents and critiques of the hospital, started supporting and promoting it, forming a strong coalition of Pueblo actors in prol of the Hospital. She did so by actively participating in the local chamber of commerce, meeting with the editorial board of the local newspaper, and communicating and evolving other relevant stakeholders. She also created a community advisory board that gathered political, technical, media and community actors that was a success. The fostering of these relationships was essential for the well-functioning and protection of the Colorado State Hospital as well as for the promotion of its interests.
The internal operation of the hospital was also exemplary, an impressive accomplishment considering that there were strong unions to deal with. Despite the downsizing of the hospital and consequent layoffs, Dr. Kort managed to overcome this problem by implement a strong consumer-focused approach in which the employees took great pride, highly contributing for a positive and committed environment that led to better and more efficient work. Employees training and appreciation events were also big moral boosters and unifying elements.
Other success factors included constant communication and debate on decisions, giving more budget authority to divisions.
Social Weather Analysis
Social weather describes what the media (and thus public opinion) are talking about and how in a given period of time.
Knowing what issues dominate in the media is a must to make sure your messages are compatible with ongoing conversations.
Banch and Allen’s IA^3 framework (Stakeholder analysis in non-market environments)
Issue: an organization should take a position on an issue if the issue’s resolution could significantly affect the organization’s ability to fulfil its goals
Actors: the next step is identifying interested actors, i.e. those with an economic or ideological stake in it
Interests: We need to understand what motivates the actors who care about an issue
Arenas: actors can meet in courtrooms, parliamentary committee hearings, the news media, the public domain, etc
Information: the kind of information that can influence the resolution of an issue varies across arenas
Assets: reputation, trustworthiness, supporters, etc
By identifying who cares about an issue, what the various actors’ interests are, and in what arenas they meet to settle the issue, an organization can plot what information and assets it may need to shape the issue’s evolution in a way that favours its agenda.
Why is demand analysis important?
Underestimating in the public sector: opening the door for competitors, loosing potential profits, politically we get a problem.
Overestimating in the public sector: wasting money.
Demand analysis
Overall theoretical demand
- > (need) Market potential
- > (willingness to pay) available demand
- > (features) qualified available demand
- > (access) Served demand
- > Satisfied demand
Market gap: market potential - served demand
Segmentation - Target Market
Market segmentation = process of aggregating users with similar wants, needs, preferences or consumption behaviour
The target market is made up of different users: the point is to understand what specific group of users we wish to focus on.
Aim: to identify users’ subsets so that
- heterogeneity is minimized within and maximized among the segments
- a unique value proposition can be designed for each of the segments we choose to serve (“targeting”)
Value Based Pricing
Reference value: price of the user’s best alternative.
Differentiation value: value to an individual user of any differences, both positive and negative, between your offering and the reference product or service ( gap analysis).
Total economic value: ceiling of the price window = Reference Value +- Differentiation Value
Portfolio Analysis
Portfolio analysis is a powerful means of understanding how different programmes and services contribute to corporate mission and strategy.
In public sector organizations, portfolio analysis is also important to assess the fit and highlight the gaps between the portfolio of services and stakeholders’ expectations.
Portfolio analysis tools - BCG and Bruger and Mohr Matrixes
BCG matrix: Market growth vs Market share (high-low x and y-axis). Cash cows, dogs, stars, question marks.
Gruber and Mohr’s programme portfolio matrix (BCG marix conversion to public sector): Financial Returns vs Social Benefits.
Montanari and Backer Programme Portfolio Matrix
Public Need and Support vs Ability to Serve. Back Drawer Problem Political Hotbox Golden Fleece Public Sector Star
One of its flaws is that one of its dimensions is a combination of 3 factors: public need, public support, and financial atractiveness.
Prince and Puffin’s MASLIN multidimensional matrix
MASLIN - Matching Service Linkages
Has great adaptability as one of the axis is to be determined by the user. The other one is needs or wants of the client group. Withdraw Review and Evaluate Lobby and Rematch Continue but monitor
Parenting Advantage (Campbell)
The parenting framework focuses on the competencies of the parent organization and on the created value from the relationship between the parent and its businesses. A good fit will create additional value, while a bad fit will destroy value.
- Examine critical success factors of each business (it serves to understand if friction is likely to occur between the business and the parent)
- Document areas of performance improvement each business (where the parent can add value)
- Review the features of the parent, grouped in a number of features (compare characteristics of the parent organization with critical success factors and parenting opportunities in each business)
- Validating the judgements
Then we put the assessments into a matrix: fit between practice KSF and Firm’s parenting characteristics vs Fit between parenting opportunities and Firm’s parenting characteristics. We get:
- Heartland businesses: have opportunities to improve that the parent knows how to address
- Edge of Heartland Business
- Ballast business: there is a good fit with thre KSF but not much room for improvement
- Alien Territory: bad on both ends
- Value-trap business: room for improvement but not good fit with parent’s characteristics
Network Organizations
Network organizations: decentralised, team-based, distributed structures, interdependence. They can be: centralized, decentralized, distributed.
Example: International Whaling Comission. Three main comittees Scientifical, technical and financial and administrative, with a Secretariat in Cambridge.
Federo and Saz-Carranza’s strategic planning framework for network organizations
Specific design features of IGO:
- membership
- control
- scope
- centralization
- flexibility
- independence
These can be grouped into 3 sets corresponding to 3 core aspects of the strategic plan process:
- decision-making: membership + control
- organizational performance: scope + centralization
- legitimacy: flexibility + independence
The preponderance of each of these 3 aspects will then lead to an appropriate type of strategic planning:
- Members-driven: large membership with consesnsus decision-making. Use strategic negotiations and stakeholder management
- Result-driven strategy: wide scope and strong vertical hierarchy (centralization). Use strategic planning systems and logical incrementalism approaches.
- Environment-driven strategy: high flexibility and independence. Use dynamic capabilities and Miles Snow Framework.
Challenges affecting organizations and decision-making
Two types of problems:
Cognitive bias: for what goes on in my head I cannot understand in a balanced way what is really going on. Organizations and managers often don’t fully understand what is going on because of their significant perceptions bias.
Agency Problems: are not a problem of not understanding, is a matter of only acting according to with their own interests or in the interest of the constituency they represent, not purely in that of the country or the general public.
Your own decision-making and organizational dynamics are shaped by perception bias and vested interests. If you fail to understand this, your decisions can be painfully wrong.
5 types of cognitive biases
- Status quo biases: biases create a tendency toward
inertia in the presence of uncertainty - Pattern-recognition biases: lead us to recognize patterns even where there are none
- Social biases: arise from the preference for consensus over conflict
- Interest biases: arise in the presence of conflicting
incentives, including nonmonetary and even purely emotional ones - Action-oriented biases: drive us to take action less thoughtfully than we should
Your own decision-making and organizational dynamics are shaped by perception bias and vested interests.
How to fight the 5 types of cognitive biases?
- Status quo: introduce incentives to measured risk-taking, use of PEST analysis
- Action-oriented: promoting a systematic use of field-forces analysis and risk-analysis
- Social biases: promoting truly participatory decision-making, but with less emphasis on consensus
- Pattern recognition and interest: hardest to tackle, using second opinions, paying attention to their occurrence, refining the decision-making processes
2 types of Agency Problems
- Misaligned risk aversion profiles (“sandbagging”, including blame avoidance): individuals often have a different attitude to risk than their overall organization does
- Gaming: “I get judged by my numbers, not by how I spend my time. I’m going to work hard enough to hit my targets, not a lot more.”
Why don’t we always take perfectly rational decisions?
1) Effect of emotions
2) Lack of full available information
3) Lack of time – to gather information or to think about the facts we have
4) Information too difficult to digest
Simon’s bounded rationality
Satisficing = satisfying + sufficing
As humans, we tend to search for good enough solutions instead of the optimal ones
Why are cognitive biases so dangerous?
They don’t cancel out: If errors are not random then they do not cancel out, because cognitive biases are systematic and thus more difficult to detect as every member of the organization tends to do them.
What are System 1 and 2 identified by Simon?
System 1: fast, automatic, associative -> intuition
Evolutionary designed, related to the fight or flight response system.
Automatic pilot: when not paying attention, System 1 assumes control -> effortless.
It is difficult to correct system 1. Think of how difficult it is to correct emotions or physical sensations. It is deeply rooted in physical reaction, in the most ancient part of our brain -> slow-learning.
System 2: monitoring, rational, slow -> reasoning
Example: When first learning how to drive, we use System 2, everything is very mechanical and non-intuitive. With time and experience, we start to transit to System 1 and driving paths start to become automatic and non-active thinking activities.
Kahneman’s Intuitive Judgement
System 1: quick, automatic, effortless, slow-learning, associative -> intuition
System 2: slow, controlled, effortful, flexible, rule-governed -> reasoning
Richard Taler - Choice Architecture
Choice architecture is the design of different ways in which choices can be presented to consumers and the impact of that presentation on consumer decision-making. For example, each of the following:
the number of choices presented, how attributes are described, the presence of a “default”.
Esther Duflo - Randomized Controlled Trials
Do randomized controlled trials from medicine and apply it to the social sciences to know what works and doesn’t work
What is a nudge?
A nudge is any aspect of the choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing their economic incentives
Arguments in favour of choice architecture
AVOID THAT INDIVIDUALS MAKE DECISIONS THEY WOULD NOT HAVE MADE Had they paid full attention and possessed complete information, unlimited cognitive abilities, and complete self-control.
Libertarian + Paternalistic
Nudging is libertarian, in the sense that it does not prohibit any options, does not involve any coercion.
Nudging is also paternalistic, in the sense that the policy maker or public manager knows better, knows better the interest of the consumer.
When do people need nudges?
People will need nudges for decisions that are:
- difficult and rare
- for which they do not get prompt feedback
- when they have trouble translating aspects of the situation into terms that they can easily understand
A nudge should be:
EAST:
Easy (most people go for the easy path)
Attractive (people should enjoy the things they do)
Social (social norms, social influences)
Timely (must be delivered at the right time)
Should have a noticeable impact but:
Cannot use powerful incentives (a powerful financial incentive is not a NUDGE)
Cannot be a prohibition
4 elements of prospect theory: How do individuals choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are uncertain?
- Reference dependence: individuals care more when having a reference point (decoy effect), comparison of options
- Loss aversion: losses loom larger than gains. Framing the problem in terms of gaining or losing something (given that the two options are equivalent) significantly changes people’s answers. A negative framing triggers urgency.
- Diminishing sensitivity (0 to 100 means more than 1000 to 1100)
- Probability weighting (humans are bad at understanding probabilities)
Asymetric Dominance (decoy effect) as a NUDGE
When we add to two options a third option that is asymmetrically dominated (i.e., dominated by one of the remaining options but not by the other), the dominating option becomes more appealing. This is also called decoy effect.
Why are we so susceptible to defaults?
- Default or Status Quo bias - stick with the status quo
- Laziness
3, Social Influences, social norms, need to conform to the norm
4, Trust that the entity or person defining the default know better, are better suited or informed to choose for us
Organization design: what is it?
- skeleton: Organizational Structure. formal design. However, not flexible, too rigid.
- Muscles: Management Systems. Its role is to promote movement and flexibility. It is divided into 3 main areas - budgeting systems, information systems, HR systems.
- Brain: Decision-Making Process.
3 pillars for a changing environment and how to tackle them
- Discontinuity (make things different and differently)
- Dealing with uncertainty (focus on resilience)
- Emergency Management (improving leadership in a changing environment)
Challenges for organizations
VUCA
Volatility
Uncertainty
Complexity
Ambiguity
Sources of complexity and ambiguity in the public sector
Environmental factors:
- legal and formal constraints
- less market exposure (no pressure from competition makes them evolve slower because of the lack of incentives to be more efficient)
- political influence
Organization-environment transactions:
- Unavoidable nature of government activities: some services are mandatory;
- Breadth of impact: greater symbolic significance of actions of public administrators;
- Higher expectations: expectations that public officials act with more fairness, accountability, honesty, responsiveness.
Internal structure and processes:
- the complexity of objectives, evaluation and decision criteria (conflicting and different goals )
- authority relations: less decision-making autonomy and greater use of regulation
- rigidity and lack of innovation.
What is complexity? (Galbraith)
Complexity components:
Organizational features:
- Numerousness (size of the organization): number of employees, number of customers/clients, number of financial resources, number of services, geographical areas of action, subsidiaries/number of offices.
- Heterogeneity: different targets, countries with a higher degree of diversification in terms of social and economic conditions.
- Variability
- Interdependence: the more related the different parts composing your final outcome, the more complex the organization.
- Environment where the organization is operating: External and Internal pressure on results
+
Pressure on results:
- External Pressure on Results
- Internal Pressure on Results
Bureaucratic model
Respect of the rules, standardized procedures, hierarchy is important to manage the exceptions, the new phenomena that are not possible to predict (when they are less than 20% of the cases, meaning a smaller level of complexity and a big degree of predictability). Everything else is governed by rules, programs and procedures.
When is the traditional bureaucratic model appropriate and when does it start becoming inefficient?
Where an organization is supplying standardized goods or services, using well-understood processes, in an environment where change is slow and predictable, the bureaucratic model with its standard operating procedures and high levels of specialization offers substantial efficiency advantages.
The problems occur when the bureaucratic model has to produce heterogeneous outputs from heterogeneous inputs, using poorly understood technologies, in an environment where change requires constant adjustment. Here, the bureaucracy fails because greater organizational flexibility is required.
Managing complexity
With a greater level of unpredictability, and therefore a higher complexity, there is a hierarchical collapse: the Bureaucratic model is no longer efficient. There is a need to provide middle management with more autonomy. Only the strategic decisions go to the higher management. Redesign the organizational chart from activities to results, change the focus on the results to be achieved instead of standardized tasks. Introduce regulation and rewarding systems oriented to the results (pay for performance systems), and delegate responsibility. Promote workgroups, shared objectives, collaboration, common vision, common values, organizational culture, sense of belonging to the organization.
Reducing complexity
Move from the traditional functional model to the divisional model. Divisional model is normally based on different markets and/or different products. Each division must have a high degree of autonomy. At the top level of the organization, we find the strategic planning, financial department. In this way, we are creating interdependent organizations inside the same organization, each with a high degree of autonomy but with a lesser degree of complexity when compared to the big original one: subdivision of the responsibilities and problems and delegation of tasks. This reduces the degree of pressure and complexity.
Why is the public sector more efficient in times of crisis?
- Clearer directions on how to achieve the goal
- Enough autonomy to make decisions at the front lines
- Higher propensity to change that replaces traditional risk aversion
- Higher collaboration across teams and institutional actors
New organizational models
More freedom, flexibility, autonomy, responsibility, adaptability, agility, transparency.
Action-oriented, performance-oriented, decentralized (networks, governance model), flexible and quick resource allocation, role mobility, continuous learning and engineering, management by objectives, rewarding system
How to deal with VUCA problems?
Foster innovation
Foster flexibility within the organization
Allow adaptability to the external environment
Main obstacles to organizational resilience
- cultural aversion to risk: no competition in the public sector doesn’t incentivize risk-taking, which is already by definition something that humans tend to avoid
- functional silos: decisions in ordinary times are taken at the highest level of management. It slows down the decision processthese barriers are broken down in times of crisis; the need to come up with a solution breaks down internal organizational barriers.
- organizational complexity: Public sector organizations are among the most complex ones.
Solutions to obstacles to organizational resilience
- embrace technological advancements and sicontinuity in the way of doing things
- capacity to meet external and internal demands
- cultural mindset based on strategic thinking, innovation and proactivity to change
Agile vs Bureaucratic Organization
Agile: Quick to mobilize; Collaborative; Responsive; free flow of information; Resilient; Learning by failure; Quick decisionmaking
Bureaucratic: Risk adverse; Efficient; Slow; Siloed; Standardized in the way of working; Reliable; Centralized; Hierarchical; Standardized
4 main factors to get an agile organization
- strategy: a common vision
- structure: stable and lean structures as backbone. Dynamism coming from cross-functional teams
- process: continuous improvement and information flow; less stable processes and standardized operations
- people: shared values, beliefs, and culture of the organization; feedback and empowering of individuals
Stability and Balance characteristics
Stability: Shared vision and purpose Shared leadership Standardized way of working Performance orientation Action oriented decision-making structure
Dynamism: focus on fitting the external context Continuous learning and reengineering Flexible resource allocation Role mobility Open physical and virtual environment Active partnership and coproduction
How to make an organization more agile?
- Redesigning of the macro-structure on the base of policy areas and users needs
- Redesigning of the structure on the base of results (and centre of results)
- Decision-making decentralization
- Reduction in the number of stable organizational units
- Enhancement of integration mechanisms
- Broad and flexible definition of job tasks
- Fostering team-based work
- Developing horizontal integration mechanisms
- Smart working enhancement - digitalization
3 main pillars of HRM in the public sector
- attracting the right people
- selecting the right people
- motivating the right people
Key Aspects of Employer Branding
Employer Branding establishes the identity of the organization as an employer
Employer Branding Value Proposition is a strategic statement defines how a company wants to be perceived by its employees. It should be about:
- Career
- Compensation
- Culture
- Benifits
- Work Environment
Goals of public organizations appraisal systems
Boosting market-orientation
Boosting organization membership and identification
Teambuilding
Individual development
EPSO competitions are based on
Qualifications
Tests
A combination of both
Corporate Governance
Defining mission and strategy
Monitoring organizational performance
Selecting and controlling resources
Developing organizational relations
Corporate governance in the public sector
Higher complexity
Multi-dimensional
Need for balancing different interests
Need for political support
Two types of reforms
Institutional Reforms: role of creating a better environment for producing changes
- improvement of the overall legal framework for public organizations
- clear definition of responsibility among politicians and managers and among different government levels
- redesign the system of relations within the public sector
- improve effective principles and systems of empowerment of agencies
- define the space of the public sector (for example, to what extent should they be privatized, should they have competition)
- simplification: simplify the rules, procedures, etc.
Managerial Reform: implement changes. Use the spaces created by institutional reforms in order to produce more efficiency, effectiveness and public value.
Managers vs Leaders
Managing people is de facto part of the job of a manager, but is closely related to the role of a leader. A manager works on the organization: sets goals plan and schedule the work define and manage the rewarding system define the responsabilities identifies the role work on roles, tasks, how things happen to reach the objectives
A leader works on people: Share a common vision motivate and inspire people share responsabilities drive the organization towards vision’s accomplishment communicate
A leader to be effective should also be a manager, but not always the other way around is true.
5 types of public leadership
Motivator Example Innovator Networker Coach
Power vs Authority
Power: Substantial The ability to influence the behavior of others; • Has to do with individual characteristics; • Does not rely on hierarchy; • Cannot be delegated; • Can exist among any two people
Authority: Formal (Bureaucratic) Has an institutional «root»; • Has to do with the managerial role; • It is hierarchical in nature; • Can be delegated; • It is based on the supervisor - member relationship.
Definition of public leadership (Van Wart)
Public leadership is the mix of behaviours, abilities, competencies, personality traits that characterize civil servants that lead other people.
This definition looks at civil servants instead of the typical sense of political leadership. It is also quite wide and looks at things you can learn instead of innate characteristics such as charisma, public speaking skills etc usually related to political leadership.
There are two main components of the corporate governance model
hard-side that is related to the technical side, design of the model considering the rules, the body, the incentives, the accountability, control system -> Manager
soft-side related to the way of exercising different roles and responsibilities and this is mainly related to the leadership style, the way of exercising the leadership inside an organization -> Leadership
