Managing Organisational Change
International Journal of Public Sector Management Emerald Article: Managing organisational change in the public sector Lessons from the privatisation of the Property Service Agency Ron Coram, Bernard Burnes Article information: To cite this document: Ron Coram, Bernard Burnes, (2001),”Managing organisational change in the public sector – Lessons from the privatisation of the Property Service Agency”, International Journal of Public Sector Management, Vol.14 Iss: 2 pp.94 – 110 Permanent link to this document: http://dx.
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The current issue and full text archive of this journal is available at http://www. emerald-library. com/ft IJPSM 14,2 94 Lessons from the privatisation of the Property Service Agency Manchester School of Management, UMIST, Manchester, UK Keywords Organizational change, Public sector management, Privatization, Government agencies, Public authority assets Abstract Whilst organisational change appears to be happening with increasing frequency and magnitude in both the public and private sectors, most of the major studies of change focus on the private sector and tend to derive their approaches to change from that sector.
From a review of the literature, it is argued that there is no “one best way” to manage organisational change but that public sector organisations need to adopt an approach to change which matches their needs and situation. The article examines the privatisation of the Property Services Agency (PSA) in order to draw lessons as to how the public sector can and should manage change. It is shown that the privatisation was characterised by a lack of clarity, an over-emphasis on changes to structures and procedures, and staff resistance.
However, underpinning this was an inappropriate approach to change. The article concludes that the main lessons of the PSA’s privatisation are that, in such circumstances, it is necessary to adopt an approach to change which incorporates both the structural and cultural aspects of change, and which recognises the need to appreciate and respond to staff fears and concerns. Managing organisational change in the public sector Ron Coram and Bernard Burnes The International Journal of Public Sector Management, Vol. 14 No. 2, 2001, pp. 94-110. MCB University Press, 0951-3558 Introduction From Kurt Lewin’s work in the 1940s to the present day, organisational change, as a systematic process, has moved from being a topic of interest to only a few academics and practitioners to one that is seen as lying at the core of organisational life (Senior, 1997; Stickland, 1998). However, whilst organisational change appears to be happening with increasing frequency and magnitude in both the public and private sectors, most of the major studies of and approaches to change ± with some notable exceptions (e. g.
Pettigrew et al. , 1992) ± focus on the private sector and tend to derive their approaches to change from that sector (e. g. Kanter et al. , 1992; Kotter, 1996; Mabey and Mayon-White, 1993; Pettigrew, 1985; Smith, 1997). Not only does this underplay the enormous changes which have taken place and are continuing to take place in the public sector, but it also ignores the need to develop approaches to change which are in tune with the circumstances in which public service organisations now find themselves (Flynn and Williams, 1997; Salauroo and Burnes, 1998).
Though there have been some well-publicised examples of public sector change projects which have gone badly wrong (Brindle, 1999), there is no evidence to show that public sector managers are, inherently, any less capable of managing change than their private sector counterparts (Ferlie et al. , 1996). However, the challenges they face are different from those of their private sector counterparts, especially in terms of public accountability, demonstrating value for money, and in meeting the increasing expectations, regarding service levels and quality, of both the general public and politicians.
Over the last 20 years, one of the most significant challenges that public sector managers have had to cope with, and one which has taken them into unknown territory, has been that the boundary between the public and private sector has become increasingly hazy (Crouch and Streeck, 1997; Flynn, 1993). In the UK, which has tended to be at the forefront of these developments, some public services, or parts of them, have been and are being put out to private tender (e. g. he management of some schools and local education authorities); in other cases, public bodies have been turned into quasi-independent organisations (e. g. the Benefits Agency); and, in other instances, some organisations have been and are being privatised in their entirety (e. g. public utilities). All these forms of organisational change throw up their own dilemmas and challenges, and they all require an approach to change which is appropriate to the circumstances involved. However, as Dunphy and Stace (1993) argued, there is no one approach which is suitable for all circumstances and objectives.
This article examines one particular and major form of organisational change which continues to have a large impact on the public sector: privatisation. It focuses upon the Property Services Agency (PSA) which, until its privatisation in the early 1990s, was responsible for the construction, maintenance and management of all the UK government’s buildings and property. By presenting a case study of the privatisation of the PSA, the article seeks to draws lessons as to how the public sector can and should manage change.
The article begins by reviewing the literature on change management. In particular, it draws attention to the need to recognise that there is no “one best way” to manage organisational change. This is followed by a description of the background to our research on the PSA, and the presentation of the case study itself. As the subsequent discussion section shows, the privatisation of the PSA was characterised by a lack of clarity, an over-emphasis on changes to structures and procedures, and staff resistance.
Underpinning this was an inappropriate approach to change. In conclusion, the article argues that the main lessons of the PSA’s privatisation are that, in such circumstances, there is a need to adopt an approach to change which balances the structural and cultural aspects of change, especially the need to appreciate and respond to staff fears and concerns. Approaches to change management As Stickland (1998, p. 14) remarks: F F Fthe problem with studying change is that it parades across many subject domains under umerous guises, such as transformation, development, metamorphosis, transmutation, evolution, regeneration, innovation, revolution and transition to name but a few. Organisational change in the public sector 95 IJPSM 14,2 96 Especially over the last 20 years or so, as the pace and magnitude of organisational change appears to have accelerated, there has been a significant increase in the number of approaches to change management on offer (see Buchanan and Boddy, 1992; Buchanan and Storey, 1997; Burnes, 2000; Cummings and Worley, 1997; Dawson, 1994; Kanter et al. 1992; Pettigrew et al. , 1992; Senior, 1997; Stace and Dunphy, 1994; Stickland, 1998; Wilson, 1992). Nevertheless, most writers tend to fall into one of two broad camps: those who support the Planned approach to change and those who espouse the Emergent approach. The Planned approach originated in the 1940s from the work of Kurt Lewin (Lewin, 1947). Subsequently, it was adopted by, and became the central focus of, the Organization Development (OD) movement (French and Bell, 1995).
However, in the 1980s, as a result of increasing criticism of the Planned approach, the Emergent approach to change came to the fore. Its proponents argued that the Emergent approach was more suitable for the dynamic and unpredictable conditions faced by organisations in the late twentieth century. The following briefly examines, and attempts to put into perspective, both these approaches to change in order to prepare the ground for presenting and discussing the privatisation of the PSA.
Planned change: summary and criticisms Planned change is an iterative, cyclical, process involving diagnosis, action and evaluation, and further action and evaluation. It is an approach which maintains that once change has taken place, it must be self-sustaining (i. e. safe from regression). The purpose of Planned change is to improve the effectiveness of the human side of the organisation by focusing on the performance of groups and teams. Central to Planned change is the stress placed on the collaborative nature of the hange effort: the organisation, managers, recipients of change and change agents jointly diagnose the organisation’s problem and jointly plan and design the specific changes. Underpinning Planned change, and indeed the origins of the OD movement as a whole, is a strong humanist and democratic orientation and an emphasis on improving organisational effectiveness. The main criticisms levelled against the Planned approach to change are, as Burnes and Salauroo (1995) point out, as follows.
First, Planned change was developed specifically for, and in response to, topdown, autocratic, rigid, rule-based organisations operating in a somewhat predictable and controlled environment. However, an increasing number of writers argue that, in the turbulent and chaotic world in which we live, such assumptions are increasingly tenuous and that organisational change is more a continuous and open-ended process than a set of discrete and self-contained events (Garvin, 1993; Hatch, 1997; Nonaka, 1988; Peters, 1989; Stacey, 1993; Wooten and White, 1999).
Second, and on a similar note, a number of writers have criticised the Planned approach for its emphasis on incremental and isolated change, and its inability to incorporate radical, transformational change (Dunphy and Stace, 1993; Harris, 1985; Miller and Friesen, 1984; Schein, 1985). Third, Planned change is based on the assumption that common agreement can be reached, and that all the parties involved in a particular change project have a willingness and interest in doing so.
This assumption appears to ignore organisational conflict and politics, or at least assumes that problem issues can be easily identified and resolved. However, as Pfeffer (1981; 1992) showed, conflict and personal and group self-interest do play an important role in what changes take place and who benefits from them. Fourth, it assumes that one type of approach to change is suitable for all organisations, all situations and all times. Dunphy and Stace (1993, p. 905), on the other hand, argue that: Turbulent times demand different responses in varied circumstances.
So managers and consultants need a model of change that is essentially a “situational” or “contingency model”, one that indicates how to vary change strategies to achieve “optimum fit” with the changing environment. Organisational change in the public sector 97 Leading OD advocates, as might be expected, dispute these criticisms and point to the way that Planned change has tried to incorporate issues such as power and politics and the need for organisational transformation (Cummings and Worley, 1997; French and Bell, 1995).
Nevertheless, as criticisms of the Planned approach mounted, supporters of the Emergent approach gained ground. Emergent change: summary and criticisms There are many writers who have contributed to the development of the Emergent approach, notably Dawson (1994), Kanter et al. (1992), Kotter (1996), Pettigrew (1985) and Wilson (1992). Unlike the supporters of the Planned approach, the main proponents of the Emergent approach are a much more diverse group who are separated by both geographic and disciplinary divides. Nevertheless, they would, more or less, agree that the main tenets of Emergent change are as follows: .
Organisational change is a continuous process of experiment and adaptation aimed at matching an organisation’s capabilities to the needs and dictates of a dynamic and uncertain environment. . Though this is best achieved through a multitude of (mainly) small- to medium-scale incremental changes, over time these can lead to a major re-configuration and transformation of an organisation. . Change is a multi-level, cross-organisation process that unfolds in an iterative and messy fashion over a period of years and comprises a series of interlocking projects. . Change is a political-social process and not an analytical-rational one. The role of managers is not to plan or implement change per se, but to create or foster an organisational structure and climate which encourages and sustains experimentation, learning and risk-taking, and IJPSM 14,2 . 98 . to develop a workforce that will take responsibility for identifying the need for change and implementing it. Although managers are expected to become facilitators rather than doers, they also have the prime responsibility for developing a collective vision or common purpose which gives direction to their organisation, and within which the appropriateness of any proposed change can be judged.
The key organisational activities which allow these elements to operate successfully are: information-gathering ± about the external environment and internal objectives and capabilities; communication ± the transmission, analysis and discussion of information; and learning ± the ability to develop new skills, identify appropriate responses and draw knowledge from their own and others’ past and present actions. Though not always stated explicitly, the case for an Emergent approach to change is based on the assumption that all organisations operate in a turbulent, dynamic and unpredictable environment.
Therefore, if the external world is changing in a rapid and uncertain way, organisations need to be continuously scanning their environment in order to identify developments and respond appropriately. Though ultimately leading to organisational transformation, to be successful, it is argued, change needs to emerge locally and incrementally in order to respond to threats and opportunities thrown up by environmental instability. Because this is a continuous, open-ended and bottom-up process, the Planned approach to change is inappropriate.
This leads to the first of three major criticisms of the Emergent approach: it is specifically founded on the assumption that all organisations operate in a dynamic environment which requires continuous transformation. It is, by its own definition, not applicable to organisations operating in stable environments where fine-tuning is the order of the day, or those whose circumstances require major changes through the use of rapid and coercive measures.
The second criticism relates to the difference between these two approaches. The Planned approach is attacked because of its advocacy of “Refreezing” organisations after they have been changed (Kanter et al. , 1992). However, if one examines the process of change advocated by, for example, Dawson (1994), Kotter (1996) and Pettigrew et al. (1992), though they argue to the contrary, they do speak of change as a “transition” process which does have a beginning, middle and end. Indeed, as Hendry (1996, p. 24) comments: Scratch any account of creating and managing change and the idea that change is a threestage process which necessarily begins with a process of unfreezing will not be far below the surface. The final criticism concerns the emphasis that advocates of the Emergent approach place on the political and cultural aspects of change. Though undoubtedly politics and culture do play a role in the change process, a number of writers have begun to criticise what they regard as the overemphasis placed on these aspects of change. Hendry (1996, p. 21), for example, argues that: “The management of change has become F F F overfocused on the political aspects of change”, whilst Collins (1998, p. 100), voicing concerns of his own and of other researchers, argues that: F F F in reacting to the problems and critiques of [the Planned approach], managers and practitioners have swung from a dependence on under-socialized models and explanations of change and instead have become committed to the arguments of, what might be called, oversocialized models of change. Organisational change in the public sector 99
Therefore, though it has apparent advantages over the Planned approach, or rather it is applicable to situations for which Planned change is not suitable, an examination of the Emergent approach reveals that it not free from serious criticism. Putting change into perspective In examining the Planned and Emergent approaches to change, what we can see is that they focus on different aspects of organisations and are applicable to different situations. The Planned approach is primarily aimed at improving group effectiveness, tends to have a top-down orientation and is most suitable for stable environments.
The Emergent approach, on the other hand, tends to focus on organisational transformation through continuous change and seems more suited to turbulent environments. This means that, despite their other strengths and weaknesses, both are essentially situational approaches: suitable only for particular situations. In addition, it is also clear that, even taken together, the two approaches do not cover all the broad spectrum of change events which organisations encounter. Senior (1997), for example, rawing on the work of Grundy (1993), identifies three categories of change: “smooth incremental” ± covering slow, systematic, evolutionary change; “bumpy incremental” ± pertaining to periods where the smooth flow of change accelerates; and “discontinuous change”. Cummings and Worley (1997) identify a continuum running from incremental change to quantum change. Dunphy and Stace (1992), in a similar but more detailed way, identify a four-stage change continuum that comprises: fine-tuning, incremental adjustment, modular transformation and corporate transformation.
Storey (1992) offers a four-fold typology of change: (1) Top-down systemic change. This is aimed at transforming the organisation. (2) Piecemeal initiatives. These are devised and implemented by departments or sections in an unconnected fashion. (3) Bargaining for change. This is where a series of targets are jointly agreed between managers and workers, but are pursued in a piecemeal fashion. (4) Systemic jointism. This is where managers and workers agree a total package of changes designed to achieve organisational transformation.
IJPSM 14,2 100 Kanter et al. (1992), addressing the issue of transformational change, have noted that it can be achieved either by a Bold Stroke approach (rapid overall change) or a Long March approach (incremental change leading to transformation over an extended period of time). In a similar vein, Beer and Nohria (2000) make an interesting contribution to the change debate. Based on over 40 years of studying the nature of corporate change, they identify two basic archetypes, or theories of change: Theory E and Theory O.
The main objective of Theory E change is to maximise shareholder value. It is applied in situations where an organisation’s performance has diminished to such an extent that its main shareholders demand major and rapid change to improve the organisation’s financial performance. Typically this is a “hard” approach based on downsizing, divestment of non-core or low-performing businesses, and the heavy use of financial incentives. Theory O, on the other hand, is also aimed at improving an organisation’s performance but his is more a “soft” approach which is based on developing the organisation’s culture and its human capabilities, and promoting organisational learning. Beer and Nohria (2000) believe that both of these are valid models of change but that both have their flaws. Theory E can achieve short-term financial gains but at the cost of denuding an organisation of the human capabilities and organisational culture necessary for long-term survival. Theory O, whilst focusing on these, falls into the trap of not restructuring to concentrate on core activities, thus failing to deliver shareholder value.
To achieve the gains of both these approaches, whilst avoiding the pitfalls, Beer and Nohria advocate using these in tandem by focusing on the rapid restructuring elements of Theory E but following this with the human capability development offered by Theory O. Although similar to Kanter et al. ‘s (1992) “Bold Strokes” and “Long March”, this idea goes beyond most other writers by pointing out that it is possible and sometimes necessary to combine approaches to change, rather than arguing for some sort of universal approach.
In concluding this review of the literature on organisational change, three issues need to be emphasised, which are as follows: (1) There are a wide variety of approaches to change, though some tend to be more popular than others. (2) As Burnes (1996) argues, there is no “one best way” to manage change. All the approaches on offer appear to be situational, i. e. limited in terms of the circumstances in which they are effective. Therefore, managers need to choose an approach which is suitable for their situation rather than assuming that what worked in the past will also work in the future. 3) In some situations, it may be necessary to combine, either concurrently or sequentially, different approaches to change. Having identified the main issues with regard to the literature on change, we can now proceed to examine how the PSA managed change in practice. This will commence with a brief description of the background to our research, and the methods employed. Background and methods This article is based on research carried out between 1995 and 1998 by the authors into the process and consequences of the privatisation of the Property Services Agency.
The research had two main objectives: (1) To identify the reasons for, and the process of, the privatisation of the PSA. (2) Post-privatisation, to examine the impact of the new arrangements on relations between government departments and the newly-privatised PSA. As mentioned in the Introduction, this article is concerned with the first objective, the process of privatisation. For a review of the impact of privatisation on relations between government departments and the privatised PSA, see Burnes and Coram (1999).
Looking at the design of the research and the methods used to study the changes at the PSA, the aim of the research was to construct a mainly qualitative case study of what took place. This was based on principles and methods of research advocated by writers such as Denzin and Lincoln (1998), Robson (1993) and Yin (1994). Though documentary evidence was collected, such as press reports, extracts from parliamentary debates, internal PSA documents and the National Audit Office reports into the sale of the PSA (NAO, 1995; 1996), the main source of data came from interviews with those most closely involved with the process.
These fell into five groups: (1) Senior civil servants within the responsible for managing and privatising the PSA. (2) Senior civil servants responsible for managing and procuring property and property services for government departments. (3) Senior civil servants in the bodies responsible for advising departments on purchasing policy. (4) Directors and operational staff in the privatised companies, the majority of whom were former PSA employees. (5) The Civil Service trade unions involved in the privatisation negotiations.
In total, some 50 individuals were interviewed. The interviews were taperecorded and transcripts sent to the interviewees for checking and correction. In addition, a draft of the final report of the research was sent to the interviewees for comment. These data formed the basis of the following description of the privatisation process. Organisational change in the public sector 101 IJPSM 14,2 102 The privatisation of the Property Services Agency (PSA) Background The origins of the PSA can be traced to 1962 when the Ministry of Public
Buildings and Works was made responsible for maintaining all the UK government’s civil buildings. A year later, the Ministry was merged with the Works Directorates of the Admiralty, War Office and Air Ministry. The merger increased the Ministry’s workforce to over 60,000. With the creation of the Department of the Environment (DoE) in 1970, it was decided that the responsibility for construction and maintenance services should become the responsibility of a separate agency and thus the Property Services Agency was born.
Its role was to: F F F provide, manage, maintain, and furnish the property used by the government, including defence establishments, offices, courts, research laboratories, training centres and land (PSA, 1988, inside cover). In the 1960s and 1970s, few questioned whether or not such activities were best carried out by the public sector, but in the 1980s the tide of opinion began to turn (Crouch and Streeck, 1997). Claims of bureaucratic inefficiency and waste in the UK public services were nothing new (Chapman, 1978; Fulton, 1968; Plowden, 1961).
However, what was new, with the election of Margaret Thatcher as Prime Minister in 1979, was that tackling “bloated, wasteful, overbureaucratic, and underperforming” public services became the centrepiece of government policy (Ferlie et al. , 1996, p. 11). Subsequently, successive Conservative governments attempted to deliver better value for money in public services through measures such as privatisation, outsourcing and compulsory competitive tendering (Flynn, 1993; Horton, 1996).
Not surprisingly, given its size and importance, but most of all given the fact that it seemed to be carrying out a role that in other sectors of the economy was carried out by the private sector, the PSA became a prime target for reform. The process of privatisation In retrospect, it is possible to see that the process of privatising the PSA went through six key stages and began well in advance of the actual announcement that it was to be privatised: . Stage 1.
In order to increase the commercial efficiency of the PSA, in 1986 the government appointed the consultancy firm Deloitte to develop and introduce new accounting and management information systems. These new systems were designed to allow the PSA to operate along private sector lines and to abandon public sector practices which were seen as uncommercial. . Stage 2. In 1987, it was announced that, from April 1988, civilian departments of government could take responsibility for commissioning their own construction projects with a value of over ? 150,000.
The Ministry of Defence was allowed to follow suit in April 1990. In effect, . . . . this meant that the PSA was going to have to bid alongside private sector companies for government work. Stage 3. In 1988, the Secretary of State for the Environment announced that the PSA would in future operate on a commercial basis. This is to say that its income, and indeed its survival, would depend on gaining work from government departments in the face of private sector competition. To facilitate this, the PSA was restructured into a number of separate business functions.
In addition, in order to promote a more commercial orientation, a Business Development Directorate was established within the PSA. The consultants Price Waterhouse were appointed to operate alongside the new Directorate to assist the PSA’s commercial development by, among other things, training staff in business accounting, financial management, business planning, people management, customer care and marketing. Stage 4. In September 1989, the government announced that the PSA was to be privatised.
In June 1990, the legislation necessary to enable this to take place was passed. Stage 5. In October 1990, in preparation for privatisation, the PSA was restructured into three main businesses: PSA Projects, PSA Building Management (which was eventually split into five separate companies), and PSA International (which, in the end, was closed down rather than sold). Stage 6. PSA Projects was privatised in 1992. This was followed in 1993 by the sale of the five companies which comprised PSA Building Management. Organisational change in the public sector 103
The above presents the privatisation of the PSA as a relatively straightforward and well-planned process. However, this is far from the reality of what happened. First, it must be recognised that most of the above actions were imposed on the PSA rather than arising from the decisions of its own management. Second, the six stages focused very much on changes to structures and procedures whilst paying little attention to the need for attitudinal, behavioural and cultural changes or, indeed, the reaction of the PSA’s staff to the notion of privatisation.
Finally, as the following will explain, the move to privatise the PSA was far slower and much messier than either the government or the PSA’s management had allowed for. The pace of privatisation As the following quotation from a director of one of the privatised companies indicates, the privatisation of the PSA took longer, and was more difficult, than expected: The privatisation process was a very lengthy process.
It was much longer than it was originally intended to be and meant that the natural unease and nervousness that occurs during such periods was prolonged. IJPSM 14,2 104 The main reasons for this slowness were twofold. Lack of strategic direction. At first, the PSA’s Board appeared to treat privatisation as a standard public sector change programme which could be planned in advance, executed in a straightforward way with few unforeseen problems, and which staff would accept, even if they did not like it. However, this proved to be far from the case.
The PSA’s Board brought in a firm of consultants to help them to clarify the PSA’s strategic direction but, as this remark by PSA’s then Deputy Chief Executive demonstrates, the result seemed somewhat unfocused: For example, we did a lot of work on objectives. I don’t think I can remember what we boiled it down to in the end, F F F something like: to preserve the maximum number of viable longterm jobs. Whatever the merits or not of the work the Board did, the middle and lower reaches of the PSA seemed more alarmed than consoled by developments.
It was also the case that even where positive decisions were taken by the top, such as a commitment to provide retraining and outplacement support for staff, they found it difficult to put them into practice. One former PSA Director stated that: There were a few things like that [the training] where I think the best intentions at the top were weakened by people underneath, and I didn’t know why. The difficulties faced by top management in developing a new strategy for the PSA and in pushing forward the pace of privatisation were threefold.
The first was that though, as civil servants, they had been brought up in a stable environment which operated by well-understood rules, they found themselves having to transform the organisation into a commercial entity that could be successful whilst not understanding the nature of competition nor ever feeling in control of the pace of change. The second was that, having been used to running a bureaucratic organisation with compliant staff, they found themselves attempting to construct a more flexible and entrepreneurial body with an increasingly disgruntled and worried workforce.
The last was that, their actions were being dictated and judged by their political masters, whose sole concern appeared to be to privatise the PSA as quickly as possible, no matter what it cost or who was offended. Therefore, senior managers found themselves caught between the politicians’ desire for speed and their staff’s desire for job security, both of which clashed with their own cautious and ruledriven approach to change. Resistance by PSA employees. This was the second main reason for the slowness of the privatisation process.
The majority of PSA employees did not want their organisation privatised. Not only did they value the stability and certainty that working for a government body gave them, but also most believed that the PSA had little chance of survival in the private sector. As one of their trade union officials put it: The implications of privatisation for staff, in respect of pensions, severance terms, general pay and conditions, were enormous. What happens if the organisation who took them over went bust at some later date?
The result of this uncertainty and fear for their future was that staff sought to resist and delay privatisation. On an individual basis, many staff resisted by withholding information and slowing down the process wherever possible. For example, some staff basically gave up work and devoted all their time to searching for another job, whilst others fabricated rumours. There was also a general increase in union militancy. On a collective basis, the PSA staff trade union decided to oppose the privatisation.
As one union official commented: F F F we felt and still feel that if you are providing a service for the public sector and using taxpayers’ money, that it’s quite inappropriate to have this work carried out by organisations making a profit. Organisational change in the public sector 105 The official also went on to state that it was union policy to delay the privatisation: F F F the idea was that the longer it took, the longer people were in the public sector.
There were issues about information, about negotiation over what the implications of the sale would be for staff, and obviously, from that point of view, the idea of slowing the process down wasn’t one that we were objecting to. Eventually this resistance became overt and staff took industrial action, including working to rule and strikes. In a belated attempt to defuse staff opposition to privatisation, the government devised a staff choice scheme whereby PSA staff could choose to transfer fully to the privatised companies, to be seconded to them for a limited period, or to take early retirement.
The staff choice scheme also protected employees’ pension entitlements. Though this defused some of the opposition, it was not until after the 1992 General Election, when many people ± mistakenly as it turned out ± expected a change of government, that staff finally accepted the inevitability of privatisation. As can be seen, the PSA’s privatisation was characterised overall by uncertainty, delay and a lack of any clear strategic direction (other than to privatise it). The entire process was driven by one unquestionable aim: privatisation.
The process, cost and consequences of privatisation were all subordinate, and, in some senses, irrelevant to achieving that one aim. Though clear in itself, the aim provided no guidance as to how it was to be achieved nor, importantly, did it offer any direction for what was to take place afterwards. As for the PSA’s strategy, instead of clarity and purpose, what developed was a stream of unplanned, ad hoc and muddled decisions made in reaction to events, rather than in anticipation of them.
Discussion Though it is not the purpose of this article to evaluate the merits or otherwise of the decision to privatise the PSA, it is important to recognise that the wave of privatisation seen in the UK in the 1980s and 1990s was essentially based on a IJPSM 14,2 106 political belief that the private sector, driven by competitive pressures, was far better at delivering value-for-money services than the public sector (Crouch and Streeck, 1997; Ferlie et al. , 1996; Flynn, 1993).
Consequently, the privatisation of the PSA, like other privatisations, was not driven by some form of rationaleconomic decision-making process, but by a political agenda aimed at transferring parts of the public sector to the private sector. Consequently, successive governments were less concerned with the process of change, or indeed its cost, than with ensuring that the transfer took place. It is not surprising, then, that the PSA’s staff should have felt resentment and a sense of betrayal that, after many years of public service, their careers and livelihoods were threatened by what appeared to them to be ideological dogma.
This put the senior managers of the PSA in a situation for which they were ill-prepared and had little experience. They had to plan for, and get staff to comply with, a proposition for which they themselves seemed to have little sympathy and over which, in the final analysis, they felt they had little control. To achieve privatisation, they attempted to apply the sort of rational-planned approach to change which had worked for them when undertaking change in the past. But past changes had been undertaken within a relatively stable public sector environment, with a compliant workforce and with few potential losers.
Unfortunately, the government’s policy in this instance was driven by mainly ideology rather than rationality. It was designed to remove the PSA from the public sector, the workforce were afraid and hostile, rather than compliant, and there were a great number of potential losers. It was also the case that the senior echelons of the PSA appeared themselves to be apprehensive and lacking in support for the privatisation. Therefore, not surprisingly, senior managers found it difficult to devise and put their plans into practice when faced with an uncertain environment and a hostile staff.
As time passed, three factors came to the fore which ensured that privatisation was completed: (1) In order to achieve its objective of privatising the PSA, the government eventually recognised it would need to be pragmatic as to how this was achieved and its cost. (2) The PSA management abandoned its planned approach to change and, basically, adopted a reactive and ad hoc approach to overcoming the barriers to privatisation ± dealing with them as they arose and being prepared to be flexible in most aspects of the process. 3) After the 1992 General Election produced no change of government or policy, it became clear to staff that the privatisation of the PSA was inevitable. As can be seen, in terms of strategic change, this was an instance where there was a clear, though limited, objective, but no clear or consistent strategy for achieving it. It is highly debatable whether or not the privatisation of the PSA has produced any measurable benefits to the UK taxpayer. Certainly the government’s own National Audit Commission (NAO, 1995; 1996) was critical of the cost and process of the PSA’s privatisation.
Also, whilst most organisations in the private sector appear convinced that closer, less hostile and longer-term working relationships between customers and suppliers are the way to achieve best value for money, this does not seem to be the case in terms of the public sector’s relations with the privatised PSA or other companies in the construction industry (Burnes and Coram, 1999). As far as change management was concerned, what we can see is that the PSA’s managers attempted to apply the sort of quick, top-down, mechanistic approach to change which had previously worked well in the relatively stable world of the public sector.
However, the PSA was moving into unknown territory, the private sector, which was far more dynamic and unpredictable than it was used to. Also, it needed to achieve two forms of change at the same time: changes to structures, practices and procedures; and changes to attitudes, behaviour and culture. Whilst the traditional top-down public sector approach might be suitable to the former, provided the environment was relatively stable, it was not suitable to the latter, regardless of the nature of the environment.
This meant that the PSA’s leaders were attempting to take their staff into unknown territory, using an inappropriate approach and in a direction with which even they were apparently ill at ease. Conclusions As the literature review argued, there is no “one best way” to manage change. Just because an approach was deemed appropriate and worked over a period of time does not mean it will work in all situations or for all time (Burnes, 1996). A top-down, planned approach may well be suitable for a stable, public sector bureaucracy, but if a need arises to move the same bureaucracy into the private sector, the same approach is unlikely to work.
As Dunphy and Stace (1993, p. 905) remarked: “Turbulent times demand different responses F F F” Although the privatisation of the PSA is now a past event, the nature of the public sector and whether further elements of it should be privatised, or required to become more market-orientated, still form part of the current political agenda in most countries. Consequently, the lessons of the PSA’s privatisation are still very relevant to those who make public policy and to those charged with carrying out the changes which such policies require of them. The main lessons are as follows.
First, to prepare services for privatisation, or to operate on a more commercial basis, requires both structural and cultural change. As Allaire and Firsirotu (1984) showed, to achieve both requires different approaches with different timescales. A similar point was made by Beer and Nohria (2000), cited earlier, who call for a combination of Theory E and Theory O approaches to achieve such transformations. To focus on only one of these, as was the case with the PSA, is unlikely to achieve the benefits which policy makers expect, and taxpayers increasingly demand. Organisational change in the public sector 107
IJPSM 14,2 108 Second, there is a need to win over staff, or at the very least to address their concerns and fears. A key element in this is the need for policy makers to move beyond basing their decisions mainly on dogma or political creed, and instead, as O’Toole and Jordan (1995, p. 190) recommend, to base them upon “a rigorous identification of weaknesses and a considered plan to remedy those defects”. As far as the PSA case was concerned, there was never really any attempt to win over staff or, until quite late in the process, to address their fears and concerns.
The main reason for this was that the PSA’s senior managers did not know how to promote a decision based on dogma, one which they had played no part in developing, and over whose consequences they had significant reservations. Third, it should also be noted that the PSA’s management themselves did not possess the skills or experience to manage such a change process. Although this was recognised by the provision of consultants to help with the more structural and technical changes, support for the more cultural aspects appears to have been ignored.
Therefore, in conclusion, as can be seen, the PSA’s privatisation was flawed and, some might consider, ill-conceived in the first place. However, this should not blind us to the important lessons it offers both policy makers and practitioners when considering and managing organisational changes in the public sector. Policy makers rightly require and expect public sector employees to provide value for money. In turn, public sector employees have a right to expect policy makers to take decisions, and manage the consequences which flow from these, in such a way that it can be openly seen that value for money is their primary concern.
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