Academic journal article
By Nutt, Paul C.
Journal of Public Administration Research and Theory , Vol. 16, No. 2
Rodriguez and Hickson (1995) and Schwenk (1990) examine decisions in public and private organizations and report notable differences. Private, for-profit organizations have smoother decision-making processes. Public organizations experience more turbulence, interruptions, recycles, and conflict (e.g., Perry and Rainey 1988; Rainey, Backoff, and Levine 1976; Ring and Perry 1985). Scholars attribute these differences to the roles that public and private organizations play in our society. Private sector organizations sell products or services to consumers in markets to create wealth for shareholders. The typical general purpose, tax-supported governmental agency, such as a state department of mental health, contracts for services and collects information about the needs of people that call for a public response. These distinct roles suggest vastly different kinds of expectations and accountability that may call for different decision-making practices. Decision-making research seldom accounts for these differences, so generalizing from one sector to another is suspect (Papadakis and Barwise 1998).
This research effort explores some of these differences by comparing how mid-level managers in each sector view the prospects of approval and the risk in simulated budget decisions. Explanatory variables include sector, budgeting practices, the cognitive makeup of the participant, and level of controversy. The budgeting practices draw on the modes of understanding found in four kinds of decision-making cultures and are applied to controversial and noncontroversial budget requests. Statistical interactions of the explanatory variables are used to examine the influence of the practices thought to be consistent with those favored by typical public and private organizations. Managers with at least five years' experience who were currently working in the public or the private sector participated in the study. Answers for two questions were sought. First, do experienced managers in the public and private sectors have different views of risk and adoption when similar decision practices are used? Second, are managers in the two sectors equally likely to act, and do they see the same level of risk in acting? The findings suggest problems and prospects in the oft-repeated call for public sector organizations to adopt private sector practices.
SECTOR, CULTURE-BASED DECISION MAKING, AND CONTROVERSY
As noted by Papadakis and Barwise (1998), the influence of context on decision making is largely unexplored. Contextual influences arise from an organization's role in a society, such as being an instrument of public policy or a means for creating wealth for shareholders. This role dictates the governance arrangements that are needed to exercise control for different types of owners, such as elected officials or shareholders. Yamamoto (1997), Lioukas, Bowrantas, and Papadakis (1993), and Mallory et al. (1983) report that the approach to governance leads managers in each sector to experience different demands and expectations, which are apt to influence their decision making. Each sector's role calls for dealing with users and clients in different ways, which may also influence how decisions are made (Chaffee 1985; Fredrickson 1985; Hitt, Ireland, and Hoskisson 2003; Mintzberg 1973; Pettigrew 1990).
A "public-private difference" stream of research, begun by Rainey, Backoff, and Levine (1976), initiated a study of the roles that public and private organizations have in our society. Using this framework, researchers have found that the demands placed on public and private organizations vary to the extent that different practices are recommended for each sector (Blumenthal 1983; Dahl and Lindblom 1953; Nutt and Backoff 1993; Perry and Rainey 1988; Ring and Perry 1985). Organizations with public features are seen as being constrained in ways that limit what they can do when making strategic choices. …