The Rise and Fall of Bureaucracy WHY A NEW

							The Rise and Fall of Bureaucracy:
     WHY A NEW PUBLIC
   MANAGEMENT; WHY NOW?

http://www.willamette.edu/~fthompso/MgmtCon/Fordism_%26_Postfordis
                                m.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 de-
 specialization
 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