Metabolism of Public Organizations
Metabolism of public organization is a managerial approach to explain the utilization and transformation of inputs (mainly public funding) to produce and supply products and services in order to reduce costs and increase the efficiency of organizations in competitive markets.
The concept of metabolism, in a broad analogy, can be applied from biology to public management to analyze processes running from inputs to outputs in organizations and explain how public organizations use economic resources provided by governments to produce/supply outputs and services in society. The concept of metabolism is uncommon in the studies of management and a brief background is useful to clarify it. In biology, metabolism indicates chemical processes that, in living organisms, transform food and drink into energy. The concept of metabolism in a context of Generalized Darwinism in science can explain how complex systems – e.g., organizations – function and behave. Metabolism has a vast use in several disciplines, such as industrial ecology, urban geography, economic geography, ecological economics, etc. (Coccia 2018a). Metabolism of public organizations is a new approach for analyzing the use of inputs (e.g., public funding) to support production, operations, and survival of these organizations in turbulent markets. This approach can also detect organizational problems for designing best practices of public management directed to control and improve the allocation of public funding and other inputs for increasing the efficiency of public organizations themselves (Coccia 2018a). Next section presents a theoretical framework of this new approach for cost analysis of public organizations.
The Metabolism of Public Organizations
Inputs: human resources, equipment, public funding for research, etc.
Production process transforms inputs into outputs in labs.
Outputs: publications, software, patents, innovative outputs, etc.
Firstly, the preliminary analysis of the metabolism of public organizations is given by descriptive statistics, trends, and bar graphs that represent the arithmetic mean of variables on y-axis and inputs (public funding, etc.) on x-axis.
Secondly, the coefficient Mit (M = Metabolism) explains the metabolism of public organization i over time t: it is the ratio of a critical input divided by a source of funding (measured in U$ or €uro for international comparisons, or local currency for domestic comparisons). This coefficient represents a contextual measure in public sector. In particular, the formula of Mit for a public organization i is given by:
Thirdly, another technique of this approach is the rate of arithmetic growth of main organizational variables, such as revenue (based on state subsidy and public contracts), cost of personnel, and total cost. In particular, if the level of these organizational variables at beginning is Pa and at the end of the period is Pt, and the period of time is equal to t, the rate of arithmetic growth ra of organizational variables is given by:
Application: A Case Study of Metabolism within a Large Public Research Body
Metabolism of the CNR organization: rate of arithmetic growth of some economic factors based on data from annual income statements
Rate of arithmetic growth
Cost of personnel
To sum up, the analysis of the metabolism seems to reveal that this public research organization absorbs a substantial proportion of public funds (state subsidy and public contracts) to cover high costs of personnel over time. Overall, then, the approach of metabolism applied on this research institution suggests possible organizational inefficiencies, driven by high costs of personnel in the long run.
Conclusion and Public Management Implications
The metabolism of public organization can reveal critical organizational and managerial issues, such as public research organization described above absorbs a high share of the total revenue for the cost of personnel, generating economic problems and several organizational inefficiencies over time. This result is also due to a public research system in Italy that has rigid research organizations to cope with public rules of budget balance that generate cuts of public funding from governments to research organizations (Coccia 2018a). This approach provides main information for public management of the PRO under study that has to control the growth of the cost of personnel in the presence of shrinking public research lab budgets to support efficiency and sustainability of this research body in the long run.
In general, the approach of metabolism, presented here, is critical to cost analysis and management within public organizations. In particular, this approach can support public management that, in the presence of budget cuts, can improve the allocation of resources and the efficiency of public organization by controlling specific costs (e.g., cost of personnel), and by balancing the utilization of public funding between different costs to support the efficiency of overall public organization over time. Moreover, if public organizations cannot reduce the high cost of personnel in order to increase general productivity, as well as they cannot offer substantial extrinsic (financial) incentives because of rigid scheme of salary and scarce public funds, then public management could increase intrinsic rewards to support motivation and performance of public organizations (Belle and Cantarelli 2015; Weibel et al. 2010; cf., Benati and Coccia 2018; Coccia and Benati 2018; Coccia 2019). O’Reilly et al. (1991) have suggested that intrinsic rewards may support job involvement and satisfaction of people in organizations (cf., Coccia 2001b). Specifically, intrinsic rewards may support productivity of personnel also in the presence of budget cuts (cf., Coccia 2019). In this context, Crewson (1997, pp. 503–504) argues that: “Intrinsic rewards are more important to public employees than to those employed in the private sector.”
Hence, the approach of metabolism proposed here can be a useful managerial technique to analyze costs and design best practices of public management directed to support efficiency of public organizations in turbulent markets.
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