Transformation Metaphor of Organizations
KeywordsPolitical Agenda Public Organization Protected Organization Routinize Organization Protected Position
Transforming public organizations is when a strategic process and strategic leadership are used to change public organizations.
In recent years, public organizations have been called upon to make radical, transformational changes (Osborn and Gaebler 1992). This call has been made before and is repeated anew, seemingly with each new budget crisis (Wechsler and Backoff 1986; Nutt 2004a). Budget crises are coming more frequently so calls for transforming organizations are coming more frequently. The question is whether such demands are feasible: Can public organizations truly make radical and transformational, changes? What constitutes a transformation? And under what conditions would transformations be possible? This chapter offers some insights into these and related questions.
The primary focus is the general-purpose bureau or agency found in federal, state, county, and city governments (Nutt 2004b). The intent is to identify conditions that make altering current practices and fashioning new ones feasible in such organizations. The ideas should extend to the private/nonprofits such as hospitals, port authorities, and regional planning commissions, as well as many other types of organizations. The many large in number but small in size voluntary organizations are not considered in this entry.
Distinguishing Types of Change
Two types of change are considered: repositioning and transformation. Repositioning focuses on current clients and their needs, which limits its scope. A transformation deals with the future clients and their predicted needs. To transform, leaders create greater variety, additional skill, and enhanced ability to serve customers/clients in new and different ways (Pauchant and Mitroff 1992). Leaders must go beyond using maintenance and control activities to improve efficiency and effectiveness. A transformation requires new ways of thinking that alter taken-for-granted and often hidden organizational rules, which limit how people think about change (Wilber 1983; Pribam 1983; Fisher and Torbert 1991). Repositioning alters current practices, ruling out radical change sought by a transformation (Wheatley 1992).
Public leaders reposition by asking hard questions about how to improve their current strategy (Nutt 2005). This involves altering current services, customers served today, current service provision channels and skills, the basis for today’s collaborative advantage, current sources of funding, and image (Hamel and Prahalad 1994; Quinn and Cameron 1988). To carry out a transformation, a leader seeks to answer these same questions put in a future context. A leader fashions a vision that suggests what future services, customers, channels, skills, bases for collaborative advantage, sources of funding, and persona might look like (Nutt and Backoff 1997; Wheatley 1992). Transformation goes beyond tinkering with today’s strategy, projecting today’s thinking into the future, to imagining what a desired future would look like. This takes place when radical and coherent changes in the services, clients, etc. that make up the organization’s current strategy are integrated with core capabilities (Nutt 2005).
For instance, the Ohio Department of Natural Resources (ODNR) was transformed with a vision to incorporate critics into its programs to build joint interests. Conflicts between sportsmen and environmentalists were managed by opening up new hunting and fishing areas and using fees for hunting and fishing licenses and park use to support wildlife, environmentally threatened areas, and state parks. Cooperation between historically antagonistic groups, representing sportsmen and environmentalists, was created and resulted in broad support for tax-based funding to protect endangered areas and wildlife and to support recreation programs. Recreational areas were expanded. The increased revenue from user fees provided the funds to support other initiatives. The synergy of protection and use programs leads to an ODNR budget that relied on the state funding for less than one-third of its programs, making it take on the characteristics of a private-nonprofit organization. The transformation allowed ODNR to move to a higher order of complexity in which change, such as new services, was not just added on but emerged from the integration of old and new services. As a result, a transformed organization is able to respond in new and different ways to the emergent demands and opportunities found in turbulent environments. Public organizations with a vision that anticipates client needs can use these needs to make changes in their core services and procedures and produce a similar result. Synergy between the organization’s new and old services and other aspects of its strategy increase flexibility and adaptability (Levine 1980).
Note how transformations go beyond fostering growth, which adds to existing capability by serving the current stable of clients more efficiently or effectively, incorporating new ideas into the organization’s strategy (Weisbord 1988; Bass and Avolio 1990). Novel ways to meet the needs of new clients are integrated with current services, channels, etc. which make up the organization’s strategy. A successful integration provides a quantum jump in the capacity of the organization. The transformed public organization brings these new capacities to bear as services for clients that can be internal or external to the organization turning upside down traditional notions of who is a customer or a client.
Change in a Public Organization
Change calls on public leaders to review how their organization responds to its clientele, noting whether this stance inhibits change. Factors that appear to block change are enumerated. The leader asks if strategic repositioning can be carried out and then if transformation is feasible.
Organizational Stance and the Prospects of Change
Some public organizations have limited capacity (resources) and/or little responsiveness to perceived missions (Levine 1980; Nutt and Backoff 1993; Ingram 2001). Capacity erodes by years of budget cutting, limitations on prerogatives, rule making by legislatures, and assignment of duties to other agencies. Motivated staff leave, further limiting capacity. As capacity declines, complacency sets in making change difficult (Alter and Hage 1993). Buffeting by events the organization is unable to manage also limits change prospects. Demands can be experienced at a rate that exceeds the organization’s ability to understand, let alone cope with expectations, creating learned helplessness. Elaborate rationales for avoiding action supplant building capacity to meet demands.
The susceptibility to change is governed by the prospects of growing organizational capacity to enhance organizational responsiveness (King 1982; Nutt and Backoff 1997; Bozeman 1987; Rainey 1997). Capacity sums up resources available. Due to the labor-intensive nature of public services, this is given by the numbers and skill levels of key people and the prospects of adding additional capacity (Levine 1978; Lawrence and Dyer 1983; Gailbreth and Schendel 1983; Thompson and Strickland 1996). A perceived lack of capacity prompts organizations to resist change, fearing that the new demands will expose shortcomings (Eichholtz and Rodgers 1964; Zaltman et al. 1973; Nutt 1987). Capacity is measured in a comparative manner, indicating per capita funding of organizational types such as university hospitals corrected for patients served by severity or business schools adjusted by undergraduate, MBA, and PhD enrollments. High-capacity agencies would be well above the median and low-capacity ones would fall below it.
In the private sector, initiative springs from demands emerging in a market (e.g., Miles and Cameron 1982; Lawrence and Dyer 1983; Porter 1985). In the public sector, responsiveness stems from the extent client needs are met. Here, oversight bodies that regulate client fees and supply funds as budgets act as the market. Instead of selling to end users, the public organization must sell an oversight body on the need to increase its responsiveness. Oversight bodies can be very fickle about expected levels of responsiveness (Levine 1980). After a long period of low expectations, the organization may suddenly pop up on a political agenda. Demands are made and responsiveness expected. The prospect of change is given by the extent to which public leaders find themselves committed to being responsive to oversight bodies. Change is held back by certain types of commitments and facilitated by others. Such latent demands can be elusive and several measures are needed to capture them. An index of responsiveness suggests the amount of agency initiative, given by the level of services offered less those not being offered. For a given type of organization, service demand is inferred by agency mission changes under discussion and new services proposed, measuring the number of clients to be served.
Organizations That Resist Change
Stable types of public organizations have little motivation to change (Fig. 1). Stability arises, somewhat paradoxically, when capacity and responsiveness are badly out of balance. Because either building capacity or responsiveness dominates, attention is focused on the maintenance of capacity or on responsiveness and not on using capacity to provide responsiveness.
Professionally Dominated Organizations – Professionally dominated public organizations have high capacity, real or perceived by outsiders, and little responsiveness. Activity is directed by professional values with little responsiveness beyond the imperatives embraced by such values. Political, legal, and economic forces that ordinarily direct and channel organizational energies and ensure accountability are not in place. Typically, such organizations have considerable prerogative to act in a prescribed arena and use connections to protect its budget and resource base.
The FBI under Hoover and the IRS are examples. Departments of taxation and the attorney general’s office provide examples in state government. Public organizations that rely on highly skilled and self-regulated staff members to provide key services can also become professionally dominated organizations. Examples include: state-run mental health hospitals, public acute care hospitals, university medical centers, university facilities, social work agencies, public defender offices, and the state architect office. Such organizations are dominated by professional elite who control the terms of services provided. The periodic release of selective data and testimonials is offered to measure success.
Change, prompted by a leader or an outsider, is very difficult when professionals can maintain this degree of control over what the organization does. A professionally dominated bureau or agency can ignore client preferences and the political agenda of reformers and may even be insulated from budget cutting. In some instances, the professionally dominated organization can turn aside legal mandates and judicial orders.
Protected Organizations – A protected organization can be created, or it may evolve a protective posture. An example can be found in state departments of development (DOD). Recently, Republican-controlled state legislatures contend such departments can spur economic growth and create jobs. The leader of a DOD carefully maintains an old-boy network, made of supporters in the legislature, in part to harness forces that would normally call for accountability in growth and job creation. When a critic asks how many new jobs have been created by a DOD and how much tax base has been given away, the network is mobilized to deflect such questions and make them seem politically motivated.
Some public organizations slip into a protected posture to survive. The impetus stems from stress as leaders attempt to respond to increased demands without the means to do so. To cope, such a leader seeks an island of stability that provides safety. Public organizations singled out for reform often find themselves in this position as mandates are added without the funding to carry them out. Cities struggling with unfunded mandates in federal legislation provide an example. To respond, available funds would be spread too thin to accomplish much making any attempt seem futile. The organization copes by resorting to strategic posturing.
For instance, state and federal laws call on state departments of education (DOE) to institute educational reforms. Oversight bodies use these mandates to lean on a DOE to carry out competency-based education, insure financial equity across school districts, implement new funding formulas, adhere to federal regulations for special education, reconcile the demands made by life skills and back-to-basics curriculums, and still others. A DOE may have neither the competence nor the funds to do all this. To survive, leaders resort to image management, talking about what they have done and not what they will do.
If oversight bodies reject a “K-Mart” solution that would let an agency deliver low quality to all comers, responsiveness is limited, doing only what the oversight body asks. To demonstrate responsiveness, leaders determine the agenda of key people on the oversight body and focus the agency’s limited resources on doing what these individuals want. For example, a bureau of workers’ compensation (BWC) narrowed its responsiveness to survive. Oversight bodies of a BWC are often polarized, with different views of the key client. Clients, represented by labor unions among others, want assurances that injured workers will be taken care of. However, small business representatives often dominate the oversight body of a BWC. Small business interests want to reduce their fees that fund compensation benefits. A BWC is often forced to choose reducing fees over benefit provision. To survive, such organizations cultivate patronage that will endorse its actions. When successful, this allows the overstressed organization to move from a threatened to a protected position.
To become protected there is a shift in responsiveness from broad to narrow. If successful, this allows the overstressed organization to move from an unstable position to a protected one. To develop the required patronage, leaders ferret out the views of opinion leaders that control funding and the terms of service, such as fees and co-payments. Public leaders can become very clever at identifying the agenda of key people in an oversight role and then giving them what they want.
Such leaders look for an opportunity to carve out a new domain in which their organization has an exclusive right to act, creating a “protected” environment. Legislation can even be written to give exclusive rights or responsibilities. For example, the Iowa Legislature gave the University of Iowa Medical School exclusive rights to provide all tertiary health care, statewide. In a protected organization, old-boy networks are carefully maintained to deflect criticism and routine accountability and to harness the forces that would normally be used to monitor actions. The leader exploits values that have become legitimized and no longer subject to challenge. No one questions the massive shift in funds to county governments for MRDD. Levies pass routinely, even though patients are still warehoused, albeit locally, and the inefficiency of county governments is well known. Organizational leaders carefully manage the old-boy network that supports their periodic levies to insure continuing funding. Control of turf in this way creates little incentive to improve capacity and makes the organization quite political.
Routinized Organizations – Public organizations with few demands and low capacity often become highly routinized, developing codified routines that are rigidly followed. Because no one questions its products, the organization continues its low-value processing with little accountability. Examples include bureaus of motor vehicle licensing, contract activities in departments of transportation, claim processing in bureaus of workers’ compensation, and service departments such as travel and records in universities. Former students who complain about poor service, such as delays in getting a transcript, are ignored by university leaders and oversight bodies who have more important things to do. Delays in receiving compensation benefits fall on deaf ears, charges of unfair or unethical contracting for highways are ignored, and questions about the time and cost to do things and the inability to deal with the most trivial exception go unanswered by the motor vehicle bureau. Oversight bodies find little reason to think about the agency, let alone question its practices, allowing such an agency to drift toward a change-resistant posture.
The Forces for Change
The protected, professional, or routinized public organization is pushed toward change by a loss of patrons and/or a loss in capacity. When this occurs, the organization experiences buffeting and feels pressure to reconsider its strategic commitments. This movement can occur in three ways as shown by the arrows in Fig. 1.
Change for a Professionally Dominated Organization
Change in a professional organization can be blocked unless capacity is thought to be declining. This blocking may continue even when the call for increased responsiveness is clear and compelling. Only perceptions of diminished capacity push the professionally dominated organization toward change.
The strategy of a professional organization rests on maintaining its perceived capacity. Capacity erosion forces change. The FBI’s reputation following Hoover’s death, and again after 9/11, went into eclipse forcing the FBI to reexamine its role with new strategic positioning. The first move is to defend past practices, coupled with some small-scale adaptations of the practices. Sustained pressure is required to force the agency to consider larger-scale change. Such pressure can force an organization to rebuild its image of competence as new practices are forged and adopted. For example, the IRS, stung by reports that they unmercifully harass taxpayers, confiscate the bank accounts of the children with parents in arrears, and give inaccurate tax advice, reformed its procedures and then engaged in damage control.
Pressures may not be sufficient to move an organization out of a professional posture. The Army Corps of Engineers, following Katrina, was faced with severe criticism. The levies supposedly constructed to hold back 100-year flood waters were unable to contain storm surge. Locals, who had predicted likely levy failure for years, were given new attention, and questions about agency practices were posed by national media. A clamor for change, however, proved to be short-lived, and the Corps returned to its professional posturing. Budgets and projects were routinely approved, with little questions about the safety factors. Performance accountability, beyond those accepted by Corps Values, continues to be ignored. The Atomic Energy Commission went through a similar sequence of questioning followed by a return to business as usual following the Three Mile Island meltdown.
Change for Protected Organizations
Protected organizations are found in the upper left corner of Fig. 1. Here, resources are devoted to cultivating patrons in an oversight body in place of building capacity to serve clients. For example, the oversight body for an economic development agency may have an agenda that ignores the public and their needs. Legislators that appoint the oversight members are often drawn to flashy projects, such as arenas and convention centers. These projects do little to create local jobs or enhance local quality of life but take precedence over projects that do. Leaders that jump on board and push arena and convention center ideas can cultivate patrons. This makes the organization highly responsive in a very narrow way. Such leaders never question the oversight body or its values and assume that clients are being served by the demands being made. This may not be so, but is never questioned. The strategy is to maintain the old-boy network and other arrangements that protect turf.
Change is unlikely unless these arrangements erode. Erosion of prerogatives occurs when patrons lose elections or leave office or when an old-boy network ceases to function, pushing a protected organization into the buffeted zone. The political agenda of newcomers or a shift in power among stakeholders can prompt a call for better client services. To increase capacity to meet these new demands, the organization moves toward the diagonal in Fig. 1.
After a new governor took office, Ohio’s Department of Public Welfare experienced such a shift moving from a protected position to one of increased expectations. This status quo was no longer acceptable and a posture of change was adopted. The welfare department abandoned practices that required clients to respond as directed and moved toward practices that emphasize helping clients (Fig. 1). The loss of a protected status may also prompt an increase in scrutiny, which illuminates low capacity. When low capacity is exposed, it often prompts rapid action to improve matters, increasing the prospect of change. A change in leadership often results, which leads to new practices.
Change for a Routinized Organization
Public organizations with very limited capacity can be ignored for decades. Until there is a shift in expectations, such organizations go about low-value processing routines with little accountability. For instance, decades of complaints about long waits and inept staff reached a breaking point and prompted change in a bureau of motor vehicles. Funds were provided for systems that allowed mail-in license plate renewals that separated taxpayers and staff, reducing both dysfunctional agency contacts with the public and the time involved. Note how complaints from consumers had to become intense before action was taken to increase competence (new systems).
New organizational stakeholders often introduce new expectations. If these expectations gather good currency, they spill over a threshold to become requirements. Usually, this stems from a galvanizing event: a patient escapes from a mental health institution and kills someone, a child is abused in a foster home, or the head of a state teacher retirement plan claims that the money in the system does not belong to the teachers. This makes questions permissible. People in oversight roles question practices such as mental health patient furloughs, the number of children being served by the Family Service Agency, or the wisdom of giving teacher retirees 13th month pay checks, which started during better economic times. This threshold will vary with agency visibility and the current economic situation. The agency is pushed into the buffeted zone when the threshold is breeched.
Organizations on the diagonal in Fig. 1 have balanced capacity and responsiveness. Questions are posed about how an organization’s capacity can be used to increase responsiveness, altering the organization’s strategy to produce hoped-for outcomes. This questioning can arise externally through the expressions of stakeholder preferences, shifts in political agendas, erosion of public support, budget shortfalls or windfalls, and legal rulings. It can also arise internally with a shift in the views of agency insiders about the value of their service practices or by changes in leadership. Internal and external pressures combine to lower the barriers erected by the protected or professional posture. This creates two new types: the buffeted and the proactive organization.
The Buffeted Organization – An erosion of competence and/or increased demands to better serve their clients creates buffeting for professional, protected, and routinized organizations. The can stem from fickle public support, changing legal mandates, shifting political agendas, new client expectations, and a loss of key benefactors. As mandates shift, budget support can decline prompting questions about how limited resources are used. As budgets are cut, priorities shift providing moving targets that lead to frustration and turnover. More scarce resources bled away as turnover forces investments in training. Organizations experiencing such a buffeting become susceptible to change, questioning responsiveness and how organizational capacity is being used.
Consider the IRS after the disclosures in the late 1990s. Two steps were taken. Responsiveness was increased in several ways including new forms of agency oversight, shifting burden of proof from the taxpayer to the IRS, and changes in IRS staff prerogatives that prohibited them from taking property without due process. This was followed by attempts to shore up its image, showing how agency resources were being put to better use by upgraded computer systems, monitoring employee behavior, and taking steps to increase the accuracy of advice given to taxpayers.
Strategic change helps the buffeted organization cope. Capacity to act is built by finding ways to increase responsiveness. This new responsiveness can lead to happier and more challenged staff and reduce turnover. As capacity is built new client responsiveness becomes feasible, increasing an interest in strategically repositioning the agency to better serve their clients.
The Proactive Organization – High capacity balanced with high responsiveness creates a “proactive” environment. For a transformation to emerge in a proactive environment, a leader must clearly understand needs and potentials to act. To illustrate, the leader of the Ohio Department of Natural Resources (ODNR) saw an opportunity to become proactive. Key stakeholders who had expressed criticisms were folded into task forces to deal with important issues such as wildlife protection, natural areas, hunting and fishing rights, waterways, and recreation. Programs were identified and funds sought to operate them through licensing the use of wild areas, through park use programs, and through new types of fishing and hunting licenses. The fees collected were turned back to fund program development, which produced more fee-generating activities until two-thirds of the ODNR’s funding was outside the state’s budget process. By responding to stakeholders in this way, the ODNR became a self-sustaining proactive state department that is highly responsive to stakeholders as well as high in action. Previously, allowable actions have been limited to changing organizational practices to correct faults. Here, the leader can seek out unmet needs and alter the delivery of services so that these needs can be meet.
Mutualist Leadership and Transformations
A dramatic increase in needs calls for strategic repositioning to alter current strategy. Changes are made in information about needs, services, service provision channels, resources (human and physical), collaborative arrangements, sources of funds, and image. At least one change (e.g., services) is required, tracing ripple effects through the other strategy elements.
If needs are not meet, a transformation will be entertained. This calls for posing the same questions as repositioning with a future focus. For example, future clients are imagined asking how they might be served (e.g., services, channels, etc.). To carry out such an effort, leaders must become “mutualists” (Nutt and Backoff 1995). A “mutualist leader” creates collaborative arrangements to meet needs that are expected to arise. To carry out mandates that exceed the prerogatives of a single agency, capacity is sought beyond the leader’s organization. Consortia such as the National Kidney Foundation and the Highway Safety are formed. Attempts by the Ohio Department of Mental Health to fold county mental health boards into a partnership to pursue quality care and better insurance coverage describe a contemporary effort of a CEO to become a mutualist leader.
Mutualist leadership takes shape as a quest, which mounts new initiatives to realize a grand vision. This requires (1) forming a consortium to draw together key stakeholders into an umbrella organization, (2) subordinating personal and organizational interests, (3) guiding stakeholders away from competition toward cooperation, (4) focusing effort on meeting needs, (5) creating a vision to meet key needs, and (6) seeking win-win arrangements (Nutt and Backoff 1995).
The mutualist leader substitutes collaboration for competition. The best outcome from a competitive posture would have each agency serve people thought to fall under their jurisdiction. Such an approach can prompt jurisdictional squabbles that leave important needs unmet or undeserved and prompts duplication. Collaborative approaches call for negotiation with taxing and budgeting authorities and sister agencies to parcel out service areas so that all service responsibilities can be met. This is done with the resources and programs drawn from many sources. The self-interests of these programs and their supporters are subordinated to the greater interest of servicing needs. The mutualist leader forms an umbrella organization to proactively guide the effort.
This requires vision, commitment, and leadership. Vision is required to anticipate emergent needs with a transformational strategy (Vail 1989). Commitment is required to set an example for others (Bennis 1989). To set the tone called for by a mutualist leader, personal aims and parochial interests are sacrificed. Leadership skill is needed to strike a posture that avoids being pretentious but takes a moral position to call for collective action. Many are apt to interpret such a posture as a clever way to promote one’s interests. Success depends on putting things into a frame in which mutualist values are believable so others will adopt and emulate these values. Many may aspire to be a mutualist leader, but few get the endorsements needed to create a proactive organization that can realize this aim.
Before a transformation can be mounted, a mutualist leader must gain the support from several sources. Leaders need authorization to begin an interagency initiative from each agency’s oversight bodies. If given, a leader must then get concurrence from other agencies that must cooperate to meet needs. A proactive organization emerges when the need for interagency cooperation is endorsed by all of the cooperating agencies. Securing this magnitude of cooperation can be a daunting task. And creating a proactive organization is essential, but not sufficient. Before settling on a transformational move, key players in the cooperating organizations offer up their pieces to the puzzle, and the mutualist leader must integrate them and fill in missing pieces.
This makes a transformation difficult to mobilize and even harder to sustain. A mutualist leader must be in place when the opportunity for a transformation arises. The organization must be buffeted, making it susceptible to change. Experimenting with repositioning must have been carried out. The need for still more pervasive change must be recognized and supported by oversight bodies from cooperating agencies. Leaders of cooperating agencies must be given the latitude to act by their oversight bodies. The likelihood of all this seems remote, making transformation a rare event. As a result, leaders may have to be satisfied with changes in current strategic arrangements and not future ones.
This may explain why substantive change and transformation are rare. By their actions, if not their public pronouncements, governors supporting only small-scale efficiency improvements, such as TQM, seem to fear strategic repositioning and duck the commitments required for a transformation. As a result, leaders can only rethink a current strategy. For example, the Ohio Department of Mental Health has long been guided by a vision of treating people in the least restrictive setting, close to family and friends, which has been called “deinstitutionalization.” A new vision of integrated care that merges acute and mental health care and their insurance coverage frightens state politicians, who have blocked such initiatives. Until such a vision is endorsed, only changes in a current strategy are feasible.
This chapter explored one of the enduring dilemmas of organizational renewal: the resistance to change and how to cope. External forces that pose limits on initiating change and limit its magnitude were considered. The forces were examined to reveal timing, when action is possible, and how to find essential steps to initiate and sustain change when forces are favorable.
Professionally dominated, protected, and routinized public organizations were noted as organizational types resistant to change. This resistance stems from an imbalance between responsiveness and capacity or little responsiveness and capacity. To lead such organizations toward change, its leaders must be given the latitude by oversight bodies to show how responsiveness can increase, capacity be built, or both. Pushing the ideas forward suggests that a message that arises internally must be brought externally and vice versa. External demands for responsiveness can be brought to insiders who are shown how capacity must be changed or augmented to meet the new demands. Internal demands for more capacity must be brought to oversight bodies to show what must be changed to be truly responsive to the needs of clients, such as more funding or better staff. Transformation was linked to creating a culture of high responsiveness and finding the needed capacity in a consortium of agencies, replacing independent organizations with a proactive consortium.
Transformation seems possible, but only when these conditions are present. The prospects of initiating and sustaining a proactive organization to fashion a transformation improve when participating agencies have mutualist leaders supported by their oversight bodies. The many difficulties in creating such arrangements may explain why the transformation of public organizations is so rare. If so, elected officials that call for radical change create impossible expectations. This clamor for the impossible is a disservice to those the agency is to serve and to the public that funds them.
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