It has been my long-held conviction that we should learn through experience. The proposition is not an arresting new one. Less remarked is the difficulty we have as individuals, and more significant as organizations, to engage in such learning processes. There are two kinds of difficulties that occur most strikingly in organizational learning: (a) the experiences themselves often go unrecognized and (b) even when they are recognized, and particularly when they occur outside the space of an organization, the learning potential is generally ignored.
The discussion of franchising in the federal government deserves the caution that we not forget the experience already had. That experience tends to be obscured by the franchising label. Its choice by the National Performance Review to describe processes more familiarly known today as enterprise management has been described as a means of reducing opposition to a good idea. Unfortunately, introducing market dynamics into the internal operations of government organizations continues to arouse opposition. Academic people, in particular, equate the market and entrepreneurial behavior with greed, avarice, and the destruction of anything that is good and fair in the society.
It was hoped that the name franchising would ease acceptance of a good and needed approach to the handling of much of the internal business of government. I am not sure that this has happened as opponents to change continue to conjure up new demons of franchising. In some quarters it is now regarded as a synonym for privatization. Whether the new label puts us ahead in the thought task of securing change or not, it is important to recognize that there is a great deal of experience with franchising.
This article is directed toward two goals. The first is to recount a personal intellectual history with the market and enterprise management, primarily to support the proposition that it is an approach whose time has come. The second is to examine the experience of the Federal Executive Institute which celebrated its 25th anniversary in 1993, as a basis for arguing that market dynamics are not enough. Like every other human activity, franchises have their frailties.
PERSONAL ACCOUNT OF FRANCHISING HISTORY
Early in my academic career I had the opportunity to read a book that shaped my thinking over the last decades. It was Politics, Economics, and Welfare (Dahl and Lindblom, 1953). What was particularly memorable was the idea, then very original to me, that markets are a system of organizations. Further, they are nonhierarchical, a particularly telling point because, even back in the early 50s, we were recognizing the dysfunctions of hierarchy.
A second, highly Important event m the evolution ot my tng, was a case study, "Gotham in the Air Age" (Kaufman, 1952). The key idea was that even a very major, general purpose government can exhaust its resources, initiative, and energy to solve big problems. The issue was how to handle the need of the New York metropolitan area for vastly expanded airport facilities. The logical place to turn was the city of New York which tried for several years to handle the necessary capital investment. Financing was the big dilemma because the city was heavily indebted and also because none of the financiers believed it could run anything well.
It remained for an upstart entity, the Port Authority of New York and New Jersey, with no taxing authority, to show the vision and develop the financing package that brought New York its major airports. All this was financed not by general obligation bonds but by revenue bonds. Whereas the general obligation bonds are backed by the full faith and credit of a taxing jurisdiction, revenue bonds are not. Revenue bond lenders have to believe that an undertaking is self-financing and that the managers are sufficiently skilled and responsible to make things work properly. The Port Authority had a reputation as a well-managed organization, whereas the city did not. …