Strategic Management Contributions To The Public Sector Accounting Essay

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Strategic Management - traditional model of administration had inward focus and short term perspective and planning-forgot about the purpose or goal of org. Longer-term strategy developed in NPM. The strategic perspective considers the organization in its external environment, and specifies clear goals and objectives and moves away from routine management toward long-term considerations including environmental threats and ops + SWOT. Without strategy, an org lacks direction, so it is now common for agencies to themselves develop objectives and priorities rather than assuming policy only derives from politicians. Strategic management creates focus, consistency, and purpose for the org.

Accountability- being responsible or liable toward someone for certain results. The system of accountability is what ties the administrative part of government with the political part and ultimately to the public. In the traditional model of administration, accountability at the bureaucratic and political level was supposed to be assured through the party political process alone, usually at election. This no longer applies as bureaucracy is now liable and directly accountable to the public for its own performance as well. This was a key aspect of public management reforms where there was a client focus on accountable management. Delivering services better, being responsive, offering choice and empowerment improve accountability. Being a public manager now means taking responsibility for results. The change to managerialism means a more direct form of accountability.

External Constituencies- Renewed focus on matters affecting the organization outside its immediate control is seen as managing external constituenciesNPM. This renewed external focus looks at strategies, opportunities, and threats. A key function of the manager is to attempt to control the organization's environment, or to influence any factor in the organization's environment or anything that might impinge on its mission. The management of external constituencies in the traditional model was different than in NPM. The most important part of managing external constituencies is dealing with interest groups.

Personnel Management - public sector reforms in internal management (managing internal constituencies). The personnel management function is crucial in any organization. In traditional administration, personnel management relied heavily on Max Weber's bureaucratic theories (tenure, appointed by superior authority, not elected, promotion based on seniority). Reforms in personnel management focused on recruiting selecting and appointing the best workers for the appointed tasksaim to focus on results, flexibility, providing incentives, market incentives, performance-based pay, promotion based on performance rather than seniority

Financial Management - Financial Management is the most imp part of the internal management of the government. Financial management in the traditional model of administration was primitive where poor input/information led to incremental management and the purpose was to spend budget with little thought as to why or for whom. Financial management reform is one of the keys to overall public management reform. The most important part of financial management is the government budget. Financial management is concerned with providing info to enable better decision-making.

Be able to discuss the following:

Strategic management contributions to the efficiency, effectiveness, economy of the public sector

More difficult in public sector because public brings with it constraints, political influence, authority limits, scrutiny and ubiquitous ownership.

Since the aim of strategic management is to incorporate strategic thinking into management at all stages, instead of undertaking a one-off planning exercise to produce a document that may not be used; this is much harder, so much so that full strategic management is uncommon in the private sector, let alone the public sector.

The advantages of the reforms applied to personnel systems in the public sector it provides a measure of stability for those inside. Appointment at the base-grade and steady progression through the hierarchy, even promotion by seniority, should inculcate loyalty to the department and public service and could reduce office politics.

The benefits of introducing e-government and its impact on the public sector in general (for example, in terms of the relationship between public and government…..) this helps for less bribery and corruption where each person can get what he needs in order because of the use of the internet with less amount of taxes and less amount of workers where corruption wouldn't be found.

Public management in developing countries (its applicability, feasibility, success, and problems)

Be able to explain the significance of the following concepts:

Performance management

Managing internal constituencies entails performance management. The focus for internal management is on results. Performance management in the traditional model of administration was inadequate. Evaluation of programs and people was infrequent with no idea of progress towards objectives which themselves weren't outlined sometimes. Reforms to performance management important to managerial programdevelopment of 'performance indicators' to measure the progress the org has made toward achieving objectives. Performance of staff is also measured by performance appraisal and monitoring. FMI in the UK was an important development to performance management (personnel). Although it is more difficult to manage performance in the private rather than in the public sector, this does not mean that no attempt should be made. These measures, however, should be tailor-made for the public sector.

Political bargaining (in budgeting)

By allocating money for some purposes rather than others, the government may alter the shape for society. Demands are always greater than what the government is actually able to pay so the government has to decide who will be favored and who won't. At the highest level of government, the only way of deciding who is to be favored by spending or penalized by particular forms of taxing is through the imperfect and sometimes irrational method of political bargaining.

Political accountability

It is a form of accountability in the traditional model of administration. Politicians are accountable to the people. Citizens hold politicians accountable through voting. In the parliamentary system: public service accountable through its hierarchy to the minister who is accountable to the Cabinet, then to parliament then to the people. In the presidential system: Judicial branch has more importance, congress and president not formally linked, federal system affects system of political accountability. Political accountability ensured in this system in a different way from the parliamentary system. In the presidential system, political accountability is ensured by a line extending from the public servant to the voter. Separate accountabilities that stem as a result from the presidential system make the task of management more complex in parliamentary systems.

Bureaucratic accountability

It is a form of accountability in the traditional model of administration. It is also known as managerial accountability. The bureaucracy merely advised political leadership on policy. Every public servant was accountable through the hierarchical structure of the department to the political leadership and eventually the people. There was supposed to be a strict separation between matters of policy, seen as the province of politicians, and matters of administration, which were left to the public service. Any act of the administration is attributable to the political leadership and the public servant is merely an instrument carrying out the policy. This gives political legitimacy but the problems are that 1) the administrator or bureaucrat is free from accountability, 2) politics and administration in this model are seen as separate distinct entities in this model and they are not (basing accountability on the politics/administration dichotomy is weak), 3) accountability is narrow in the sense that politicians are accountable for errors rather than achievements so it encourages risk-averse behavior.

Policy communities

The policy community was defined as that part of the political system that by virtue of its functional responsibilities, its vested interests, and its specialized knowledge-acquires a dominant voice in determining government decisions in a specific field of public activity and is generally permitted by society at large and the public authorities to determine public policy in that field. A policy community is populated by government agencies, pressure groups, media people, and academics that have an interest in a particular policy field.

Policy communities give those most affected by specific policies an opportunity to influence them. The development of policy communities is a move toward a more comprehensive representation of interests, which enhances legitimacy of agencies. The policy community may be a response to the decline in importance of the bureaucracy or the realization that legitimacy needed to be found somewhere. It is persuasive in accounting for the new closeness between bureaucracy and government. Policy communities exist when particular agencies and the interest groups of those particular areas are effective partners in the policy process (they are involved in the decision and implementation process).

Two aspects of the move towards policy communities are 1) the decline in prestige and influence of the bureaucracy and 2) the relationship between government and groups changed to a more openly political system where policy outcomes are the result of political competition between inside and outside actors. As a result, the policy system is more open and dynamic.

Interest groups

Interest groups are also known as pressure groups. The most important part of managing external constituencies is dealing with interest groups. They are vital for the policy and management processes. They have a number of functions which include:

Facilitating communication between members and the state

Providing legitimacy for the public policies they support

Regulating their members

Sometimes assisting the state in adm. of policies and programs

They are organizations separate from government though often in close partnership with them and they attempt to influence public policy as they provide an institutionalized link between the gov and major sectors of society. Involved in policy making and implementation. In the traditional model of administration, interest groups were looked at in a negative light. However, the relationship between bureaucracy and interest groups changed where interest groups led public debates, became a link b/w the gov and the ppl, and fulfilling some gov and bureaucratic roles.

Accountable management

Accountable management is one of the changes involved in the managerial model of accountability. Accountable management means holding individuals and units responsible for performance measured as objectively as possible. This all works to enhance accountability. Letting managers manage means that accountability can be more directIf the manager is given the resources to carry out a specific job and is personally responsible for achieving it, it should be obvious whether the task has been completed or not. A system of accountable management would ensure this. There should be a delegation of tasks, agreed measures of performance, systems for reporting and monitoring, incentives and sanctions. There are three parts to the adoption of accountable management:

achieving accountability can be done through stating objectives and targets

taking personal accountability rather than just organizational accountability-holding managers at any level accountable, not just at the top

retrospective accountability

Direct accountability

The change to managerialism means a more direct form of accountability.

Managerial view of accountability includes direct accountability. Political accountability exists but there is greater accountability for results to politicians and the public, especially the clients. There is less emphasis on the avoidance of mistakes. Since public servants are part of the policy process now, they are managers and need to be accountable for their actions. Direct accountability includes:

A client focus

Direct talks with the people through the agency or interest groups Public managers manage the relationship with clients to see avenues of direct accountability. Client focus includes satisfaction of clients, openness of administration to clients in the decision making process and these all represent a far more direct form of accountability than in the traditional model.

Accountable management

See 7.

Be familiar with the following:

PPB is the planning programming budgeting system that was introduced into the US defense Department and extended to other federal agencies.

ZBB is the zero-based budgeting which was introduced by the United States Department of Agriculture. The basic idea is that no assumption should be made that future spending is related to past spending so that the department or agency must justify its entire budget each year.

Civil Service Reform Act was similarly based on the view that management needed to be improved and that managers would take greater responsibility for their organizations and their staff. It also introduced performance appraisal and performance pay where they introduce intensives common in the private sector into the public sector to give some tangible rewards to the able.

FMI (Financial Management Initiative in UK) that aimed at promoting in each department and organization and a system in which managers at all levels have: a clear view of their objectives and means to assess and wherever possible, measure, outputs or performance in relation to those objectives as well as well defined responsibility for making the best use of their resources, including a critical scrutiny of output and value for money; and the information the training and the access to expert advice which they need to exercise their responsibilities effectively.

Be able to list the following:

The components of the strategic management process (Nutt and Backoff model)

Depict organization's historical context in term of trends in its environment

Assess the immediate situation in terms of current strengths and weaknesses and future opps and threats (SWOT Analysis)

Develop an agenda of current strategic issues to be managed

Design strategic options to manage priority issues

Assess the strategic options in terms of stakeholders affected and resources required

Implement priority strategies by mobilizing resources and managing stakeholders

The differences in the implementation of strategic management in the public versus the private sector

More difficult in public sector because public brings with it constraints, political influence, authority limits, scrutiny and ubiquitous ownership.

Since the aim of strategic management is to incorporate strategic thinking into management at all stages, instead of undertaking a one-off planning exercise to produce a document that may not be used; this is much harder, so much so that full strategic management is uncommon in the private sector, let alone the public sector.

Disadvantages of the traditional model of personnel management

System characterized by rigid hierarchy unable to cope with rapid changebecame self absorbed and claustrophobic

Bad selection, appointment, and development of workers for the recruited tasks

System of promotion based on seniority resulted in having a group of un-ambitious public servants as departmental heads and acknowledged that either performance cannot be measured or that everyone has equal performance in administration. Both are damaging to the personnel system.

Absence of performance management may lead to managers hiring ppl of only their kind (i.e. males only, ppl from same religious or political sect)

Emphasis that was placed on general ability rather than on specific skills

There was an obsession with fairness rather than ability to achieve results

Rigidity of administrative structure

Main steps in the budgeting process

Formulation- where the budget is drawn up

Authorization- the formal approval by the legislature

Execution-where it is carried out

Appraisal- how it performed

The stages in development of information system

Automation -aim is to use machines to reduce costs of paper-based work

Informatization - emphasis on the information that can be liberated

Transformation - using business process reengineering to reorganize across boundaries and to share data. It can be regarded as the goal of e-government.

The three types of accountability

Accountability for finances - obligation to use taxpayers money wisely

Accountability for fairness- obligation to treat all citizens fairly

Accountability for performance - objective, goal or benchmark of performance upon which the accomplishment of public purposes can be assessed.

Be able to describe:

The two major functions of budget for government (economic and financial

Economic Functions -tackle how the gov, through the budget, influences the entire economy

*Through the budget, gov tries to determine level of public activity in the economy, a distribution of income and wealth, and control over economic activity. These are usually described as policies for allocation, distribution, stabilization.


Concerned with size of private & public sectors (size of gov)

And because of this its considered to be a political process


Is Gov's attempt to redress inequalities in wealth and income b/w citizensa major part of it is provision of social welfare

Some on the Right argue that fairer distribution leads to poorer economy by reducing profitability and investment


Gov aims to improve overall economy through budgetary policy; It is the most difficult economic function

Financial Functions- Financial functions of the budget are similar to accounting it is related to the balance sheets which are drawn up for gov activity

*Financial functions of the budget can be divided into two aspects:

Accounting Function

- the evaluation of total gov and public authority expenditures

Accountability Function

- to Act as the legislature's instrument of accountability and control over the gov in its handling of financial matters

The main features of the traditional financial management (i.e. line-item budget) and the critics of such system

The main features of the traditional financial management/line item budgeting are that:

it is a one-year budget

Only inputs are considered into the administrative process

It represents incremental changes from the previous year

The advantages of traditional financial management include:

It is a good control mechanism - it limits expenditure

Makes the budget easier and more manageable

The disadvantages of traditional financial management are that:

Managerial efficiency not improved, little flexibility

Managers concerned with spending allocated money rather than achieving the goals of spending it in the first place (it stresses inputs rather than outputs)

It is short-term/one year cannot deal with long-term goals and no idea of future costs

Lack of info in traditional budget and because of this politicians have limited ability to make major changes

The main reforms associated with financial management in the public sector (budgeting, accounting, devolution of budget, and contracting out)

More recent public management changes include a series of changes to gov finance. The main reforms are:

Budgeting reforms

Gov attempt to regain control of their spending

Management oriented reforms and focus on what orgs do and produce and the means for holding them accountable for performancegive managers budgetary and other incentives that make them aware of and accountable for costs and performance

Advantages in the program budgeting approach over the traditional budget approach:

It allows better allocation of resources

Forward planning is enhanced

Budgets open to public scrutinyenhance link b/w gov and public and improves accountability of gov

Imp successful budgeting changes include: there is more financial discretion with operational managers, preparation of detailed budget estimates beyond the usual single yea,

Accounting reforms

Accrual accountingmore sophisticated, includes the value of assets in a more comprehensive way. Its major objective is to compare the total of economic costs incurred during a reporting period against the total economic benefit accrued in that periodbasically, the value of assets is included as well as their depreciation, so that a complete picture of the gov's financial position is known in a way similar to that of the private sector.

Accrual accounting requires that the full economic costs be charged to the operating units.

Accrual based budgeting is difficult to bring about, and if implemented badly, can have rigidity similar to the trad. model

More intense use of auditing

Devolution of budgets

Relating budget authority with management authorityentrusting managers with responsibility for their operating resources (it has not compromised spending control)

Contracting out

Cost saving made w/n contracting out the provision of gov services

In general, financial reforms aim to make the public sector more like the private sector in how it deals with moneyperformance-based budgeting

The new external focus in management

An organization needs to pay attention to the outside world because that is where opportunities and threats are found. Public programs are visible and belong to all citizens so they are more influenced by outside bodies. Users and taxpayers feel some ownership of all the activities of government. The wider interest means greater scrutiny of the public sector by the media and the public at large. The public sector does not even have control over its own resources or goals. It is open to continuous scrutiny and therefore having external political limits and high levels of accountability and therefore requires a greater external focus by the public organization, in order to be aware of its environment and to manage its constraints. The process of dealing with external components is a function of management. The 'managing external constituencies' part of the general management function involves

dealing and coordinating with external units of the same org

dealing with independent orgs and other parts of the gov, interest groups(most imp)

dealing with the press and the public

External constituency management now emphasizes service delivery, the empowerment of clients. The inability of the traditional model of administration to emphasize the importance of dealing with external constituencies is one of the reasons of its decline.

The public administration in developing countries during the following periods: colonial governance, post colonization, post cold war

The four types of accountability relationships

Romzek argues that there are four types of accountability relationships:

Hierarchical - rely on supervisory and organizational directives, including rules and SOPs for the standards to which employees are answerable for their performance. Obedience is the behavioral expectation.

Legal - emphasize compliance with some externally derived expectations or standards of performance and close scrutiny and oversight as the means by which employees are held accountable for their performance.

Political- emphasize responsiveness to the expectations of key external stakeholders such as elected officials

Professional - emphasize responsibility and respect to expertise. Performance standards established by professional norms.

*Traditional accountability emphasized hierarchical and legal accountability = less autonomy and closer supervision.

*Political and Professional accountability relationships rely on higher levels of autonomy, greater discretion granted to employees.

*Argument that the public management reforms have involved reducing compliance accountability (either hierarchical or legal) but increased political and professional accountability. The PM reforms attempt to reduce overemphasis on inputs and process and emphasize deregulation, increased discretion and flexibility, and greater emphasis on outcomes and outputs (and the kinds of accountability best suited to these reforms are professional and political types).

The differences between accountability in the private sector and the public sector

In the private sector, there is a layered structure of accountability whereas in the public sector there isn't. Management of company accountable to shareholders. Management in the public sector are accountable to the public.

In the private sector, fluctuations in the share price are a measure of performance. In the public sector, being accountable for performance entails achieving results, not making the biggest profit.

In the private sector, there are constant threats. Customers will go elsewhere. Public sector one in the same, belongs to the same stakeholders, gov and public.

In private, more accountability, no tenure.