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# Section 1: The Public Management Context

## Government is the Problem

_Friedman, M. (1993). Why government is the problem. Hoover Press._

Author: Uk, Bolary; Editor: Sears, Kicia Kimberly

The article was adapted from the 1991 Wriston Lecture, which was presented in New York City. It argued that the government is the reason behind all of the major social problems in the United States.

Friedman argues that there are 10 major social problems created by government.

First, the US government’s expenditure on education is the second big social spending after military and it has tripled after adjusting to inflation in the last 30 years; however, the schools have been deteriorating.

Second, the lawlessness and crime in society. There are many laws to break, and a "[large] fraction of the laws fail to command the allegiance of the people." The government can enforce only laws that most people believe to be good laws, meaning the laws that most people would follow even if the laws did not exist. The issue here, the author asserts, is that there are too many actions rendered illegal that people generally believe to be "moral and proper," and this makes them difficult to enforce without resulting to brute force. Friedman argues that a major problem is the prohibition of drugs. He believes these laws end up doing more harm than good.

Third, homelessness made by government actions, such as rent control, empty mental facilities and turn people out on the streets with few options. Additionally, he argues "urban renewal and public housing programs have destroyed far more housing units than they have built."

Fourth, the collapse of family values such as increased "teenage pregnancies, illegitimate births, and one-parent families" were caused by "mistaken and misdirected" governmental policy.

Fifth, the high cost of housing and the destruction of housing is a problem. He argues this was caused by rent control policies in cities such as New York as well as expanded regulations for building. The costs of obtaining permits and building within regulations is too high.

Sixth, the high cost of Medical Care: the cost was 26 times as high in 1989 as it had been in 1946. Most of the increased cost after 1965 mostly pay for personnel the author views as ineffective.

Seventh, the savings and loans crisis produced by government, "first by the accelerating inflation in 1970s, which destroyed the net worth of many savings and loan institutions, then by poor regulation in the 1980s, by the increase in the amount covered by deposit insurance to $100,000, and...[the recent] heavy-handed handling of the crisis."

Eighth, the highway congestion. The government is unable to produce an adequate highway system compared to the increasing needs of automobile drivers.

Ninth, air control facilities run by the government are unable to effectively handle the number of airlines, planes, and personnel demanded by the airline industry.

Finally, Friedman mentiones miscellaneous issues such as the botched economic policies of the Bush Administration that contributed to the 1990-1991 recession, the over-regulation of industry, and agricultural policies that end up wasting food.

Friedman argues that the basic fucntions of governemnt are to "defend the nation against foreign enemies, to prevent coercion of some individuals by others within the country, to provide a means of deciding on our rules, and to adjudicate disputes."

Further, Friedman argues against his critics by attacking what he calls their best evidence that capitalism and private enterprise is the major cause of problems: pollution. He argues that in countries where industry is run by the government, pollution is far worse. In the United States, pollution is not as bad because private enterprise has found it more profitable to avoid pollution and therefore, the market adjusted and pollution did not get too bad. He argues that government does play a role in pollution regulation, but that the U.S. has created policies that are expensive and ineffective.

Friedman goes on to explain why he believes the government is the problem:

The influence of special interests which favor a few and impose small costs on many. Friedman uses the example of taxi regulation in New York City. Although the market would seem to support an increase of taxis in operation, the current drivers do not wish to compete and decrease their slice of the pie. Therefore, they lobby city hall to ensure governmental limitations are continued. This is an example of a deeper truth: the pursuit of self-interest. Friendman argues that this quality is in all people, whether they run private companies or governmental agencies.

"Self-interest is served by different actions in the private sphere than in the public sphere." An enterprise in private sector may succeed or fail. So their bottom line is to either make the enterprise work or to shut it down. However, the enterprise in the government sector has a very different bottom line. When it does not work, nobody likes to admit the mistake. Instead "they argue that the enterprise initially failed only because it was not pursued on a large enough scale." Friedman argues that this fundamental difference has caused failing governmental programs to spin out of control, as more money is pumped into them.

Another example in international sphere is the International Monetary Fund (IMF) and the World Bank. The IMF was established to administer a system of fixed exchange rates. After President Nixon closed the gold window in 1971, the fixed exchange rate system was replaced by a system of floating exchange rates. Instead of closing down, the IMF changed its function and expanded to be a relief agency with greater financial support from its sponsors.

After WWII the US had wage and price control. In order to recruit employees, many employers began to offer health care as a fringe benefit to attract workers. "As a new benefit, it took years for the Internal Revenue Service to require the cost of the medical care to be included in the reported taxable income of the employees." Later the wage and price control were eliminated, but the tax exemption of health benefits continued and employers providing benefits to workers has been normalized as an essential right.

Overall, Friedman argues the issue is that the government is spending too much on the wrong things, public officials are "led by an invisible hand to serve private interests," and people have no voice in governmental institutions. According to James Payne’s study of 14 different government hearings dealing with spending issues, "of the 1,060 witnesses who appeared, 47 percent were federal administrators, and another 10 percent were state and local officials...and 6 percent were congressmen". In short, the spending programs are shaped by government officials.

Friedman argues that there are many ways to correct these problems. The one that he emphasizes is creating term limits for government officials, particularly in Congress. He believes this would eliminate the conflict of interest that positions representatives as direct beneficiaries of very large governmental bodies. Further, he argues the people would support term limits, as they have in several state elections. Though he understands this would not eliminate the multiple problems he delineates, he thinks this would be a huge step in the right direction.

## Reinventing Government

_Clark, CS, “Reinventing Government: Two Decades Later.” Government Executive: April 26, 2013._

Author: El Ayachi, Youssef; Editor: Sarawat, Fariha

## Is Public Management Unique?

_Boyne, G. A. (2002): Public and Private Management: What’s the Difference, in: Journal of Management Studies, 39:1, pp. 97-122._

Author: Creedon Jr, John Thomas; Editor: Hamlin, Madeleine Rose

In Public and Private Management: What's the Difference, Arthur Boyne argues that there is a lack of evidence to support the thesis that public and private sector organizations are too different to apply private sector managerial practices to. The article statistically analyzes and critiques 34 empirical studies by critics of New Public Management (NPM). While much of the evidence supports that they are very different on the surface, Boyne argues that few of them are statistically significant.

Boynes breaks down the analysis of the studies under four theoretical interpretations of publicness on the differences between public and private organizations:
- Publicness an organizational environments
- Organizational goals
- Organizational structures
- Values of managers.

Under each of these theoretical concepts, Boynes evaluates the statistical analyses of empirical evidence and claims assumed by the research in a number of subcateogries. Boynes analysis for each will be briefly summarized below:

**Publicness an organizational environments**
- Complexity
- Permeability: All studies support that publiv orgs are more open to environmental infuences but statistical results provide weak evidence of this.
- Instability
- Absence of competitive pressures

**- Organizational goals**
- Absence of equity and accountability in private sector: Results are mixed.
- Multiple goals and stakeholders in public sector: No tests to support one way or the other.
- Goals of public organizations more vague

**Organizational structures**
- Public organizations more bureaucratic: Majority of studies find strong support but there is no statistical controls of organizaitonal size.
- More red tape in public organizations: If red tape is interpreted as procedural delay then there is some support but the evidence is not always consistent with the conclusion.
- Lower managerial autonomy in public organizations: Statistical results mixed and inconclusive.

**Values of managers.**
- Public sector less materialistic: Strong evidence that public sector managers are less materialistic than their private sector counterparts.
- Public sector ethos: Evidence is partly consistent with the view that managers are driven primarily to serve the public interest.
- Less organizational commitment in public sector: 3/5ths of studies consistent with hypothesis that organizational commitment is weaker in public sector.

Some criticisms of the empirical evidence is that they were primarily done in the United States which possesses unique characteristics that define the public and private sectors when compared to many other coutnries. Additionally, the studies were all performed between 1960-1999, with most being from the late 1970's and early 1980's before NPM and a strong movement to apply private sector practices to public sector organizations. Moreover there were omissions of explanatory variables, little control, and few multivariate analyses. Boynes notes that all of these factors may have skew results.

Boynes utilizes a support score of 50% or higher to indicate whether instances would occur by chance or alone but argues this number should really be higher. The author concludes that there is little statistical significance that their are differences so fundamental between the public and private sectors that private sector management practices could not effectively be applied to public organizations. Only three studies met Boynes statistical threshold of significance: Public organizations are more bureaucratic, public managers are less materialistic, and organizational commitment is weaker in the public sector. Boynes concludes that that this not to say there are not differences but there remains little empirical grounds support that theory and oppose NPM's utilizaiton of private sector practices.

## Managing Government, Governing Management

_Mintzberg, H. (1996). “Managing Government, Governing Management.” Harvard Business Review, May, 75-83. _

Author: Dorries, Joshua Wayne; Editor: Checksfield, Molly Wentworth
and Editor: Sarawat, Fariha

Clarke writes about the Clinton administration’s effort to reinvent the way the government works--The Clinton administration’s National Performance Review, which was re-christened during President Clinton’s second term as the National Partnership for Reinventing Government. Clinton and Gore decided to create a smarter government by adopting private sector practices aimed at improving efficiency, to reduce costs and have greater results.

This goal driven effort focused on   putting customers, the taxpayers, first, cutting red tape, empowering employees to get results and cutting government back to basics.
The scheme has had mixed success and has been criticized for aligned with major challenges, management goals not relating to budgets and lack of rigor in achieving results. A lot of the work was undone by the subsequent Bush administration.

## Is Public Management Unique?

_Boyne, G. A. (2002): Public and Private Management: What’s the Difference, in: Journal of Management Studies, 39:1, pp. 97-122._

Author: Creedon Jr, John Thomas; Editor: Hamlin, Madeleine Rose

In Public and Private Management: What's the Difference, Arthur Boyne argues that there is a lack of evidence to support the thesis that public and private sector organizations are too different to apply private sector managerial practices to the public sector. The article provides a review of 34 empirical studies comparing public and private sector organizations, and employs quantitative methods to analyze and critique the results of these studies. While critics of New Public Management (NPM) argue that business practices from the private sector cannot be applied to public organizations, Boyne argues that, based on the available literature, there is little evidence to support that the two spheres are fundamentally different.

Boyne first describes the concept of 'publicness,' which he defines according to Bozeman's 3-part model, whereby a public organization can be distinguished from a private one in terms of its ownership, funding, and control.

Then, in reviewing the literature comparing public andn private organizations, Boyne structures his findings according to four themes:
- Publicness and organizational environments
- Publiness and organizational goals
- Publicness and organizational structures
- Publicness and managerial values.

Boynes analysis for each theme will be briefly summarized below:

**Publicness and organizational environments**
- Complexity: Studies show that public agencies tend to be more complex than private ones.
- Permeability: All studies support that public orgs are more open to environmental infuences but statistical results provide weak evidence of this.
- Instability: There tends to be more turnover of managers at public organizations.
- Absence of competitive pressures: Public agencies have few competitors for provision of their services.

**Publicness and organizational goals**
- Absence of equity and accountability in private sector: Results are mixed.
- Multiple goals and stakeholders in public sector: No tests to support one way or the other.
- Goals of public organizations tend to be more vague.

**Publicness and organizational structures**
- Public organizations more bureaucratic: Majority of studies find strong support but there are no statistical controls for organizational size.
- More red tape in public organizations: If red tape is interpreted as procedural delay, then there is some support but the evidence is not always consistent with the conclusion.
- Lower managerial autonomy in public organizations: Results are mixed and inconclusive.

**Publicness and managerial values**
- Public sector less materialistic: Strong evidence that public sector managers are less materialistic than their private sector counterparts.
- Public sector ethos: Evidence is partly consistent with the view that managers are driven primarily to serve the public interest.
- Less organizational commitment in public sector: 3/5ths of studies consistent with hypothesis that organizational commitment is weaker in public sector.

Boyne notes that many of the studies were conducted in the United States, and therefore cannot necessarily be applied to international contexts. Additionally, the studies were all performed between 1960-1999, with most being from the late 1970s and early 1980s before there was a strong movement to apply private sector practices to public sector organizations. Moreover, there were omissions of explanatory variables, little control, and few multivariate analyses. Boyne notes that all of these factors may have skew results.

Boyne utilizes a support score of 50% or higher to indicate whether instances would occur by chance or alone but argues this number should really be higher. He concludes that there is little statistical significance to prove that are differences so fundamental between the public and private sectors that private sector management practices could not effectively be applied to public organizations. Only three studies met Boyne statistical threshold of significance: public organizations are more bureaucratic, public managers are less materialistic, and organizational commitment is weaker in the public sector. Boyne concludes that that this not to say there are not differences, but that there is not enough evidence that public and private organizations are too different to apply similar management practices across sectors. Overall, there is more research to be done in this area.

## Managing Government, Governing Management

_Mintzberg, H. (1996). “Managing Government, Governing Management.” Harvard Business Review, May, 75-83. _

Author: Dorries, Joshua Wayne; Editor: Checksfield, Molly Wentworth

Managing Government can be surmised into one concept: balance. Henry Mintzberg’s primary supposition is that we need balance among the four sectors of society (the public and sphere, and the cooperatively owned organizations and not-for-profit noncooperative organizations), as well as a balance between our public concerns as individuals with the private demands of institutions.

According to the Mintzberg, because Western society feels that capitalism won over communism, we believe that the private sector is good, and the public sector bad, with all other types of organizations deemed irrelevant. Thus, people have erroneously argued that the government should become more like a business. The author disagrees, arguing that “[i]f we are to manage government properly, then we must learn to govern management.” He states, “capitalism did not triumph at all; balance did. We in the West have been living in balanced societies with strong private sectors, strong public sectors, and great strength in the sectors in between. The countries under communism were totally out of balance.”

Managing the government as a business promotes an interpretation of the populous as _customers_. But when it comes to complex services promulgated by the government, the idea of customer is dangerous. As the author writes, “the private ownership model, much as it provides ‘customers’ with a wonderfully eclectic marketplace, does have” as he says “... something more than arm’s length trading and something less than encouragement to consumer.” “When I receive a professional service from government […] the label _client_ seems more appropriate to my role.” Yet, beyond customers and clients, members of society are citizens with individual rights and allowances. Yet, citizenship goes beyond receiving various services, and imbeds within some sort of 'obligations as a _subject_.'” (Pg. 77) In one way or another, we are all subject. We pay taxes, fight and allow ourselves to be drafted into the armed forces, and respect government regulations. These four labels that members of society fall within are useful to clarify the varied purposes of government. Each label is served by a different sector of society, whether customers are appropriately served by privately owned organizations or through cooperatively owned ones, or client relationship which are best served by non-owned organization or cooperatively owned ones. A balanced society requires the various intuitional forms of ownership and control for success, the question becomes how government activities should be managed?

Mintzberg details Albert Shapero of Ohio State University concept of Management in an attempt to prove the incapability between managing a government as a company. Shapero’s three assumptions are: first that _particular activities can be isolated – both from one another and from direct authority_; second, that _performance can be fully and properly evaluated by objective measures_; and finally that _activities can be entrusted to autonomous professional managers held responsible for performance_. According to Mintzberg, “[t]hese assumptions[…] collapse in the face of what most government agencies do and how they have to work.”

In the _Government-as-Machine Model _the government “is viewed as a machine dominated by rules, regulations, and standards of all kinds.” (pg. 80) This model as fallen out of favor due to its lack of flexibility and responsiveness to the individual. The _Government-as-Network Model_, the polar opposite of the government-as-machine model, is where government is viewed as one intertwined system, a complex network of temporary relationships fashioned to work out problems as they arise and linked by informal channels of communication. The _Performance-Control Model_ is the realization of Shapero’s Management, and “aims above all to make government like business.” (pg. 80). The _Virtual-Government Model_ “contains an assumption that the best government is no government,” the motto of which could be thought of as “privatize, contract, and negotiate.” (pg. 81)

Mintzberg argues that the above models all fail, as they do not structure social authority adequately. Instead, he argues for the _Normative-Control Model_, which is “not about systems but about soul.” The idea is that control is normative, meaning it is “rooted in values and beliefs.” The key to the success of the normative model is dedication by and for the providers of service. The normative model is based upon five key elements: _selection_ of people chosen by values and attitude rather than credentials; _socialization_ to ensure a membership dedicated to an integrated social system; _guidance_ by accepted principles rather than imposed plans, vision rather than targets; shared _responsibility_ by all members; and _judgement_ of performance by experienced people.

While Mintzeberg believes that we as a society need to shift towards the normative model, he concludes that “[t]here is no one best model. […] Government, […] is an enormously eclectic system, as varied as life itself.” (pg. 82). Mintzberg concludes that “business is not all good; government is not all bad. Business can learn from government no less than government can learn from business; and both have a great deal to learn from cooperative and nonowned organizations. We need proud, not emasculated, government. Above all, we need balance among the different sectors of society.” (pg. 82-83).

## Managers Not MBAs

_Moynihan, Donald P. (2007) Review of Managers not MBAs, by Henry Mintzberg. Public Management Review 9(1): 155-158. _

Author: Washington, Layvon Q; Editor: Perez, Philip A

Donald Moynihan, provides an introspective review of Henry Mintzberg’s book, _Managers, not MBAs_. Moynihan explores and concurs with Mintzberg’s criticisms of MBAs today and the impact that it has on management.

Moynihan argues that current MBA programs do not resemble “actual management,” but rather “creates illusions” about what management ought to be. Moynihan articulates the point that while MBA programs teach critical skills, such as analytics, they neglect the craft based on experience. As a result, graduates are overly analytical and/ or engage in a "heroic pretense" that they are managers. Mintzberg and Moynihan view MPA programs as the best option for managers because they drive individuals to create a social impact. The clear separator between MPA and MBA programs, as stated, is the corrupting influence of money. MBA students often come with the notion that fortunes will be made after graduating because of the promise of high-paying jobs. Given that MPA candidates cannot expect to make a huge fortune, it is often the motivating force for them to become active public servants, which is a trait that is absent from individuals who hold MBAs, Mintzberg and Moynihan argues.

Given the benefit of professional experience in public administration, Mintzberg proposes the creation of a Masters Program in Practicing Management (MPM). This model would be for individuals between the ages 35 and 45, who have significant management experience. The MPM would require individuals to leave their jobs for intensive two-week periods. However, Moynihan argues that this would exclude most of the population of current MPA programs because the MPA “provides different benefits to students at different periods of their careers” (p.157). As students with more professional experience have a head start and opportunity to understand “relevance of concepts and analytical skills as a balance to managerial craft” (p.157).

The benefits of the MPM proposed by Mintzberg stem from classroom pedagogies that emphasize practical experience and participation. "Faculty should lecture less, facilitate more, enlarge participation, defer to the experience of their students, and encourage them to learn from one another" (p. 157). Based on Mintzberg's proposal, Moynihan suggests MPA programs should make it clear to students that analytics are a small part of management, and that the "true art and craft of management" can only be developed through learning soft skills such as effective communication, teamwork, the ability to negotiate, ethics, and leadership. Furthermore, faculty at MPA programs should assign work that is less theoretical and more relevant and digestable for students. Mintzberg offers strategies in his book that can be utilized by individual professors, while others would necessitate an overhaul of professional education programs.

Mintzberg critiques of MBAs and proposal for MPM are attempts to make individuals more cognizant of the social impact that they can create. Social impact is the crux of public administration and managers ought to be driven by the need to make an impact, rather than fortune!
# Section 10: Organizational Culture
_How does culture emerge within an organization, and how can managers and leaders shape it? What role does personality play in the cultural DNA of an organization? How can you effectively leverage the culture within an organization?_

## Culture Eats Strategy for Lunch
_Parr. S. Culture Eats Strategy for Lunch, Fast Company. Author: Fantigrossi, Steven Marc; Editor: Steele, Samantha E_

Culture is defined as “a balanced blend of human psychology, attitudes, actions, and beliefs that combined create either pleasure or pain, serious momentum or miserable stagnation.” An organization's brand is a result of its culture and serves as the most important factor in helping an organization stand out from the pack. An organization won’t be successful in the long term by only making good products and a profit, a good culture is also necessary. Good culture incorporates focus, motivation, connection, cohesion, and spirit in order to create a healthy workplace environment for employees to succeed. Employees and leadership alike must understand the vision of the organization and take steps to move forward towards its goals. Workers should be happy to be at work, be loyal to the organization, and put the team before themselves by working with others to increase efficiency and effectiveness.

But successful company culture cannot be created overnight, it has to be embodied by everyone in an organization from the leader down to the bottom. It has to be indoctrinated into employees from day one, just as a U.S. Marine learns the values of “the few, the proud” during the first day of training. In order to develop and nurture good culture, dynamic and engaged leadership must effectively communicate its organization’s values both within and outside the organization and show that they genuinely care; “authenticity and values always win.” Employees must be given clear roles and held accountable when they violate the values that they should be upholding. Also, organizations need to stop and celebrate the organization's success and take time to learn from its failures.

Organizational culture is a driving force in retaining both employees and customers. But having a common culture shouldn’t be confused with a lack of diversity. Core values drive culture and it is essential that everyone in an organization is moving in the same direction. However, within that culture, people of many different backgrounds, experience, and skills must be included to make a organization successful. By hiring employees who believe in the core values of an organization and that fill a unique role, an organization will be well-suited to be prosper in the long term.

## Building a Team Culture Guided by Happiness
_Sutherland, J. & Sutherland, J.J. (2014). Scrum: The Art of Doing Twice the Work in Half the Time. Crown Business, Happiness: pp 145-170. Author: Dorries, Joshua Wayne; Editor: Orlan, Samuel Lawrence_

## Why Zappos Pays Employees to Quit
_Taylor, B. “Why Zappos Pays Employees to Quit, and You Should Too.” Harvard Business Review, May 19, 2008. Author: Rosa, Adelaide Lee_

## I'm Sorry to All the Mothers I Have Worked With
_Female company president: "I'm sorry to all the mothers I worked with." Fortune, March 3, 2015. Author: Sarawat, Fariha; Editor: Dorries, Joshua Wayne_

## Why Do So Many Incompetent Men Become Leaders?
_Chamorro-Premuzic, T. “Why Do So Many Incompetent Men Become Leaders?” Harvard Business Review, August 22, 2013. Author: Gobbo, Andre Francis; Editor: Hamlin, Madeleine Rose_

This article aims to explore the reasons why there are so few women in management positions. It starts by going through the three most popular explanations for why this phenomenon exists: (1) they are not capable, (2) they are not interested, and (3) they are both interested and capable but unable to break the glass ceiling. However, the author finds that these 3 explanations fail to account for the largest reason why women are underrepresented in management roles: a failure to distinguish between confidence and competence.

The author then goes on to explain that because we conflate confidence and competence, we tend to view men as better suited for management positions because they display their confidence (sometimes even hubris) more often than women. The arrogance and overconfidence more often found in men translates into them being perceived as better leaders, when in fact these traits are inversely related to leadership talent.

In most sectors the best leaders are usually humble. This trait is more commonly found in women than in men. Furthermore, this is true not just in the United States; the author cites a study done involving 23,000 participants in 26 different cultures indicating that women are more sensitive, considerate, and humble than men. The author cites another study showing that normative data on thousands of managers from across different industries and sectors points to men being consistently more arrogant, manipulative, and risk-prone than women.

The author makes an important distinction between _getting_ a management job and _doing the job well_. This difference is why many incompetent men find management roles and proceed to not do well. Because of this, many leaders tend to fail in their roles. The author notes that good leadership has always been the exception, not the norm.

Because there is a rise in trying to get women into leadership roles, the author notes that women shouldn't be trying to adopt these faulty characteristics of men in order to become more appealing for management positions. Rather, women should be emphasizing the characteristics that make them better in leadership roles: eliciting respect and pride from their followers, effective communication of their vision, empowering and mentoring subordinates, and a more flexible and creative approach to problem-solving.

While the glass ceiling is quite thick for most women, the author finds a bigger problem in the lack of career obstacles for incompetent men, and that we equate good leadership with psychological features that make the average man more inept than the average woman.

## The Hidden Dimension of Corporate Culture
_Grant, A. (2013). “Givers take all: The hidden dimension of corporate culture.” McKinsey Quarterly, April. Author: Perez, Philip A; Editor: Steele, Samantha E_

## Can a Teacher Be Too Dedicated?
_Can a Teacher Be Too Dedicated? The Atlantic. Author: Boucher, Timothy M.; Editor: Dorries, Joshua Wayne_

## The Untold Story of Larry Page's Comeback
_Carlson, N. “The Untold Story of Larry Page’s Incredible Comeback.” Business Insider, April 24, 2014. Author: Swartwood, Hilary Ann; Editor: Dieselman, Andrew_

## Inside Amazon: Competition as Culture
_Kantor, J. & Streitfeld, D. “Inside Amazon: Wrestling Big Ideas in a Bruising Workplace.” The New York Times, August 15, 2015. Author: Swartwood, Hilary Ann; Editor: Farrior, Cheri Nicole_

# Section 3: The Theory of Change

How can we use a “theory of change” or “logic model” framework to develop a better understanding of key assumptions and implementation challenges of a program? How do these models guide our design of key performance indicators?

## The Theory of Change

Theory of Change: A Practical Tool for Action, Results, and Learning (2004). Annie E. Casey Foundation. Read pp 1-17.

Author: Rosa, Adelaide Lee; Editor: Sears, Kicia Kimberly

Theory of Change

Carol Weiss outlines the centrality of good theory to practical issues. Proper articulation of the theory involved in a specific organizational change allows those affected by the change to better understand the process. In order to promote a more comprehensive understanding, a roadmap can be an extremely effective tool. Key elements of the roadmap include “assumptions, such as the final destination, the context for the map, the processes to engage in during the journey and the belief system” (Theory of Change 1).

An **outcome map** outlines relationships between process and results; it is a “visual diagram” that links the chosen strategies to their intended effects. It is a useful tool that can be applied to small-scale, short term projects or meta-scale long term initiatives. In order for an outcome map to be successful, it must represent the perspective of affected communities.

A list of assumptions should underpin any working documents presented to the public and involved stakeholders alike; the information presented has greater meaning when it can easily be understood in the context by which it was envisioned and created.

**Impact** effects are incremental changes that occur as the initiative progresses. Typically these include changes for individuals that then aggregate to changes for populations and communities. However, impact effects by themselves are merely steps along the path and do not ensure durable results.

Here follows a list of potential outcome areas that might serve as useful measures of change during the planning and implementation of an initiative. It is critical to note that each initiative will by its nature incorporate a unique assembly of outcome areas, and further that the provided list is far from complete. Also critical for the following impact effects, as well as influence and leverage effects, is the need to operationalize the concept.

attitudes, perceptions, beliefs
- awareness
- behavior
- family stability
financial status
- education
- social conditions
economic conditions

An outcome statement showing a change in behavior, for example, may be something like increased voting in the community. Changes in family stability may be shown in effects such as an increase in families maintaining a stable residence.

**Influence** effects are much more likely to engender lasting change, as they target institutions, cultural and social norms, public policies, laws, regulations, and much more. In conjunction with impact effects, they result in successful initiatives.

- visibility of issue
community norms
- partnerships
public will
- political will
- regulations
service practices
- business practices

Influence outcomes may take the form of a community's increased belief in its power to make changes happen, partners in the community sharing resources and data, and political leaders becoming more aware of community issues.

Often overlooked, **leverage** effects form the third pillar of meaningful change. This subtle but critical aspect involves changes to the investment climate.

- public funds
- available community resources
private investment

Leverage can be expressed as a reallocation of public funds to a certain problem or solution area, new resources within the community accessible for the specific purpose of improving the lives of residents, and expanding business opportunities.

**Core capacities** are “building blocks that enable powerful strategies to become actualized … people, processes, supports, models, techniques, structures, plans, frameworks, inputs.” Each of these is extremely useful as an independent operator, but they function best in symbiosis. Proper communication for example supports a collective vision and results framework. Effective partnerships can result in an authentic civil demand. Core capacities, effectively developed, lead to achievement in “impact, influence, and leverage outcomes” (Theory of Change 10). Of all the core capacities, formation of a working group stands out as the most foundational.

A causal relationship pathway, known informally as a **“so that” chain** helps stakeholders see where their influence can be felt on the way to change. It can be drawn graphically with directional arrows or sequentially with logical statements. In essence, it forms the skeleton of the aforementioned **outcome map**. It is entirely possible and even likely that an outcome map will have multiple “so that” chains. Core capacities are visualized as inputs. Impact, influence and leverage can be viewed as outputs, although they are often interim outputs on the way to the ultimate objective.

## Logic Models

_Millar (2001). “Logic Models: A Systems Tool for Performance Management.” Evaluation and Program Planning Review, Vol 24: pp 73-81. _

Author: Washington, Layvon Q; Editor: Lancto, Katelyn N

The authors Millar, Simeone, and Carnevale defines the logic model process as tools that assist program managers and evaluators in determining the effectiveness of their programs by assessing the nexuses between program resources, activities, outputs, audiences, and outcomes related to a specific problem or situation. The authors describe the logic model as a cause and effect relationship between program inputs, activities, outputs, and outcomes. Through this model, managers and evaluators must analyze how an input will effect an outcome.

The process of the logic model begins with the outcome, before the inputs. The outcomes aids in ensuring that the program managers are able to answer the questions, such as what still needs to be done, rather than what has already been done. The authors also note that it is important to begin with outcomes, rather than inputs because inputs may create constraints for current activities. This process addresses the issue of limited control over complex issues because the concepts that need to be considered are described when we seek such outcomes.

Logic models are also important in addressing challenges by outlining the intermediate results that are critical in achieving crucial objectives. When the objectives are not met, it is often critical to reprogram. The logic model process aids in fostering action plans with timelines and positions, which can further act as a restructuring tool. Logic models also identify partnerships that are crucial to enhancing our performance.

The elements of the Logic Model include the situation, which is a statement that provides the opportunity to communicate the relevance of the project to stakeholders, the inputs, which is what we invest, the outputs, which is what we do and who we reach, and the outcomes in the short-, medium-, and long term changes. The Logic Model allows for a link between the problem (situation) to the intervention (our inputs and outputs), and the impact (outcome).

The logic model process, the authors argue, are essential in helping to transition from measuring performance to managing performance. The transition occurs when stakeholders work together with other parties to set objectives and examine expectations. However, this model falls short of examining external factors, as stated by Miller, whether in the form of actors or structural occurrence.

A logic model framework can be used to develop a better understanding of key assumptions and implementation challenges of a program by assessing the causes of gaps and ways to fix those gaps and other complexities. Moreover, action plans can act as the vehicle to reaching solutions and better understanding challenges. A project originally designed with assessment in mind is much more likely to yield beneficial data, should evaluation be desired. When the focus is on outcome, we ask ourselves “what needs to be done?”, rather than “what is being done?” The logical model is a mere process that aids in developing effective programs, and while helpful, can have external factors that are harmful to a program.

# Section 4: Strategic Planning

## The Strategy Change Cycle

_Bryson, J.M. (2004). Chapter Two: “The Strategy Change Cycle: An Effective Strategic Planning Approach for Public and Nonprofit Organizations.” Strategic Planning for Public and Nonprofit Organizations. Jossey-Bass Publishers, San Francisco: CA._

Author: Damon-Cronmiller, Christopher; Editor: Gobbo, Andre Francis

## The Price of Success: Minnesota Public Radio

_Phills, J. A., & Chang, V. (2005). The Price of Commercial Success Minnesota Public Radio: social purpose capitalism. Stanford Social Innovation Review, 3(1), 65-72._

Author: Whiting, Cal McCulley; Editor: McCully, James I

## Leading IslandWood: Strategic Planning in the Nonprofit Sector

_David Cook and Lauren Guzauskas (2012). Leading IslandWood. E-PARCC Case Study in Collaborative Governance._

Author: Steele, Samantha E; Editor: Kim, Chung Myung

## Strategic Management in the Public Sector

_Boyne, G.A., and Walker, R.M. (2010). “Strategic Management and Public Service Performance: The Way Ahead.” Public Administration Review, December-Special Issue, S185-192._

Author: Tansits, Colin E; Editor: Washington, Layvon Q

## The Evolution of Public Sector Strategy

Brown, T.L. (2010). “The Evolution of Public Sector Strategy.” Public Administration Review, December-Special Issue, S212-S214.

Author: Berkley, Njeri N; Editor: Rosa, Adelaide Lee
In Chapter 2 of Strategic Planning for Public and Nonprofit Organizations (entitled “The Change Cycle: An Effective Strategic Planning Approach for Public and Nonprofit Organizations”) author JM Bryson discusses his “Strategy Change Cycle” in detail. He also makes recommendations on when people working in public service organizations should make use of this strategy.

Along with the Theory of Change, the Strategic Planning Model has been proven effective in both academic and practical settings. This model is designed to have the same broad applications for public service organizations, whether they be through the government or as an independent non-profit.

According to Bryson in Chapter 2, p. 21, the Strategy Change Cycle can be broken down into the following activities: setting the organization’s direction; formulating broad policies; making internal and external assessments; paying attention to the needs of key stakeholders; identifying key issues; developing strategies to deal with each issue; planning review and adoption procedures; implementing planning ; making fundamental decisions; taking action; and continually monitoring and assessing the results.

**Ten-Step Strategic Planning Process**
The Strategy Change cycle also follows a much more structured series of 10 steps which Bryson explains in more detail. These steps are not necessarily they are the most “useful” in a professional setting, but they are the steps that are most popular amongst those who are familiar with the Strategy Change Cycle.

1. _Initiating and Agreeing on a Strategic Planning Process_
This step primarily involves figuring out who is directly involved in an organization’s decision-making process, and who should be most involved in carrying out the overall strategic planning effort.

2. _Identifying Organizational Mandates _
The second step involves figuring out the “musts” that an organization confronts, which can prove useful for key decision makers in ensuring that they know the expectations of themselves and their immediate colleagues going forward.

3. _Clarifying Organizational Mission(s) and Values_
Directly linked to the previous step, organizations in the 3rd Step should figure out what social and/or political needs it seeks to fulfill, and how they should serve “as a means to an end, not as an end in themselves (27).” Stakeholder analysis is invariably a component of this step, and therefore has some overlap with Step 1. In fact, Bryson recommends that parts of this 3rd Step should be undertaken before anything else in the strategic planning process.

4. _Assessing the Organization’s External and Internal Environments _
In the context of strategic planning, an organization's external and internal environments refer to opportunities and threats that exist both inside and outside of the organization that could directly impact its future.

5. _Identifying the Strategic Issues Facing the Organization_
According to Bryson, “Strategic issues are fundamental policy questions or critical challenges that affect an organization’s mandates, mission, and values (30).”

6. _Formulating Strategies and Plans to Manage the Issues_
Broadly defined, a strategy outlines “what an organization is, what it does, and why it does it (31)." A strategy also explains how an organization should face its “issues” outlined in the previous step.

7. _Reviewing and Adopting the Strategies and Plan(s)_
This 7th step involves confirming whether everyone in an organization agrees on the same strategic plan and has no reservations about it.

8. _Establishing an Effective Organizational Vision _
Bryson argues that having a vision is useful to an organization in that it allows “members to know what is expected of them, without constant managerial oversight (35).”

9. _Developing an Effective Implementation Process_
In what is arguably the most important component of the Strategic Planning Cycle, an organization figures out how to make its plan a reality from the ground up. Obviously this step is easier said than done.

10. _Reassessing Strategies and the Strategic Planning Process _
This final step is meant to be an ongoing process, or at the very least “once the implementation process has been under way for some time (37).”

**Tailoring the Process to Specific Circumstances; Roles for Planners, Decision Makers, Implementers, and Citizens**

In the last section of the second chapter, Bryson stresses that the Strategic Change Cycle is not meant to be taken literally or as a “one-size-fits all” public administration theory. In other words, an organization facing administrative challenges may have to start at Step 2 or even Step 9 in order to effectively complete its strategic planning process.

Bryson also acknowledges that implementation of a strategic plan often occurs during (or even before) the complete formation of said plan due to time constraints and the need to make decisions quickly.

On a final note, Bryson argues that the importance of citizen participation in an organization's strategic planning process is by and large dependent on how program-focused the organization is. If a strategic planning initiative focuses solely on the internal affairs of a public organization, then executive staff and/or board members would naturally have the most stake in it. On the other hand, program-focused strategic planning necessitates more citizen participation due to the larger number of stakeholders involved.

## The Price of Success: Minnesota Public Radio

_Phills, J. A., & Chang, V. (2005). The Price of Commercial Success Minnesota Public Radio: social purpose capitalism. Stanford Social Innovation Review, 3(1), 65-72._

Author: Whiting, Cal McCulley; Editor: McCully, James I

**Overview of the Case Study:**
This case study analyzes Minnesota Public Radio (MPR) and offers three main questions on the relationships between non-profit organizations and for-profit businesses.
These main questions are:
1. What factors contribute to a non-profit’s ability to build for-profit ventures?
2. How can a non-profit best utilize it's earned income to advance its social mission?
3. What are the challenges and dilemmas of social entrepreneurship?
MPR commercial endeavors began on “A Prairie Home Companion” which sold t-shirts and merchandise of concepts from the show. These fundraising efforts were highly successful and MPR soon faced a steady flow of profits. Consequently, MPR created the Rivertown Trading Company to manage the sale of these items. By 1998, Rivertown generated sales close to $200 million and on average contributed $4 million to support MPR. President Bill Kling termed this type of business as “social purpose capitalism.” Social purpose capitalism was defined as “the application of the traditional principles of capitalism … to a nonprofit organization [to] benefit the public sector.” MPR and its executives soon faced criticism and skepticism from the public, as well as politicians and state judiciary for its use of for-profit funds for the benefit of a non-profit. Jon Pratt, executive director of the Minnesota Council of Nonprofits, described this dilemma: “This is the plight of the nonprofit sector today. It is both told to be more businesslike, and then attacked for being too businesslike.”

**MPR, Greenspring, and the Controversy over Social Purpose Capitalism:**
MPR underwent a reorganization in 1987 that placed the Rivertown Trading Company under the umbrella of a for-profit company called Greenspring. Although MPR and Greenspring were legally separate, Kling served as President of both organizations and they functioned largely in unison. The new company greatly helped MPR raise funds and improve its services. By 2004, MPR had an operating budget of $47 million, had 38 stations covering Minnesota, parts of Wisconsin, the Dakotas, Michigan, Iowa, Idaho, and Canada. It had approximately 650,000 listeners per week and served a regional population of more than 5 million people. MPR staff received over 800 journalism awards and Kling was awarded the 1981 Edward R. Murrow Award from the Corporation for Public Broadcasting. MPR’s successes were due in large part to its ability to raise for-profit funds which called into question its non-profit status.
A major point of contention was how much Kling and others were making as dual-executives in MPR and Greenspring. As a non-profit, executive salaries were a part of the public record. In 1995, Kling’s MPR salary was $67,000. In 1996, Minnesota passed a law requiring non-profit executives to disclose their income from related for-profits; Kling made $291,752 at Greenspring for a total income of $358,752. This disparity in income raised a potential conflict of interest and worried the public and lawmakers.

This case and _social purpose capitalism_ highlight the difficulties that non-profits face in raising revenue to expand their service capacity. Non-profits are increasingly tasked with becoming more efficient but are highly scrutinized for using for-profit techniques or business endeavors to accomplish their mission. It cannot be denied that most of MPR’s success was due to its ability to raise profits to increase its capacity. The authors summarized this controversy: “Both the government and private funders have encouraged – and even pressured – nonprofits like MPR to become more self-reliant by pursuing earned income. But these stakeholders, as well as the general public, are ambivalent about such commercial activity when it becomes so successful that it outstrips the core social purpose activities.”

## Leading IslandWood: Strategic Planning in the Nonprofit Sector

_David Cook and Lauren Guzauskas (2012). Leading IslandWood. E-PARCC Case Study in Collaborative Governance._

Author: Steele, Samantha E; Editor: Kim, Chung Myung

### Starting IslandWood
Paul and Debbi Brainerd had been house hunting in Bainbridge Island in 1997 when they first visited an 1100 acre site that was scheduled for residential and commercial development. After touring the site and finding it full of ecological wonders, Debbi wanted to start an environmental education center for inner-city youth. The founders purchased a 255 acre parcel and donated the land to the non-profit organization they created, originally named Puget Sound Environmental Learning Center (PSELC). Despite the well-meaning vision that started what came to be known as IslandWood and all of the contributors that bought into that vision, the organization would hit a few speed bumps resulting from the poor management of the diversity of stakeholders.
### Troubles on the Island
IslandWood was Debbi’s brainchild and she had a clear vision, and a strategic plan to go along with it. The bones of which were to: 1) acquire land, donors, staff; 2) open operations and be fiscally sustainable. It was the intricacies of the plan that complicated things, the devil is in the details as they say. Everyone involved believed in her vision for IslandWood, everyone bought into the “why” but not the “how,” not her strategy. Part of the reason was the diversity of staff brought into the organization. PSELC had found their site, found donors, recruited numerous well-known board members and staff and even established a partnership with the University of Washington. However, each person had their own passion and personal expertise that was often created conflicts with other's interests. The disparity between staff eventually led their first executive director to leave the organization before the site had even finished construction. Not only that, as each individual worked hard to reach their goals, they started to feel that vision and mission was changing, so they began to burnt out.
After hiring consultants to investigate the decrease in staff moral they came to find that there were three distinct, competing cultures at the organization. These three distinct groups were, academics and educators, non-for-profit expertise, and lastly the corporate culture. In addition to the high turnover rate, they were also facing financial challenges. As a result, IslandWood had decided to cut community programs for the Bainbridge Island residents, this would severely strain the relationship they had with the local community. Within four and a half years the organization was looking for their fourth executive director, Ben Klasky was eventually hired for that role.
### A New Start
Ben immediately scheduled individual meetings with each staff member, including all part-time employees. He used each interaction to help shape the critical trends he decided to address during the strategic planning process. Klasky worked to maintain a strong relationship with Debbie in order to provide a strong unified front to the organization. In what turned out to be an advantage, the media misrepresented the financial troubles of IslandWood claiming they were losing millions of dollars a year. Ben reached out to all of the donors in order to discuss the potentially damaging article. This occurrence actually helped transition the power and organizational authority over to Ben. Debbi decided to step down from full-time work, with the support of the board of trustees, and Ben inherited the roles of the day-to-day operations. Ben took charge on building a strategic plan that involved better utilizing IslandWood all year, not just Monday through Thursday during school session and developing a better relationship with the local community. The article leaves us with Ben’s realization that it was now time to reach out to the board of directors and staff leaders to aid him in the construction of this plan.

## Strategic Management in the Public Sector

_Boyne, G.A., and Walker, R.M. (2010). “Strategic Management and Public Service Performance: The Way Ahead.” Public Administration Review, December-Special Issue, S185-192._

Author: Tansits, Colin E; Editor: Washington, Layvon Q

Boyne and Walker provides a review of _Strategic Management and Public Service performance_, which discusses strategic managment practices for many public service organizations. The authors begin the article by addressing the notion that public organizations are expected to achieve high standards on a variety of dimensions of performance. These expectations are not going anywhere, according to the authors. The crux of the article, however, focuses on the strategy which organizations adopt to pursue their objectives.

_Why Does Strategy Matter?_
Unlike private sector organizations focused on beating rivals, public organizations’ strategy is set to bettering their performances and services. The powers of public organizations are limited by political, legal, and regulatory constraints. However, there are different strategies available in the public sector: “product and process innovations (i.e. provision of new services), coverage of new client groups, and delivery of services ‘in house’ or in collaboration with others.”

Miles and Snow’s typology of strategies sets out three different ways for an organization to approach the political, physical, and socioeconomic environment: 1) a prospector organization actively seeks out new opportunities for providing existing services and innovations in the types of service that are provided, 2) a defender organization focuses on procedures rather than products and tries to maintain a stable portfolio of services that are delivered reliably and at low cost, and 3) a reactor organization has no real strategy of its own, but instead take its cues from powerful actors in its environment, such as higher levels of government or regulatory agencies. The authors summarrized the aformentioned approaches by stating that “the three main options that are open to a public organization that is seeking to meet the expectations of its many stakeholders: search for something new, stick with the existing pattern of services, or await instructions.”

Strategy in public organizations is based on the assumption that an unambiguous strategy is a necessary prerequisite for good performance. There are 3 key suppositions to be made with this idea: 1) performance is not completely determined by the technical and institutional environments and by internal organizational characteristics such as structures and processes, 2) a strategy that is linked to identifiable goals for performance improvement may help generate support from managers and frontline staff, and 3) strategic management actually varies across public organizations.

_Strategy and Performance: What do we know?_
Despite limited data and only few articles to base its conclusion on, the article explains that the numbers illustrate that “strategy content is clearly an important variable that influences performance.” The article stated that “prospecting” is usually with higher levels of organizational performance, and according to the data, prospecting trumps defending and reacting. It is important to note that the findings made by this article are not supported in all contexts. However, the article concludes that prospecting is “the stance best able to overcome performance obstacles associated with regulation and red tape.”

_Strategy and Performance: What do we need to know?_
Despite the evidence presented by the article, the authors explain that strategic management needs “more theory, more data and more empirical evidence from a variety of locations.” The authors propose that studies done in the future not only conceive of strategy as a continuous variable, “but also place public agencies along Bozeman’s publicness continua.” The authors believe that this additional dimension to research in this field will yield new empirical and theoretical contingencies.

In their conclusion, the authors state that their review of the evidence shows that “some small steps have been taken on a long journey,” but that more steps need to be taken and must be done by explicitly theorizing the relationship between strategy and publicness, and by being cognizant of national context.

The authors proffer that the current data, on local governments in England, Wales, and Texas is insufficient for proper conclusions on the theory and practice of strategic management in the public sector. The authors call for academics and practitioners to acquire a stronger knowledge on which strategies work best in a much wider variety of circumstances by the year 2020.

## The Evolution of Public Sector Strategy

_Brown, T.L. (2010). “The Evolution of Public Sector Strategy.” Public Administration Review, December-Special Issue, S212-S214._

Author: Rosa, Adelaide Lee; Editor: Berkley, Njeri N

**The Evolution of Public Sector Strategy**
The initial research finding that underpins this work, which should be referenced and consulted for further insight, “concluded that true **strategic behavior** … was possible in the public sector, but extremely rare” (Nutt and Backoff 1995). Strategic behavior is limited by complex policies and programs, political concerns, and institutional limits on discretion. However, it has recently been boosted by the ever growing access to information that public managers enjoy. What remains to be developed are the cognitive frameworks for information management in the 21st century. Strategic theory needs to evolve from zero-sum resource competition to alternative explanations.

**Part I – The Building Blocks of Public Sector Strategy**
“[1] Managers should have **access to information** about factors that influence organizational goals and objectives. [2] Plans of action based on this information should be the product of organizational **participants from multiple levels**. [3] This decentralized fluidity should be coupled with **increased managerial autonomy**” (Brown 2). Malleable and adaptable plans of action should enable decisionmakers to reevaluate strategies and enforce midcourse corrections as predicaments change and new information becomes accessible. New Public Management is cited as an example of this reinvention in action; linkage to incentive systems has been a key innovation in this process.

**Part II – The Missing Building Block – Theory**
“Strategy is, at its heart, an exercise in developing and applying theory” (Brown 2). Due to the complexity of public institutions, strategic plans (which Brown calls decision-making heuristics) are helpful to simplify the process and focus on the most critical elements. It is important to note that any theory, like any strategy, is based on a set of assumptions that must be understood before putting either into practice. All too often practitioners accept the theory without investigating the assumptions beforehand. Theory can link into practice through the use of logic models that “identify the assumptions, resource inputs, programmatic activities, outputs, and outcomes” (Brown 2). However useful strategy planning tools such as these are, they assist merely in evaluating strategy, not in creating it from theoretical principles.
Strategy theory, even in the 21st century, remains rooted in realist thought and military treatises. These antecedents influence a worldview of _competition_, of _limited resources_, of _victory and defeat_. Theories such as these have continued relevance when there is indeed resource competition, such as in the budgetary process, but are increasingly antiquated for most public institutions. Instead, we as practitioners must turn to social science theory: economics, political science, sociology, psychology. Relying on social scientific theories allows the public manager to think strategically in both competitive and non-competitive dynamics.
Example: public sector contracting. Why are “inter-organizational collaborations” advantageous? Economic theories like transaction-cost economics and principle-agent theory investigate opportunism. Sociological institutionalism investigates reciprocal norms of behavior (Brown 3). Multiple disciplines and theories must be combined to craft a better understanding and a more robust strategy. Social science frameworks must be translated and applied to strategic decision making in the public sector.

# Section 5: Measuring Performance

How can we translate abstract organizational goals into tangible outcomes that can be easily measured? What types of metrics and performance indicators have worked well in specific organizations? What are the limits to a performance or outcome-based perspective in the public sector (or alternatively, what types of programs will be difficult to track)?

## Validity and Reliability

_Kimberlin, C. L., & Winterstein, A. G. (2008). Validity and reliability of measurement instruments used in research. Am J Health Syst Pharm, 65(23), 2276-84._

Author: Hanson, Keely; Editor: Hanson, Keely


The purpose of this article is to review issues related to the **validity** and **reliability** of measurement instruments used in research. The article provides background on why using tests or instruments that are valid and reliable to measure such constructs is a crucial component of research quality. Given that public organizations have many areas where metrics and performance indicators may be subjective in nature, this article explains how reliability and validity can be useful in assessing performance in order to mitigate subjectivity and effectively translate organizational goals into tangible outcomes.
Reliability and validity are highlighted as key indicators of the quality of a measuring instrument and are defined as follows:

• **Reliability**-- how estimates evaluate the stability of measures, internal consistency of measurement instruments, and interrater reliability of instrument scores.
• **Validity**-- the extent to which the interpretations of the results of a test are warranted, depending on the particular use the test is intended to serve.

**Evaluating the quality of measures**
Whether it is healthcare, education or beyond, there are many organizations in the public sector where data collected encounters a greater degree of subjectivity in judgment, or other potential sources of error in measurement. Managers and their research team must control for known sources of error and report the reliability and validity of measurements used.

Reduction of error is one of the main focuses when developing and validating an instrument. There are several measures that reliability estimates are used to evaluate. Reliability is used to evaluate the, “the stability of measures administered at different times to the same individuals or using the same standard (test–retest reliability).” It also looks at “the equivalence of sets of items from the same test (internal consistency) or of different observers scoring a behavior or event using the same instrument (interrater reliability).” These specific items within reliability that public administrators can evaluate when interested in performance evaluation are: stability, internal consistency, responsiveness, and interrater reliability.

- Stability of measurement, or test–retest reliability, is “determined by administering a test at two different points in time to the same individuals and determining the correlation or strength of association of the two sets of scores.” It essentially helps evaluators understand how consistent or stable the results of a test being administered are.
- When evaluating stability, the time interval in between test administrations is very important and critical to the assessment. The article explains that it is ideal that the, “interval between administrations should be long enough that values obtained from the second administration will not be affected by the previous measurement (e.g., a subject’s memory of responses to the first administration of a knowledge tests, the clinical response to an invasive test procedure) but not so distant that learning or a change could alter the way subjects respond during the second administration.”

**Internal consistency**
Internal consistency is a measure of how different items assess the same construct or idea on the same test. This gives public managers the ability to understand how well an item of interest is being accounted and the consistency of their results. The most widely used method for estimating internal consistency reliability is Cronbach’s alpha, which is “a function of the average intercorrelations of items and the number of items in the scale.”

**Responsiveness **
Responsiveness is the ability of a measure to detect change over time in the construct of interest. Reliability is a crucial component of responsiveness and can be very useful in the public sector to identify interventions that are effective in changes of interest.

**Interrater reliability**
Interrater reliability helps illustrate the degree of consensus amongst observers. It is also know as interobserver agreement, and can be important in ensuring that raters making subjective assessments have consistency. It “establishes the equivalence of ratings obtained with an instrument when used by different observers.” A reliable measure that involves judgments or ratings by observers, will observe consistency between different raters. There must be No discussion or collaboration can occur when observers are giving ratings in order to maintain the integrity of interrater reliability.

Validity is a very relevant construct for public administrators given the public nature of their work. It is known as “the extent to which the interpretations of the results of a test are warranted, which depend on the test’s intended use.” Evaluations in the public sector need to be mindful of validity, because it is “the extent to which an instrument measures what it purports to measure.” In evaluation, an instrument can be reliable without being valid. Public administrators have a responsibility of transparency and are depended upon to have the upmost integrity in what they provide to the public; that is why validity emerges extremely important, especially in respect to subjective constructs.

Whether it is in health, education, or other arenas of the public sector, there are many cases in performance evaluation that may require quantifying attributes that cannot be measured directly. These explanatory variables that are not observable are called hypothetical constructs. **Hypothetical constructs** “cannot be measured directly and can only be inferred from observations of specified behaviors or phenomena that are thought to be indicators of the presence of the construct. An operational definition of a construct links the conceptual or theoretical definition to more concrete indicators that have numbers applied to signify the “amount” of the construct.” How this construct is operationally defined and quantified is the core of the measurement.

**Construct validity**
This type of validity assesses how well the test or experiment measures the construct of interest. Evaluation of construct validity requires “examining the relationship of the measure being evaluated with variables known to be related or theoretically related to the construct measured by the instrument.”

**Content validity**
Content validity is usually assessed based on the judgment of experts in the field. It addresses how well the items developed to operationalize a construct, “provide an adequate and representative sample of all the items that might measure the construct of interest.”

**Criterion-related validity**
This type of validity "provides evidence about how well scores on the new measure correlate with other measures of the same construct or very similar underlying constructs that theoretically should be related." Selecting an appropriate and meaningful criterion measure can be a challenge because often the criterion a researcher would like to be able to predict is too far ahead in time or too expensive measure.

**Selecting an existing instrument**
Especially in the public sector where assessments have long been utilized and are often required, evaluators should identify any existing instruments that measure the construct of interest before developing a new test or measure. It can be more cost-effective and time-efficient. The article also highlights the following questions to ask when selecting an instrument:

_1. Do instruments already exist that measure a construct the same or very similar to the one you wish to measure?
2. How well do the constructs in the instruments you have identified match the construct you have conceptually defined for your study?
3. Is the evidence of reliability and validity well established? Has the measure been evaluated using various types of reliability estimates
4. In previous research, was there variability in scores with no floor or ceiling effects? D
5. If the measure is to be used to evaluate health outcomes, effects of interventions, or changes over time, are there studies that establish the instrument’s responsiveness to change in the construct of interest?
6. Is the instrument in the public domain? If not, it will be necessary to obtain permission from the author for its use. Even though an instrument is published in the scientific literature, this does not automatically mean that it is in the public domain, and permission from the author and publisher may be required
7. How expensive is it to use the instrument? A mail questionnaire costs less to administer than do telephone or face-to-face interviews.
8. If the instrument is administered by an interviewer or if the measure requires use of judges or experts, how much expertise or specific training is required to administer the instrument?
9. Will the instrument be acceptable to subjects? Does the test require invasive procedures?_

As a public manager interested in evaluation, there must be great attention paid to how instruments for **data collection** are developed, and should include pilot testing to determine their reliability and validity. This will help ensure the quality of research conducted.

One of the primary threats to quality assessments is the accuracy of data collected. In the public sector, there may be much use of **self-reported **and/or **secondary data** sources. Using secondary data may have particular relevance for data assessment in the public sector. Collecting secondary data is generally a standard practice for public organizations. However, the article highlights that it is imperative to “verify that the data set appropriately measures the variables required to answer the research questions.” Self-reporting can be particularly subject to issues of responses with social desirability biases or perceived impressions that need to be made. This should be considered when public managers seek to assess or collect data, especially when conducting surveys or questionnaires. One strategy to mitigate this when asking questions about frequency of behavior, is that it usually best to let the subject fill in the blank on an item with a clearly defined reference period. There are other ways to control for social desirability biases and evaluators should defer to such when using self-reporting measurements.

In the public sector, there are many variables of interest and outcomes that are important that will inevitably be abstract in nature. Using tests or instruments that are valid and reliable to measure such constructs is a critical aspect of ensuring research quality, and becomes even more imperative when assessing services and outcomes within the context of the public sector.

## Key Performance Indicators

_USAID (1996). Performance Monitoring and Evaluating Tips: Selecting Performance Indicators._

Author: Checksfield, Molly Wentworth; Editor: McCully, James I

The USAID Center for Development Information and Evaluation has developed criteria for how to create performance indicators to determine a program's success in achieving its objectives. This methodology expands past a results statement that shows what objectives are hoped to be achieved but rather a measure to determine if the objective has been achieved. Indicators are generally quantitative measures but can also be qualitative observations. They define how performance will be measured along a scale or dimension, without a specific level of achievement (Targets are separate from indicators). These evaluations serve as extremely valuable parts of an organization's reflection process while working towards its goals.
Being able to monitor performance is important for the wellbeing of an organization, as well as the ability to measure how a program is progressing towards its intended goals and outcomes. They are an indispensable management tool for making performance-based decisions about program strategies and activities.
However, many organizations have difficulty determining how to measure performance indicators most efficiently. Selecting appropriate and useful performance indicators requires careful thought, iterative refining, collaboration, and consensus-building. According to USAID, there are four steps in selecting proper performance indicators:

**Step 1. Clarify the results statements: **
The first step in determining effective performance indicators is being able to clarify a common goal that the organization is striving for. This goal should be articulated as clearly and concisely as possible. It is imperative that all those working towards the goal are aware of the team’s objectives so that results can be measured most accurately.
When developing results statements, it is best to use precise language, as individuals may interpret broad statements differently.

Clarification of the _type of change_ being sought is important as well, whether behavioral, situational, conditional, attitudinal, etc. Also, it is important to indicate whether the goal is absolute change, relative change, or no change.
 Absolute change: creating something new
 Relative change: “increases, decreases, improvements, strengthening or weakening in something that currently exists, but at a higher or lower level than is considered optimum” (USAID, p. 2)
 No change: maintaining the status quo.
Proper identification of _where change should occur_ is important as well- this is also known as the “unit of analysis”. Change can occur among individuals, groups, communities, regions, etc.
It is necessary to provide clarity about how different types of activities will directly lead to intended results in order to determine reasonable expectations for outcomes. In contrast, certains activities will produce the change less directly. Therefore, how direct of an effect of change should also be conisdered.

**Step 2. Develop a List of Possible Indicators**
There are a variety of ways to evaluate outcomes, but it is advised to select indicators that are best suited for the type of results desired. One way to determine how to choose an indicator is to list the types of indicators possible to use in a given situation. Always keep the objective in mind, consult with the experts of that field, and utilize the experience of other units with similar indicators.
Inclusivity is also vital to the development of a robust list of performance indicators so that all perspectives are on the table when choosing the most appropriate levels of measurement.

**Step 3. Assess Each Possible Indicator**
The next step is to assess all possible indicators brainstormed in step 2. There are seven criteria to evaluate such indicators:

1) Performance indicators should measure the intended result as closely as possible. _Direct measures_ are a more accurate representation of performance than indirect ones.
2) _Objective measures_ reduce ambiguity and levels of interpretation.
3) Performance measures should most _adequately_ measure the result in question.
4) Descriptive, _quantitative analyses_ are often preferred over qualitative measures where possible because they yield more straightforward results. The type of indicator (quantitative or qualitative) should be determined on a case to case basis.
5) _Disaggregated data_ indicate differences in how the outcomes affect groups. It is best for management to be able to measure how performance indicators affect a variety of different groups, rather than the group as a whole.
6) _Practicality_ of an indicator is important because the cost and time necessary to obtain data should be used in assessing whether an indicator is acceptable for achieving the goal.
7) _Reliability_ of the data is an important factor in choosing a performance indicator based on the data

A helpful way to choose performance indicators is to create a spreadsheet to assess each indicator by rating each criterion from 1-5 and then determine best fit based on the overall score of each indicator.

**Step 4. Select the “Best” Performance Indicators: **
The final step is to narrow the performance indicator list down to those of best fit based on the intended outcome. The cost and practicality of each performance indicator should be taken into consideration when determining the best measurements of performance.

** Conclusion: **
It is important for an organization to brainstorm which performance indicators are best suited to measure success so that goals are realized most efficiently. The data collected by the performance indicators measures the progress of an organization, and is therefore vital to the mission and life of the organization.

## SMART Criteria
_SMART Criteria for Performance Measurement._

Author: Rodriguez Ranf, Daniela; Editor: Gobbo, Andre Francis

The [SMART Criteria article]( is about how to evaluate and develop clear and useful objectives. SMART is an acronym comprised of key measures for judging objectives: **S**pecific, **M**easurable, **A**chievable, **R**elevant, and **T**ime-bound (_please note that different sources exchange words like attainable instead of achievable, or realistic instead of relevant_). The development of the SMART criteria have been most commonly credited to Peter Drucker’s Management by objectives (MBO) concept, also known as management by results (MBR). This concept defines a process within organizations where management and employees are in agreement of objectives and goals, and understand what they need to do to achieve them. SMART criteria does not imply that all objects must be quantified at all levels of management. The utility of SMART criteria should be seen as a combination of the objective and the action plan.

The following characteristics of S.M.A.R.T goals are described by Paul J. Meyer in _Attitude is Everything._

_**Specific:**_ This first criterion focuses on scope. It stresses the need to be specific when developing objectives or goals in order to avoid misinterpretations, and to provide as much clarity and direction as possible. A good test to see if a goal is specific enough is to apply the five “W” questions:
_- What: What do you want to accomplish?
- Why: Provide specific reasons, purpose or benefits of accomplishing the goal.
- Who: Who is involved?
- Where: Identify a location.
- Which: Identify requirements and constraints_

_**Measurable:**_ The second criterion focuses on the need for a standards of measuring progress. This is necessary for a team to know that they are working towards the successful completion of a goal. Measurement helps a team stay on track, develop benchmarks, meet deadlines and helps evaluate progress. Indicators should be quantifiable. Questions to ask to see if a goal is measurable include:
- How much?
- How many?
- How will I know when it is accomplished?

_**Achievable: **_ The third criterion focuses on the need for goals to be realistic, attainable and within reach. It highlights the importance of being aware of the team’s capacity and resourcefulness. The article explains that “when you identify goals that are most important to you, you begin to figure out ways you can make them come true. You develop the attitudes, abilities, skills and financial capacity to reach them. The theory states that an attainable goal may cause goal-setters to identify previously overlooked opportunities to bring themselves closer to the achievement of their goals.” Questions to ask when trying to evaluate whether a goal is achievable include:
- How can the goal be accomplished?
- How realistic is the goal based on other constraints?

_**Relevant:**_ The fourth criterion focuses on identifying whether the goal matters to the mission of the organization, program, or department. Goals need to be relevant and important to supervisors, bosses, the team, and the organization. A common understanding of relevance and why goals are important can unify teams and drive progress. It is important for goals to be relevant, but it is also crucial for goals to be aligned with other goals for a coordinated and cohesive approach to achieving all of the goals. Answering yes to the following questions would help evaluate where a goal is relevant:
-Does this seem worthwhile?
- Is this the right time?
- Does this match our other efforts/needs?
- Are you the right person?
- Is it applicable in the current socio-economic environment?

_**Time-bound:**_ The fifth criterion focuses on having a clear time-frame and target dates. Setting deadlines helps the team prioritize and structure resources and time in order to complete tasks. The importance of this criterion is also to establish a sense of urgency and a clear end-date in order to prevent goals from being sidetracked by day-to-day tasks. Questions to ask when evaluating whether a goal is time-bound include:
- When?
- What can I do six months from now?
- What can I do six weeks from now?
- What can I do today?

Other authors have added additional letters to SMART. Here are some examples:
- Evaluated and reviewed
- Evaluate consistently and recognize mastery

- Trackable and agreed

- Realistic and relevance ('Realistic' refers to something that can be done given the available resources. 'Relevance' to the bigger picture and vision.)

- [Management by objectives](
- [Performance indicator](
- [Strategic planning](
- [PDCA](
- [SWOT analysis](
# Section 6: Performance Management Systems

Are statistically driven performance management systems a fad or a public management reform here to stay?

How do performance management systems position organizations, their structures, cultures, and employees, to reach milestones.

## Why Do Managers User Performance Information?

_Moynihan, D.P. and Pandey, S.K. (2010). “The Big Question for Performance Management: Why do Managers Use Performance Information?” Journal of Public Administration Research and Theory, 20(4): 849‐866._

Author: Farrior, Cheri Nicole; Editor: Rosa, Adelaide Lee

**Introduction **
Can government activity reduce the performance deficit? Significant concerns have long been raised that government organizations are unresponsive, inflexible, and inefficient, that private enterprises are more capable of more efficient operation. In response to these concerns, government reforms require agencies to track and measure strategic goals, targets, and achievements. As a result of this reform process, there exists more access to performance information than ever before. Managers use performance information to study the successes and failures of an organization. It also enforces goal-orientated decisions that the public expects from bureaucrats. A challenge of this process is how to use information from performance evaluation systems; information alone without context has little meaning.

**Previous Research**
"Research on performance information has linked the following variables to be positively associated with performance information use: **administrative stability**,** internal requirements** and **lower levels of government**, **inclusion of organizational members** in performance management processes, and **chief executive power**" (Moynihan, Pandy). Efforts by the **central **agency to** control** the policy agenda and **measurement challenges** are both negatively associated with effective use of performance information. Significant evidence shows public employee behavior can benefit the organization. Employees that have a high level of public service motivation are more likely to be committed to their job and experience greater job satisfaction, as they care more about achieving organizational goals. Employees are more likely to use performance information when _rewards_, such as pay and promotions, are linked to _goal achievement_. Leaders who have more task-specific responsibilities are more likely to use performance information than more senior leaders, because senior leaders spend a lot more of their time dealing with things outside of management. The supply-side approach to performance information suggests that available performance information data is more likely to be used when tied to management systems. The contrary, a demand-side approach, states that access to data is not enough, because managers must actually want to use the data. Mangers who are in support of the development of the organization are more likely to use performance information data than those who do not buy into the goals or vision. Furthermore, if managers have flexibility they are more likely to use performance information to find opportunities for innovation. Over the years the role of budget officials has changed, becoming more about controlling performance, measuring technical efficiency, and overseeing allocation of resources.

**External Factors**
If citizens and stakeholders support performance information use then it is more likely to be implemented. There is an assumption that more participatory governments would feel more pressured to use performance data. Professional organizations in the public sector likewise encourage the use of performance management systems.

**Data Collection**
The survey was administered to senior managers, general managers, and field managers who head key departments. The majority of the participants were older white men who were highly educated with high salaries. The survey measured the use of performance information to make decisions, noting the regularity and consistency of use.

**Results & Discussion**
Results show that public service motivation and performance information use are positively correlated, but there is not convincing evidence that public service motivation fosters higher performance. Results also imply that performance systems should focus on encouraging a sense of public service, not just rewarding expectations; performance information use correlates with _altruism_ rather than _self-interest_. Due to the strong correlation between individual reward and performance data, incentives are more likely to encourage performance information use. Greater access to performance management systems likewise increases the frequency of use. When an organization is more open to taking risks, they are more likely to have reported performance information use. Organizations with greater managerial flexibility also display increased use of performance information. The results neither accept nor reject the variable tested, instead calling for additional testing to filter out several environmental variables that affect performance information use.

## Use of Incentives in Performance Management Systems

_Heinrich, C.H. (2010). “Incentives and Their Dynamics in Public Sector Performance Management Systems.” Journal of Policy Analysis and Management, 29(1): 183‐208._

Author: Checksfield, Molly Wentworth; Editor: Swartwood, Hilary Ann

Heinrich and Marschke illustrate the complexities of measuring performance through a variety of examples in the public sector. The authors explore the history of performance management, and the challenges in determining how to measure performance based on organizational structure and how well performance indicators reflect the true values of the organization.

Early performance measurement was based on scientific management principals, and has since transitioned into a stricter focus on outcomes in complex organizational settings. As performance measures have changed over the years, the types of measurement used within the public sector have changed as well. Instead of focusing solely on the descriptions of structures within the scientific model, we now see a greater emphasis on studying the dynamics of systems and the incentives that guide employees to work towards organizational goals.

Performance can be measured through the use of incentives to motivate employees to reach the goals set by their organization. The definition of performance within an organization is largely based on the values of that organization, as well as the type of motivation employees possess (intrinsic/extrinsic). An employee who is well matched with an organization with similar values may need less incentive to reach organizational goals; suggesting that some employees may respond more directly to employers’ incentives.

Employers (principals) should determine which performance indicators to use within the context of their organizations, as well as how to measure performance before they begin assessing their employees. While some employees respond to incentives in the form of monetary compensation, others may respond to more value-added incentives. It is necessary for employers to understand the preferences of the employees in order to maximize worker output.

The principal-agent model measures organizational structures as well as the features of performance management through the lens of resulting incentives. Heinrich and Marschke suggest that a combination of objective and subjective assessments provide a more accurate depiction of employee effort. Determining how to best quantify subjective measurements remains a barrier for measurement practices.

Not all organizations should be treated alike- incentives should only be used in instances in which employees will respond. Some actions may affect performance differently than they affect value- a point that is crucial to understand when measuring performance and incentives. Intrinsically motivated individuals can be assigned tasks that specifically target their skills and value where they act as stewards of the goals of the organization, while others who are extrinsically motivated can be assigned tasks that are more easily measured.

One of the loopholes in performance management systems is the ability for employers to game the system. This concept of “gaming” results in lower program impacts- controlling the performance measure could have seemingly positive effects for the organization, but produce an inaccurate depiction of program growth. Another potential barrier for success is when an organization sets “benchmarked targets”, where too much emphasis is placed on performance without analyzing the process behind the progress within the organization.

In conclusion, the process by which an organization decides to measure performance should be based on that organization’s goals as well as the employee’s extrinsic/intrinsic motivations related to their work. Before performance indicators are measured, principals should have a foundation of knowledge about the type of measurement being used so that the effectiveness of the measurement is not distorted by the neglect of the principal. Each employer’s situation is unique- and a variety of factors should be taken into consideration when implementing performance management systems.

## Integrating Performance Management and Strategic Planning

_Collins, J., & Hansen, M. T. (2011). Great by Choice: Uncertainty, Chaos and Luck-Why some thrive despite them all. Random House, CH 6 – Specific, Methodological, Consistent (SMaC)._

Author: Fantigrossi, Steven Marc

A SMaC recipe is a specific, yet durable set of operating practices that allow organizations to replicate success. The acronym “SMaC” stands for **specific**, **methodical**, and **consistent**.

SMaC recipes are long-term strategic guides that are intended to last many years. Through changing economic situations, SMaC recipes keep organizations on track towards their stated goals and allow them to operate at a high level despite uncertainty. Companies that follow through with SMaC practices are more successful than their non-SMaCing counterparts.

In an constantly changing world, organizations often incorrectly believe that they must respond to every change, or they will fall behind. As Collins points out, “most change is just noise and requires no fundamental change in ourselves.” Organizations must also commit to following their recipe and only amending it when sufficient empirical evidence suggests a change in course of action.

Former CEO of Southwest Airlines, Howard Putnam, created a specific and simple SMaC recipe for the company that was only changed 20 percent in 25 years. It made Southwest successful by focusing on providing short, low-fare, and quick service to customers traveling in Texas and kept the company out of the business of food service and mail delivery. In 1997, Steve Jobs turned around Apple by bringing the company back to its original SMaC recipe that it had abandoned after he was ousted more than ten years earlier.

The United State’s Constitution is another example of striking the proper balance between addressing change and adhering to core principles.The Constitution’s framework of clearly articulated principles provided the basis for which the government operates. The founders understood two important things as human beings: we are unable to predict the future and we want to immediately respond to change. The lengthy and difficult amendment process was created to allow the Constitution to be changed, but only after the nation had thoroughly debated the suggested change.

SMaC recipes are articulated through ten key statements that serve as do’s and don’ts for Managers to follow. SMaC principles keep organizations doing what they’re good at and prevent them from overextending themselves. The SMaC recipe can be utilized by leaders in organization to set clear goals for the organization and plan strategically.

## Performance Management in Practice Part 1

_Collins, J., & Hansen, M. T. (2011). Great by Choice: Uncertainty, Chaos and Luck-Why some thrive despite them all. Random House, CH3 – The 20 Mile March._

Author: Hanson, Keely; Editor: Uk, Bolary

The 20 Mile March is a performance management system designed to position an organization to reach milestones by setting a performance metric to be met on a consistent basis over a long period of time to achieve sustained growth. It imposes order amidst inconsistency by operating as a strategic mechanism that builds organizational confidence, especially in times of uncertainty. Setting performance benchmarks to drive consistent progress into an organization’s culture, no matter if the conditions are good or bad. In other words, this promotes a culture of commitment to high performance in difficult conditions and holding back in good conditions. This mechanism can keep an organization’s performance on a right and controllable track and solve problems by taking corrective actions along the way. This approach depends on fanatic discipline to achieve systematic progress with a no excuses approach. It can be leveraged to navigate turbulence, especially in an out-of-control environment.

There are seven key distinguishing factors that make a good 20 Mile March:

1. Clear performance markers:
a. Delineate a lower bound of acceptable achievement.
b. Must be challenging to achieve in difficult times, but not impossible.
2. Self-imposed constraints:
a. Honoring an upper bound that delineates boundaries of overextension in good conditions.
b. Constraints should complicate pressure of achieving more or at higher levels.
3. Appropriate to specific enterprise:
a. Tailored to the respective organization and its environment.
4. Largely within the team or company’s control to achieve:
a. Based on tangible goals that do not require luck.
5. A proper timeframe:
a. Timeline long enough to retain power, and brief enough to control for variability outside of control
6. Designed and self-imposed:
a. Internally-designed and imposed.
b. Reflects clarity and rigor specific to underlying performance drivers for that enterprise.
7. Achieved with high consistency:
a. “March” must be achieved year after year.
b. Must be achieved as a result of fanatic discipline.

The 20 Mile March is not limited to the financial sector. It can be implemented across organizational sectors as long as it has the aforementioned characteristics that make a 20 Mile March successful. The absence of a 20 Mile March may make an organization more vulnerable to turbulence and uncertainty. Adhering to the 20 Mile March system fosters organizational confidence because it demonstrates performance is determined via actions rather than as a result of conditions. The more volatile the environment, the greater the need for a 20 Mile March. It acts as an internal safeguard to being overextended when calamity hits. There are some questions that arise in regard to the 20 Mile March approach. For example, how do you balance fanatic discipline and adherence to a specific performance metric without undermining innovation and adaptation? This should be a consideration when implementing the 20 Mile March as a performance management system. However, if there is a need to establish organizational confidence, delineate boundaries for sustainable success, and achieve consistent results, then the 20 Mile March is a viable performance management approach.

## Performance Management in Practice Part 2

_Hatry, H., and Davies, E. (2011). A Guide to Using Data‐Driven Performance Reviews. IBM Center for the Business of Government._

Author: Steele, Samantha E; Editor: Wohlenberg, Danielle Irene

Businesses and government alike are seeking ways to improve efficiency and effectiveness in order to to better serve their constituents. Performance measurement has become a familiar tool to achieve just that. This summary will identify and explain three important concerns for implementing a performance system and touch on what and where stakeholders should be involved in that implementation process.

So what is a data-driven performance system? It is a strategy for leadership, specifically for federal executives, so that they can improve efficiency and effectiveness within their sector. This strategy implements goal driven management, facilitated by data analysis and regular reviews on performance indicators. These tactics are not simply a fad, and are proving to be a management reform that is here to stay; in fact, it has even started to become a requirement for some government agencies. The Government Performance and Results Act (GRPA) Modernization Act established in 2010 currently requires that each federal agency: set priority goals, identify a goal leader, review progress on goals, and then publically report that progress on a quarterly basis.

Hatery and Davies created a “how to” guide for implementing and operating data-driven performance reviews. These authors have identified three vital considerations to a functional performance system; they are: interested and engaged leadership, timely performance measures, and staff that has the capability to analyze measures prior to performance review meetings. The first consideration lays in leadership; it is essential that leaders are not only interested in supporting this strategy but have the willingness to attend and participate in regular meetings. Second, performance measures must be comprised of valid, accurate data on program outcomes that have the ability to promote meaningful discussion. Lastly, staff must be able to support their leadership by examining data and providing thoughtful advice to contribute in meetings.

The implementation activities should include a number of vital persons in order to produce an impactful data-driven performance system. Hatery and Davies suggest that heads of all reporting units be included in the start-up activities. Specifically, they should be directly involved in developing the approach of the system, clarifying goals, aid in creating follow-up protocol after each meeting, determining staff and resources required, and it is especially important that they help to choose performance indicators. It is also necessary to consider the stakeholders in a data-driven management performance system. In a federal agency the stakeholders include the public, other federal agencies, as well as the state and local government. Hatery and Davies suggest that these stakeholders not be allowed in performance review meetings initially, but that they be phased in over time.

A number of successful programs have implemented data-driven performance systems and found that services have improved, and that associated costs have gone down. Examples include the CompStat in New York City, and the FDA-TRACK. The CompStat in New York City has as of 2011, been the most studied performance review program, andit has rendered a “substantial contribution to reducing crime in NYC”. The FDA-TRACK performance management system was designed in 2009 and after its implementation in 2010, individuals noted that the system provided opportunities for more preventative measures. Regular meetings allowed for the discussion of possible hindrances to performance and thereby allowed for quicker solutions.

In order to achieve a successful implementation of a data-driven performance system it is necessary to have: interested and engaged leadership, timely performance measures, and staff that has the capability to analyze measures prior to performance review meetings. Additionally, a successful implementation involves all of the heads of reporting units. The stakeholders for a performance system of a federal agency include the public, other federal agencies, as well as the state and local government. Each of these stakeholders should be allowed to observe performance review meetings once a firm system has been established. Hatery and Davies have illustrated how to reach important milestones with a performance management system by describing what is necessary of employees, and the type of structure and culture to propagate within an organization.

# Section 7: Incentives in Organizations

What are the important questions should we ask before we start to design organizational incentives? Which incentives work (and under what circumstances)? What types of incentives do not work? Are performance reviews (peer feedback) a good incentive to use?

## Making Sense of Incentives

_Levitt, S. (2005). Do This, Get That: Making Sense of Incentives. Associations Now._

Author: McCully, James I; Editor: Creedon Jr, John Thomas

The author’s underlying premise is that incentives are a vital tool for accomplishing objectives. He believes that “economics is, at root, the study of incentives: how people get what they want or need, especially when other people want or need the same thing.” Under the general public’s perception, incentives are associated with business. However, even in this context, the use of incentives is highly underutilized given the great reward. This is especially prominent in the nonprofit sector where incentives are seen as a corporate mechanism and frowned upon. Given the great reward that incentives bring in accomplishing objectives, true mastery of the incentive system is difficult. There is underlying issue with individuals gaming the system to their benefit while reaching the goals initially planned.

### Three Incentive Programs

Incentive programs can be split into three types: economic, social, and moral. The most common incentive program would be financial and is the manner in which the general public views incentives but it is not necessarily always the most effective mechanism.

Social incentives focus on making individuals feel liked, respected, and appreciated. This can be done through special recognition for a job well done or through an employee-of-the-month program. On the flip side, by publicizing relative performances of individuals can stigmatize poor performances and act as a form of negative social incentive as well.

Moral incentives allow individuals to act upon an internalized moral code by presenting them with choices that could be right or wrong. An example would be to increase the number of organ donors, a moral incentive would be to let individuals know the value they would provide since organs would save lives. These types of incentives lends themselves well to the non-profit sector as many who work in this sector view themselves as driven towards a higher cause.

A question is presented as to whether all three incentives should be used together to maximize the benefits. The author argues that this strategy is not efficient as evidence points to financial incentives weaken both social and moral incentives and vice versa. An experiment showed that parents who were fined for coming late to pick up their children from day care did not reduce the number of parents who came late but rather increased the number. The experiments concluded that with no initial fine, parents were faced with a social or moral penalty for making the day care providers wait longer with the children. However, once a financial penalty was placed, which could be seen as a financial incentive to not be late to pick up their children, it took away from the moral or social penalty as parents did not feel as bad for being late since they had to pay for it. This experiment shows that it is very difficult to combine the three types of incentives.

### Incentives Audit

The author discusses looking at both internal and external audits and comparing the best and worst individuals from both scenarios and what makes them so. Using this evaluation can then produce an incentive system that would fit better with the vision of how the organization should work. One particular focus is ensuring the right type of incentive is used to match with the desired result. This is not a simple task of asking the targeted group what would make them respond. The author believes that there is a great source of data that could be used to analyze these issues but it is not being used by organizations as much as it should be. One issue is that to draw relevant conclusions would require experimentation that may not be well received by clients and customers.

### Testing Incentive Plans

Two methods: First, integrate incentives one at a time so each can be measured or aligned more easily than if it were offered as a batch. Second, implement a range of treatments for different groups. The best ways to evaluate incentive programs is through randomization and take the process like an experiment but care should be taken not to antagonize people.

Experimenting with different incentive programs is extremely useful and important but there are two reasons for caution. One, a slight change can lead to large changes, second, changes that you get are often unanticipated. Mistakes are going to be made but the challenge for association leaders will be ensuring that an incentives strategy inspires not only tremendous activity among their members and stakeholders but also drives the right activity. This could be the difference between energetically driving an organization to accomplish even the most grandiose goals or settle for mediocrity.

## Performance Monitoring Systems

_Are Amazon’s Feedback Tactics Unusual? BBC, August 22, 2015. _

Author: Hamlin, Madeleine Rose; Editor: Whiting, Cal McCulley

In August 2015, the New York Times published an exposé about the work culture in Amazon’s white-collar Seattle headquarters. Despite the controversy that ensued, Peter Fleming argues that there is little new about Amazon’s management practices.

Amazon employees are subject to what is known as a ‘rank and yank’ performance review system: they are regularly reviewed and ranked, and the lowest-performing employees are fired. The system relies on a micro-performance management philosophy that is best reflected in the company’s “Anytime Feedback Tool.” Using this tool, workers can comment anonymously on their co-workers’ performance at any time. Employees are reviewed on nearly every action, including how long it took them to reply to an email. In this way, Amazon effectively “turn[s] the annual performance review into a daily event.”

However, Fleming argues that, despite relying on new tools enabled by ‘big data’ technology, the principles behind Amazon’s management system date back to Taylorism. Frederick Taylor (1856-1915) popularized the 'rank and yank' management system that emphasized the scientific measurement of every aspect of worker performance. He was famous for using a stopwatch to evaluate steel factory workers and their output. Amazon's use of 'big data' is an extension of Taylorism facilitated by the increased capacity and use of technology. Many major companies employ ‘rank and yank’ systems, including General Electric, Microsoft, and Accenture. The “Anytime Feedback Tool” is not so different from the “360 degree” appraisal method, which has been used since World War II.

While Amazon is not alone in its management practices, doubts remain about the efficacy of this system. Fleming argues that constant surveillance and evaluation discourages cooperation and breeds paranoia, mistrust, and anxiety, making it difficult for workers to perform.

## Highest Paid CEOs are the Worst Performers

_Adams, S. The Highest Paid CEOs are the Worst Performers, New Study Says. Forbes, June 26, 2014. _

Author: Wohlenberg, Danielle Irene; Editor: Kim, Chung Myung

**The Impact of Incentives for CEO’s**

This article analyzes the success of companies when the CEO has a pay increase. According to Michael Cooper from the University of Utah’s David Eccles School of Business “the more CEO’s get paid, the worse their companies do over the next three years.” This then poses the question, is money an incentive for better performance? Or does it develop complacency and overconfidence?

A combined study by The University of Utah, Purdue, and the University of Cambridge researched 1500 companies over three year periods, from 1994-2013. The revenue generation of these companies was then compared to other companies in the same field. The research discovered a trend, that CEOs with higher pay have companies who do “worse”. More specifically the companies that were paid at the top 10% of the scale had the worst performance, returning 10% less than other companies in their field; and the top 5% of CEOs with the highest pay had companies that did 15% worse on average than their peers.

Michael Cooper theorizes that this trend is a result of overconfidence by the CEO and leads to overinvesting, and investing in bad projects. He suggests that claw-back provisions can be used as a way to incentivise the CEO to make better and wiser financial decisions. The claw-back provision can be included in the CEO's contract and would stipulate that if the firm perform poorly compared to its peers, then the CEO will lose a share of his or her compensation.

This research recommends to therefore increase proficiency of a corporation through negative incentives instead of positive incentives. According to Cooper most corporations however are unlikely to implement negative incentives.

## What Field Experiments Have Taught Us About Managing Workers

_Levitt, S. D., & Neckermann, S. (2014). What field experiments have and have not taught us about managing workers. Oxford Review of Economic Policy,30(4), 639-657. _

Author: Legnetto, Deanna Marguerite; Editor: Hanson, Keely

## Field Experiments: Where they are and where they should be

Levitt and Neckermann discuss the extent to which research is available on field experiments as useful tools to measure relationships between employees and their employers. While significant evidence is avaible indicating output responds positively to
financial incentives, there is mixed support in regard to the output response to employer generosity.

Their discussion highlights five commonly known main points to be made about these relationships, and also recommends that research be conducted by asking these questions to be asked concerning these relationships.

There are five conclusions to be made from field experiment research regarding employee incentives. According to Levitt and Neckermann, both monetary and non-monetary incentives will work. It is evident that when presented with general or competitive financial incentives, employees performing simple or straight-forward tasks will work harder. If employees are given a few gestures of appreciation, whether it be monetary through pay raise or gift or general consistent kindness, work output will tend to increase but not at the same rate. Providing employees with different types of recognition including awards and honors may correlate with increased levels of output, but will differ among organization type and culture. The social culture of the workplace that exhibits friendly professional relationships can have a positive effect on work effort. Lastly, the organization of the work itself, especially implementing group work, can effect employee performance.

Although employee responses to incentives is an interesting point to be made, Levitt and Neckermann believe field experiments have failed to assess three other areas that can be connected to the relationship between the employee and employer. Examining the recruiting process an employer exhibits may give valuable information on the relationship between employees and employers. Field experiments should analyze the reasoning behind promotions and assess their implications. Funding employee training is also another area that would benefit from further analysis. Little research and experiments have been done regarding recruiting, promotions, and training mainly because employers are not interested and have difficulty admitting there are issues in these areas. Aside from financial approaches to incentives, employers can add ‘meaning’ to mundane tasks and/or recognize their employees and also potentially see an increase in output. Thus, social relations are also important for employers to consider in how firms function and design their incentive structures.

## Group-Level Incentives

_Pentland, A. (2014). Social Physics: How Good Ideas Spread-The Lessons from a New Science. Penguin. CH 4: Engagement._

Author: Lancto, Katelyn N; Editor: Orlan, Samuel Lawrence

Engagement is the repeated cooperative interactions within a group. Collaboration is achieved by encouraging individuals of a group to adopt certain behaviors and norms that become harmonious. Working together requires compromising to adopt behaviors and develop habits that result in optimal cooperation. Many animals have developed techniques to facilitate group decision making, such as signaling mechanisms, vocalization, body posture and hand movements. Synchronization and uniformity of idea flow is critical within a group; when the majority of group members seem ready to adopt new ideas, the skeptics are convinced to go along.

Leaving the animal world, engagement is important in business as well. Research has shown that engagement can improve the social welfare of the group and promote positive behavior that is conducive for successful business practices. Microfinance banks are an example where strong social engagement is key to success. They have found that strong engagement increases the likelihood that loans will be repaid.

An experiment was done to see how Facebook users would respond to social pressure. Some users received a “get out and vote” message alone, some received the message along with seeing the faces of friends who already voted. The group that was shown pictures of their friends who had already voted, voted at a higher rate. Words themselves had very little effect without the social pressures. The manipulation of social ties was effective in pushing individuals toward a desired behavior. Seeing members of the group adopting new ideas or exhibiting certain behaviors provides motivation to follow suit. Social pressure works, especially in small groups, because the ability to punish or reward members helps promote cooperative behavior. This also tells us that standard economic incentives often miss the mark because they ignore the fact that people are social creatures influenced by social ties. Therefore, in order to change behavior, we need to aim incentives at social networks, rather than offering traditional economic incentives.

Another experiment was conducted to test the theory that the best way to motivate people was by using social network incentives. Citizens of Boston are much less likely to engage in physical activity during winter. The experiment sought to promote physical activity levels by assigning all participating members two “buddies” and the buddies were given cash rewards based on the behaviors of the “behavior-target person.” It turned out that this system increased physical activity almost four times as much as traditional individual incentives, and for those who had a close relationship with their buddies, the effect was almost eight times as high. The study found that the number of direct interactions that people had with their buddies was a good predictor of the level of behavior change. Additionally, the number of times people had direct interactions with each other gave an accurate preediction of the trust they expressed in each other.

This chapter also looked into “digital engagement.” Pentland looked at an experiment where individuals were not only rewarded for staying active, but they could see how their buddies were doing online. This added a competitive aspect that led to a doubling in the effectiveness compared to the financial incentive alone. Social media is often used within companies, especially those with global reach that span across time zones. A study of companies with digital networks found that when the digital social network grows in bursts of engagement, the network ends up being more effective than when it grows gradually. Additionally, it mattered who invited whom to join the network. The study found that if you receive three invitations from people who are close to you, you are virtually guaranteed to join. However, even if you received 12 invitations from people you are not regularly engaged with, you were not likely to change your behavior and join.

Adam Smith explained capitalism as the “social fabric created by the exchange of goods, ideas, gifts and favors”, which guides capitalism to create solutions that are good for the community. However, Adam Smith lived in a smaller world, where the poor were not considered and the lack of engagement between rich and poor removed the social constraints. When there is no engagement between social groups, there is more chance of “between-group violence” because the groups are poorly integrated. When there is a mismatch of this type, subjugation and persecution often follow. When there is not cooperation, but instead a distrust based on previous interactions, the majority of interactions are explosive, and each interaction would serve to further erode trust leading to increasingly negative engagements.

In summary, success at being part of a team depends on having continual engagement with the team network. The level of engagement is a strong predictor of team productivity and resilience across human activities. There are three key ideas about engagement, or in other words, the process in which the ongoing network of exchanges between people changes their behavior: (1) Engagement requires interaction because there needs to be network restraint, or repeated interactions between all members of the group. The number of direct interactions is a good measure of social pressure to adopt cooperative behavior, as well as an excellence predictor of how well people maintain new, more cooperative behaviors. (2) Engagement requires cooperation where each individual must be pushed towards joint ownership of the group project or goal. (3) Engagement requires building trust which enhances the expectation of future fair and cooperative exchanges.

## Monetary vs. Non-Monetary Compensation

_Ariely, D. (2008). Predictably irrational (p. 20). New York: HarperCollins. CH 4: The Cost of Social Norms. _

Author: Sears, Kicia Kimberly; Editor: Farrior, Cheri Nicole

Ariely argues that we live in two worlds of exchange: a world of social norms and a world of market norms.

In the world of social norms, people are willing to help another person as a favor, without expecting anything in return. The pleasure of helping someone is worth the exchange of our efforts. In this world, the mention of money is gauche: We would be offended if someone offered to pay for a Thanksgiving meal we've just cooked for them, for example.

However, accepting gifts is perfectly ok in the world of social norms. Even though we know, intellectually, that gifts cost money, we feel that a small gesture is appropriate--though perhaps unnecessary--in exchange for our help.

In the world of market norms, however, money is expected. There are no "warm & fuzzy" feelings about our exchanges. We expect to be compensated at a value equivalent to our efforts and talents. The market world is not mean, per se, but it values "self-reliance, inventiveness, and individualism." In addition, in market norms, people expect to be paid on time and consumers get what they pay for.

Keeping these worlds separte is crucial. When we begin to mix them, social norms are the ones that get destroyed.

The author cites experiments done to explore this dual yet often unspoken understanding of how exchanges work. In one experiment that he completed with a partner, participants were asked to complete a mundane task on a computer: putting a circle from one side of a screen into a box on the other. One group was given $5 at the beginning of the experiement for 5 minutes work. The second group was given $.50 for the same amount of time. A third group was asked to do it without mention of any reward. The results were interesting: the first group ($5) dragged an average of 159 circles in 5 minutes; the second group ($.50) dragged an average of 101 circles, and the third group ($0) dragged 168 circles. Though the difference between the first and third group averages is small, the implication is clear: on average, people will work just as hard for a favor (free) as they will for an appropriate wage.

The same experiment was done with gifts: the first group was given a box of Godiva chocolates ($5 value), the second a Snickers bar ($.50 value) and the third was not promised a gift. The result was that all three groups worked equally hard on the task--the first group dragged 169 circles, and the second and third dragged 162 and 168, respectively.

These experiments show that a social exchange (gifts or simply favors) can compel people to work just as hard as they would for an appropriate wage ($5).

When the author and his partner blended the worlds--as they have advised against--the results were predictably worse: Before the experiment, they told the first and second groups the cost of the gift. "They reacted to the explicitly priced gift in exactly the way they reacted to cash, and the gift no longer invoked social norms--by the mention of its cost, the gift had passed into the realm of market norms." People will work hard for free or they will work heard for a reasonable wage, but if you offer them a small monetary payment then they will walk away. When offering a gift as compensation, do not mention the cost of the gift or it will loose its purpose.

The author argues that Market norms also create a strange set of behaviors with regard to how we interact with one another. As mentioned before, the market norms value individualism and self-reliance--two things that seem at odds with the "warm & fuzzy" feelings of social exchanges. The authors wanted to see if simply making people think about money was enough to invoke these norms and do away with social norms.

They gave two groups a set of scrambled sentences or phrases to unscramble. In one group, the sentences were neutral and did not invoke the market. In the other, the sentences were related to money (for example, "High-paying salary" versus "It's cold outside"). Once these puzzles were done, participants in each group were given a more difficult puzzle and told that they could ask for help if they needed it. The group given money-related sentences showed much more self-reliance and either didn't ask for help, or waited for longer before asking for help. This is seen as a positive effect.

However, the particpants in the group with money-related sentences were also less likely to assist others, including other participants who were struggling, an expirimenter who needed to enter a lot of data, or a "stranger" who "accidentally" spilled pencils.

The point of these experiments is to show that social norms and market norms really make people think and behave differently when it comes to the exchange of goods and services. When kept separate, things go smoothly. When mixed, the market norms tend to win out over social norms and damage personal relationships as well as productivity.

The author also discovered that mixing the worlds has even worse affects on social norms. A daycare in Israel imposed a fine on parents who picked up their children late in an attempt to discourage tardiness. What they discovered was that the social contract they had in place prior to the fine--guilt, mostly--was much more effective than the fine. People were picking up their children late even more frequently. Therefore, they removed the fine. However, the social norms had already been ruined by imposing the market norms (in the form of a fine), and tardy pickups became even *more* frequent. The point is that market norms are powerful: they have the ability to destroy social norms for a long time after they have come and gone.

Here, the author begins to make an argument regarding the proper places of social and market norms with regard to the business world. Companies have begun attempting to create a social connection between themselves and their customers and/or their employees. This is a good idea in theory, but has not been successful for more than a few companies. The author argues that this is because companies fundamentally don't understand social norms. They expect to "have it both ways" by asking customers for loyalty then turning around and imposing exhorbitant automatic fees on bank accounts, for example, or by asking employees to behave as friends doing favors by going above and beyond (staying late, being available out of office, etc.) but do not return the exchange with behavior or policies in kind (being unreasonable regarding sick leave, cutting health benefits, etc.)

The author argues that this problem is especially hurtful to employer/employee relationships. Companies want productivity and loyalty, but cut all kinds of benefits for employees that foster these behaviors far more than money. Ariely: "As companies tilt the board, and employeees slide from social norms to the realm of market norms, can we blame them for jumping ship when a better offer appears?"

Since social norms are just as powerful as market norms and foster a more desirable environment for both companies and their customers or employees, the author concludes that more needs to be done BY companies to foster an environment of social exchange. A company can't claim to be "family" and then turn around and treat its customers or employees poorly. Though the author understands that an entire world made up of *only* social norms of exchange would not be realistic or particualrly fun, more social norms need to be introduced--and properly upheld--to truly improve our lives.

People aren't willling to risk their lives ding their job when the pay isn't worth it or they don't feel that their job is valued high enough. However, this situation could be changed by elevating the social norm and making workers feel like the job they are doing is worth way more than the pay they receive for it.

In the educational setting, standardized testing and performance based salary are pushing schools further and further away from social norms and more into market norms. The focus should not be so much on test scores and salaries, but more so linking students education to social goals and making them feel a sense of pride and purpose in their education. It is important to get kids excited about their education the same way they get excited about other things that are important to them, such as sports.

Money can turn out to be a costly way to motivate people, whereas social norms are cheaper and have a larger effect.

## Pay for Performance

_Lazear, E. P. (1996). Performance pay and productivity (No. w5672). National bureau of economic research. _

Author: Dieselman, Andrew; Editor: Washington, Layvon Q

"Pay Performance and Productivity"

In Edward P. Lazear's 1996 working paper, supported in part by the National Science Foundation and the National Bureau of Economic Research, he discusses the implications of performance pay and productivity. This case study examines Safelite Glass Co.'s switch from paying hourly wages to paying piece rates.

Lazear theorizes that paying workers based on performance, rather than traditional hourly wages, will increase their levels of output. In using data from the Safelite Glass Co., Lazear is able to conclude that (1) a switch from hourly to performance based wages had a "significant effect on the average levels of output." Lazear is also able to state that (2) there are two reasons for this increase: workers have more incentive to produce more; and, there is a reduction in turnover among the most productive workers coupled with an ability to hire the most productive workers.

This paper refutes claims that monetized incentives will reduce output. Lazear does not outright state that a piece rate wage system is better, only that his data supports the traditional economic theory. A firm must still weigh this information with the low monitoring cost and "perhaps higher quality output," which one gets through the hourly wage system, with the benefits from piece rate wages. It is important to note that Lazear's results found that by shifting from hourly pay to performance based pay, the productivity of the average worker increased by 36%, in one year after the new system was adopted (Lazear, p.36). Interestingly enough, this new system attracted empolyees who had better productivity than veteran employees.

Based on Lazear's article, some important questions that should be considered before designing organizational incentives includes the following: Does the benefits outweight the cost?; In what ways will veteran and incoming employees be effected?; How will the change from hourly to performance based wages impact the hierarchical structure of the organization, will there need to be more managerial position to monitor performance? The aforementioned will aid in determining if the shift from hourly wage to performance based wage will be the most effective method in improving productivity through incentives.
# Section 8: Citizen Participation

## Discussion Case

_Jack Becker (2014). When a Highway Divides a City Improving Decision Making in Syracuse, New York. E-PARCC Case Study on Collaborative Governance._

## Citizen Participation
_Irvin, R. A., & Stansbury, J. (2004). Citizen participation in decision making: is it worth the effort? Public Administration Review, 64(1), 55-65._

Author: Orlan, Samuel Lawrence; Editor: Damon-Cronmiller, Christopher

### Introduction
Since the 1950s many governmental organizations at all levels have launched citizen-participation programs, predicated on the assumption that if citizens become more actively involved, then governance will emerge as more democratic and effective. A popular assumption is that an engaged citizenry promotes policies grounded in citizen preference and developes a greater understanding of the tough decisions government administrators must make; which in turn fosters a less divisive and confrontational environment that is easier to govern and regulate. Yet, there are social and economic costs of citizen participation, as Irvin and Stansbury point out.

### Benefits
Improved participation could stop the erosion of public trust evidenced by widespread hostility toward government entities. In evaluating the effectiveness of the citizen-participation process, there are two tiers of benefits (process and outcomes) and two beneficiaries (government and citizens.) One decision process advantage is the benefit of education. Administrators can educate citizens by explaining their reasons and clarifying their logic in the hope that a greater level of community understanding will yield better policy decisions; thus leading to improved environmental and social outcomes. Citizens can educate administrators by informing them of certain community positions, since policies that are well grounded in citizen preferences tend to be implemented in a smoother, less costly manner.

Another advantage is that the government can persuade citizens and vice versa. Government leaders can build trust and allay anxiety and/or hostility, while citizens can enlighten their leaders on their own needs and concerns. Whether government merely works to win over citizen sentiment, or if it truly collaborates with citizens, is up for debate. Nevertheless, if goverment officials can persuade influential community members, enthusiasm for the policy will likely spread throughout the community as a whole. The citizen-participation process also allows for the government to gain legitimacy and for citizens to gain skills for activist citizenship. Citizen advisory boards additionally provide an “opportunity to meet face to face with and personally persuade decision makers.”

Furthermore, citizen participation can help break gridlocks and lead to positive outcomes. Participatory initiatives can vastly improve social outcomes because they put pressure on politicians to take actions for which they are reluctant (e.g. implement budget cuts.) Likewise, government agencies can obtain political support to make decisions they would have a difficult time doing unilaterally. From a government standpoint, public participation reduces the probability of litigation making it cost-effective. This does not mean that disgruntled stakeholders will not walk out of the process or go to court, but that it is the cost-efficient decision compared to no stakeholder participation at all. Overall, citizen-participation results in better policy and implementation decisions. Environmental policy formation is one specific area where citizen-participation is incredibly useful for informing regulators exactly where volatile public backlash is likely to occur, and for winning the sympathies of a few influential citizens in places where opposition to environmental regulation is strongest.

### Drawbacks
On the flipside, citizen participation can also be both time consuming and costly. The per-decision cost of citizen-participation groups is normally much higher than the decision making of a single government administrator who is likely technically trained and politically astute enough to recognize the probable consequences of the decision, and may come to the same decision that the community group chose with considerably less deliberation time. Many argue that decisions happen slowly enough in government organizations without complicating it with public forums. A robust participation process could very well divert resources away from an agency’s mission. Others argue that the social-capital value that citizens gain by becoming involved offsets these costs, and does not account for smoother, and thus cheaper, implementation due to smarter policy.

Community size and demeanor can also serve as a drawback. When the group is small and homogeneous, as is the case in many rural communities, collaborative decision making works better than in larger areas where it is naïve to think 10-15 citizen representatives can alter popular opinion of a much larger diverse group. Many communities also demonstrate complacency in regards to citizen participation and top-down administration is simply the most efficient. A study showed that while community members indicted their intent to participate, less than 1% followed up by seeking information to join a participatory process. Also, there is nothing to suggest that those who actually do participate automatically possess altruistic concern for others.

Another disadvantage is the “representation” itself and lack of authority. Citizens are not paid for their time so citizen-participation committees tend to be dominated by strongly partisan individuals whose livelihoods or values are strongly affected by the decisions being made, or by those who live comfortably enough to allow them to participate regularly. Usually, committees are disproportionally comprised of top socioeconomic individuals, and studies show that the median income of these members are usually higher than regional averages. Often, decisions are ignored or merely taken under advisement which breeds resentment. Lack of a real “voice” can lead to the participation processes backfiring and an increase in public dissatisfaction.

### Environmental Decision-Making Case Study
In considering new management alternatives for the Papillion Creek watershed in Omaha, researchers received a grant from the EPA to incorporate multicriteria decision-making methodology into a participatory process with area stakeholders. Working groups were formed that included agency representatives, rural public, urban public, recreational users, and developers. However, articles in local newspapers, brochures, phone calls, and even free pizza were unsuccessful in attracting interested stakeholders to public meetings. The project failed to spark widespread public interest because of a failure to define the problem so people did not regard it as a crisis issue. EPA officials acknowledged from the start that the stakeholders’ decisions would be strictly advisory, and they failed to involve certain stakeholders with extensive political influence. Subsequently,the project was doomed due to widespread public complacency.

### Ideal/Non-Ideal Conditions for Citizen Participation
There should be careful selection of a representative group of stakeholders, a transparent decision-making process to build trust among all participants, clear authority in decision making, competent and unbiased group facilitators, regular meetings, and adequate financial resources to support the group process. Low-cost indicators and high-benefit indictors should be identified. Examples include “citizens readily volunteer for projects that benefit the entire community” and “hostility toward government entities is high, and the agency seeks validation from community members to successfully implement policy,” respectively. An administrator might be better advised to use a more streamlined decision-making process if high-cost, low-benefit indicators are present. Examples include “low-income residents are key stakeholders for the issue at hand and should be included, yet they cannot because of work and family priorities” and “the decisions of the group are likely to be ignored, no matter how much effort goes into their formation.” Widespread public benefit should be the goal of any public policy, and any administrator needs to consider the advantages and disadvantages of a citizen-centric decision-making process.
# Section 9: Strategic Decision-Making

Managerial decision-making reliably fails in predictable ways. What are the main sources of bias and weakness in strategic decision-making, and what types of habits and processes can we develop to overcome these constraints?

Assigned Cases (full group is responsible for presentations and summaries):

## Overview of Managerial Decision-Making

Garvin, D.A., and Roberto, M.A. (2001). “What You Don’t Know About Making Decisions.” Harvard Business Review, September, 108-116. Author: Creedon Jr, John Thomas; Editor: Wohlenberg, Danielle Irene

The Gavin and Roberto article, "What You Don't Know About Making Decisions" argues that decision makers are adopting the wrong approach by advocating for a particular decision, rather than inquiring about how and what the best decision should be.

Advocates generally approach a decision by passionately arguing for a position while simultaneously downplaying contrasting viewpoints, or aguments against which prevents a health dialogue and consideration of opposing views. The decision becomes a competition that focuses on winning for their side, rather than achieving the most optimal outcome. This leaves others feeling disaffected and shut out of the process. By approaching a decision through inquiry, one can better consider a variety of options; They can collaborate and stimulate creative and productive problem solving while reducing the factors that would create dissent.

In order to achieve optimal outcomes through inquiry, the authors recommend three methods to employ in decision-making: constructive conflict, consideration, and closure.

**Constructive conflict** argues that debate and disagreement are a healthy part of decision-making, so long as the conversation is substantive, challenging, critical, and has a well-defined goal and rules that prohibit defaulting into defensiveness or misdirected language. People are broken up from their typical pre-disposed silos and put in with others to challenge their presumptions and reconsider key assumptions.

**Consideration** refers to an environment of peaceful and respectful dialogue and understanding of challenging viewpoints. Participants in the process must convey openness and actively listen to other views, rather than simply waiting their turn to re-affirm their predisposed biases.

**Closure** is the final consideration that Gavin and Roberto stress for an effective decision-making process based on inquiry rather than advocacy. An agreement must not only be arrived at, but it must be done in a timely manner. Rushing too quickly to an answer to minimize conflict may fail to properly evaluate the decision and gloss over critical issues while deciding too late may cause people to get caught in a feedback loop re-iterating their opposing arguments over and over without resolution.

## Expertise:

_When should we trust an expert? And how often are they right?_

Lancto, Katelyn N; Checksfield, Molly Wentworth; Sarawat, Fariha; Rosa, Adelaide Lee; Orlan, Samuel Lawrence

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. Introduction.

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. CH 7: Ooch, pp 140-143 (pundits and predictions).

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. pp 3-5, 35-38, 140-143 (overconfidence).

Sutherland, J. & Sutherland, J.J. (2014). Scrum: The Art of Doing Twice the Work in Half the Time. Crown Business, pp 129-132 (expertise without context).

Leonhardt, D. "Sorry, NFL Fans — A Tweeting Robot Is Probably Smarter than Your Team’s Coach." WBUR, November 19, 2014.

When we are making decisions, we easily draw conclusions based on the information that is in front of us, while failing to consider the broader picture (this is called “what you see is all there is,” or “the spotlight effect”). However, what’s in the spotlight is rarely everything that we need to know in order to make a good decision; this can lead to poor decision-making. Human decision making is often flawed, from the career choices we make to our personal decisions. “Following your gut” is rarely the best way to make a decision. Rather in making decisions, you should focus on using a good process. A process is important because it is hard to fix a bias in our mental process just by being aware of it. “A better decision process substantially improves the results of the decisions, as well as the financial returns associated with them” (p 6).

Overconfidence, narrow framing, confirmation bias and short-term emotion are the four villains of the decision making process. Narrow framing is the the tendency to see decisions as simple binaries, without accounting for alternatives and options. Confirmation bias is the seeking out information that supports our self-serving, preconceived ideas, assumptions and beliefs. Short-term emotion is allowing temporary emotion to supercede evidence or logic in decision-making. Overconfidence is having irrational confidence in outcomes and predictions and it can give us false hopes about the unpredictability of the future. The four-peg WRAP strategy can help fight these four villains.
_Widen your options
Reality--test your assumptions
Attain distance before deciding
Prepare to be wrong
**Pundits & Predictions: **
University of Pennsylvania psychology professor Phil Tetlock developed a survey in 1985 designed to determine the validity of predictions in experts’ areas of expertise. Tetlock asked 284 economists and political experts to predict basic trends within their respective fields. The study yielded nearly 83,000 predictions and found that experts underperformed compared to algorithms that assumed no change to the previous year’s status quo. Pundits with more media appearances tended to be the worst predictors. The findings suggest that relying on predictions by experts is not advisable.

**Bot vs. Experts**
New York Times created the Fourth Down Bot which analyses coaches’ decisions on whether or not to go for it on 4th down. The purpose was to show that coaches (read: experts) are too conservative with their 4th down play calling, and based on statistics are hurting their own team with their decision making. The Bot analyzes NFL history, recent game history, various odds, average punt distance, data on what happens when teams get the ball at the 20-yard line vs. the 40-yard line, etc. The Bot then tweets out its situational analysis (Example: “Detroit punted on a 4th-and-1 at their 45. I would have gone for it.”) Over the last couple decades NFL offenses have significantly improved (many more yards and points), so the value of having the ball has increased, while the distinction of whether you have it at the 20 or 50 has declined. NFL coaches have not adjusted to this statistical reality. The Bot cannot take into account the specific teams as it is predicting based on an average offense vs. an average defense. Reporters have questioned coaches when they see the Bot is critical of their decisions, but it has had little effect to lead to more logical, statistics-based decisions.

**SCRUM - Expertise Without Context**
“Planning Poker” is a quick and accurate way of gathering estimates using Fibonacci numbers, taking the average of each team member’s estimated effort to complete a task. Should the initial estimates be too far apart, iterations of discussion and re-estimation commence. It is critical that the project team runs this evaluation rather than an outside expert. Sourcing estimation from the team avoids misinterpretation and builds context. This allows the planning process to target beneficiaries and correctly follow objectives, to build a story rather than a disjointed collection of data.

## Prediction:

_What are the different forms of prediction?_

Kim, Chung Myung; Uk, Bolary; Damon-Cronmiller, Christopher; Gobbo, Andre Francis; Dorries, Joshua Wayne

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. CH 7: Ooch, pp 140-143 (pundits and predictions).

Chapter 7 of _Decisive: How to Make Better Choices in Life and Work_ by Heath & Heath, details a method they call "ooch" to test out potential scenarios in order to make high-stakes decisions in a small amount of time. All too often, according to Heath and Heath, we make extremely important decisions without having enough information to make them, or the time to gather the preferred amount of information to do so. To "ooch," as the two authors put it, is to conduct small tests in order to test one's "hypothesis" about how a particular program or business model might work, and then make a more informed decision based upon the results from these tests. Heath and Heath refer to a legal secretary, scientific equipment manufacrurers, and even an elementary schooler as people who used ooch to great effect. Having at least a little bit of information before making high-stakes decisions is important for everyone - even for experts with several years of experience. Using economists and political scientists as examples, Heath and Heath point out that while experts in the social sciences get almost double the amount of assumptions they make correct than novices do, the success rate for these experts is still only 45% on average. Thus, the ability to "ooch before leaping" is a skill set that hods great potential benefit to just about anyone, no matter what age or job occupation they have.

Lehrer, J. (2010). How we decide. Houghton Mifflin Harcourt. CH2 – The Predictions of Dopamine.

In the article, the author presents elements that are closely related to one’s decision-making processes and activities that take place in brain when making decision. Based on the studies of a Cambridge Neuroscientist, Wolfram Schultz, the decision making process begins with the change in level of dopamine in our brain. Interestingly, the level of dopamine was varied upon the certain patterns that are based on the past experiences and current situations. If there is failure in getting reward for certain decision or action, some kind of error signal gets generated and the newly adjusted dopamine level will affect the level of dopamine being generated. The neurons in our brain will constantly gather new information and data to generate new patterns during the decision making process and it helps to prevent further errors in future prediction.

Interesting example was given in the reading, during the Operation Desert Strom, Lieutenant Commander Michael Riley found blip in the radar, at that moment, he did not have enough information about that blip to distinguish whether it was a friendly plane or a silkworm missile. He had to make decision to shoot it down or just let it go, and he finally made the decision to shoot it down and was later discovered that it was a Silkworm missile. Although there was no way for Riley to distinguish that radar blip, Schultz discovered that it was Riley’s dopamine neurons that unconsciously helped him detecting slight difference in the blip to make a final decision to shoot it down. A cognitive psychologist, Gary Klein found out that in high-pressure situations, the intuition of our decision making could be surprisingly insightful. In the case of Riley, he felt something wrong about the radar blip, because he had used to a very consistent blip pattern of the planes from the Silkworm missile and the different timing of the radar blips that helped him unconsciously evaluated the altitude of the blip. Just like a computer programmed Artificial Intelligence, human brain is designed to go through learning process that includes both successes and failures to minimize the errors or mistakes in future decision making process, and within that frame, dopamine is unconsciously helping one to make decision.

Gladwell, M. (2007). Blink: The power of thinking without thinking. Back Bay Books. CH1 – The Theory of Thin Slices: How a Little Bit of Knowledge Goes a Long Way.

## Bias:

_What are the most common ways in which decision-processes fail?_

Berkley, Njeri N; Sears, Kicia Kimberly; Tansits, Colin E; Fantigrossi, Steven Marc; Steele, Samantha E

Ariely, D. (2008). Predictably irrational (p. 20). New York: HarperCollins. CH 8: The Cost of Ownership (loss aversion)

In the article, The High Price of Ownership: Why we Overvalue What We Have, the author addresses the question of whether owners believe that their possession is worth more money than potential owners are willing to pay. Hypothesizing that ownership of something increases the value in the owner's perspective, the author ran an experiment using excited students at Duke University vying for the opportunity to be entered into a lottery to win tickets to a Duke basketball game. While all the students may have valued the tickets equally prior to being selected, after the lottery drawing occurred, the students were psychologically divided into the ticket owners and non-ticket owners group. The result was that students who did not own a ticket were willing to pay around $170 for one while students who owned a ticket believed their ticket to be worth roughly $2,400.

The article mentions three loss aversion “quirks” that humans tend to have that can be attributed to the difference in perceived value:

- We fall in love with what we already have
- We focus on what we may lose, rather than what we may gain
- We assume other people will see the transaction from the same perspective as we do, sharing our feelings, emotions, and memories.

Ownership doesn’t only apply to material items, but ideas as well. Ownership can even occur before someone becomes the legal owner of an item or idea--that’s why different marketing strategies such as a 30 day money back guarantee work so effectively. Prior to that thirty days, you feel as though you own the item (“virtual ownership”) and do not want to “lose it”. Similarly, it is hard for an individual to downgrade to a lower level item (e.g. luxury to basic car) once they have tasted the higher level.

Understanding the influence of loss-aversion can help us understand how certain decisions of whether or not to make change can be subject to bias. Despite evidence pointing in the direction of change, decision makers may decide to continue with an idea or item that they have due to the fact that they may overvalue that idea or item as “owners”.

**Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. CH 6: Zoom-In, Zoom-Out (the importance of baseline probabilities)**

When we make decisions, we often acknowledge that we don't have all of the information. Heath argues that we typically trust our own ideas about a decision over the averages. That is, we trust the inside view—our own impressions and assessments of the situation we're in—over the outside view—analysis of the larger class of situations.

However, the outside view is almost always more accurate: we check reviews on yelp or tripadvisor rather than trying to glean our own impressions from a company's website. We are naturally drawn to the inside view because we feel like we're the only ones who truly know our situation, that we can beat the odds because of our unique qualifications and experience. It's what makes entrepreneurs bold, says the author, and that's a good thing.

The issue is that we often become trapped in the inside view, and as a result, our decisions will be worse. Heath advises that we begin by looking at the outside view. This involves gathering information in an attempt to find the average, or the "base rates." The author calls this "zooming out."

To zoom out:
- Begin by collecting data. This can be published or from groups who have attempted a similar task.
- You may also ask an expert—someone who has more experience than you—to describe their experience.
- TIP: You are not looking for predictions, experts are bad at making them. Instead, you are trying to find the base rate, or what you can "reasonably expect to happen" after making a particular choice.

As we know, however, often data—as good as it may be—does not fully describe a particular issue, problem, or situation. Nor is it enough for us, as decision makers, to base a complex choice upon. We want to get at what feels more real to us. This is when the author suggests "zooming in." Instead of going back to our own inside-view impressions, though, the author stresses the importance of zooming in on personal experiences of those that have made the choices we are considering.

To zoom in:
- Look for texture beyond the data you've collected: get the opinions behind "liked" vs "didn't like." This may provide context that will better inform your decision.
- Ex: A Yelp review of a Mexican restaurant shows a 3.5 average rating. Instead of stopping there and refusing to eat there, you read a few of the low reviews and find out they are based on things that may not apply to your situation: noise on a Friday night, price, unreasonable expectations of servers, etc. Therefore, you can make a better decision since you now understand the nuance behind the numbers.

Heath advises us, whenever possible, to both zoom-in and zoom-out.

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. pp 11-15 (confirmation bias)

****Author: Colin Tansits****
Heath's book, “Decisive: How to make better choices in life and work,” addresses three specific topics relevant to bias: confirmation bias, the zoom in zoom out technique, and overconfidence. This section discussed "confirmation bias."

Confirmation bias is the human habit of developing a quick belief about a situation then seeking out information to bolster that belief. Thus when people have the chance, they will select information that supports their preexisting attitudes, beliefs, and actions. When we want something to be true, we will find information that makes it true.

The tricky part about confirmation bias is that it can look scientific—people collect data which supports their assertions. Little do they know they are “cooking the books.”

The book retells a story about the president of Intel who struggled to make the decision about foregoing the company’s production of memory—the product that Intel was built on. Memory was being taken over by Japanese companies, and Intel was losing money on it. After considering what a new president and CEO would have done in his situation, it became clear that Intel must drop memory and move away from it. This story illustrates the “confirmation bias” habit of trying to support decisions which we want to be correct, despite empirical evidence suggesting otherwise.

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. pp 3-5, 35-38, 140-143 (overconfidence).

**Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. pp 3-5, 35-38, 140-143 (overconfidence).**

Humans aren't very good at making decisions. Many of us reverse, fail, or quit in business and in our personal lives. Brains can't make rational decisions—we are too full of biases. "Going with our guts" doesn't work any better, either. So, what's the solution?

Some argue that it is analysis. Rigorous analysis will lead to better decisions. Though this helps, studies have shown that the decision-making __process__ is far more important than the analysis alone, by a factor of six. Being too confident in our own decisions without doing proper research or without considering alternatives or flaws often results in failure.

Later, the author tells the story of the Quaker CEO who bought the parent company of Gatorade—a huge success—when he attempted to find another success in Snapple teas and juices. However, this failed miserably. The gut-instinct that had prompted the CEO to trust Gatorade proved wrong on Snapple. One of the problems here was overconfidence in this CEO's feelings: no one at Quaker was there to argue against buying Snapple.

Another problem here is framing the choice one is thinking about as the only option. The author notes that "whether or not" choices fail 52% of the time, versus choices that contain several options, which fail 32% of the time. The lesson here is to ignore the gut, and to broaden our decisions to include several options.

A final point the author makes regarding overconfidence is the tendency to trust experts too much. In fact, though experts are great at analyzing what has happened in the past and what is happening in the present, they are not very successful at predicting the future.

Sadly, experience and education did not increase the expert's chances of being any more correct about future trends than a layman presented with base rate information. The lesson here is to stop seeking out predictions, and expect base rates to continue. This will result in more accurate decisions.

###Leonhardt, D. "Sorry, NFL Fans — A Tweeting Robot Is Probably Smarter than Your Team’s Coach." WBUR, November 19, 2014.

Leonhardt in his article, "Sorry, NFL Fans — A Tweeting Robot Is Probably Smarter than Your Team’s Coach,” describes a robot created by the New York Times that conducts fourth-down analysis for football games. By utilizing a large archive of past NFL games, the robot conducts situational analysis for live games and tweets the odds of going for it on fourth down. This robot has recently brought the conservative bias of NFL coaches into light.

As the NFL has aged, offenses have gotten progressively better and it seems that the coaching has not adjusted to this fact. Having possession of the ball these days has far greater value than it did in past decades. If nothing else, this robot illustrates the very conservative nature of fourth-down calling. The author of this article suggests that coaches should have more faith in their players considering the extremely productive nature of modern NFL offenses. Many fans have been following the robots tweets and have been holding the coaches accountable for their play calling.

Of course this bot does not have perfect accuracy. Bills coach Doug Marrone addresses this fact in an interview where he was criticized for his conservatism and the bot was specifically referenced. Marrone stated that the bot is tailored for the average team, not for an individual match up, which is certainly a truth. He goes on to say that not many of his peers would have been any less conservative than he. Leonhardt criticizes this logic pointing out that it is not helping his team win to claim that other coaches would have made the same move. Professor Cade Massey noted that coaching seemed to trend toward higher risk play calling in ’08 and ’09, until a notorious play made by Patriots coach Bill Belichick went for it on a fourth and short but missed and cost the team the game. After this coaching seemed to trend back toward more conservative play calling in fourth down situations.

A tweeting robot that conducts football situational analysis has managed to uncover the biased nature of coaching in the NFL. Despite advances in offensive performance, play calling in fourth down situations has remained very conservative. Being overly conservative is a common occurrence, and often contributes toward the failure in decision making. Leonhardt advocates for more trust in athletes and for allowance of higher risk play calling. This advice can certainly be applied to decision-making in general, reminding us to make choices based in logic rather than risk aversion.

## Groupthink:

_What is groupthink, and how can we avoid it?_

Dieselman, Andrew; Whiting, Cal McCulley; Perez, Philip A; Boucher, Timothy M.; El Ayachi, Youssef

_**Hansen, M. “How John F. Kennedy Changed Decision-Making for Us All.” Harvard Business Review Blog Network, November 22, 2013.**_

In 1962 President Kennedy ordered a review of the decision making procedures that led to arguably the worst decision he ever made, known now as the Bay of Pigs fiasco. Reviewing psychologists determined that the decision making process that went on and led to the authorization of the Bay of Pigs Invasion was plagued with groupthink - the "psychological drive for consensus at any cost that suppresses dissent and appraisal of alternatives." One historian, who was present during this decision process noted that the "meetings were taking place in a curious atmostpher of assumed consensus, [and] no one spoke against it."
To remedy the failures in decision making that resulted in the politically-damning fiasco, President Kennedy instituted four new priorities regarding how his top aides and advisors would come to critical decisions. The first of these changes was that every participant in the process would "function as a 'skeptical generalist,'" and avoid reviewing the problem from just his/her department's standpoint. The second change was to encourage that group meetings take place in informal locations, and not conform to formal agendas or protocols so that individual status did not hamper frank discussion. Third, each decision making process should involve sub-groups who would break-out, work on theories, and then reconvene. Finally, the team would sometimes meet without the President in order to avoid aides/advisors from just following the cues of the President. The underlying principal "was to solicit diverse viewpoints, stimulate debate, explore options, probe assumptions, and let the best plan win on its merits. This change in decision-making was incredibly successful and lead to a fruitful non-violent end to the Cuban-Missile Crisis in 1962. In addition, this method of combatting groupthink has been implemented numerous times and has had success across many different sectors of society, including corporate boardrooms.

Sutherland, J. & Sutherland, J.J. (2014). Scrum: The Art of Doing Twice the Work in Half the Time. Crown Business, pp 111-132.
Sutherland & Sutherland open this chapert, titled "Plan Reality, Not Fantasy," by detailing a phone call he had received from the Chief Architect of Software at Medco. Medco, as 'Scrum' describes it, was "a Fortune 100 firm with nearly $38 billion in revenue, the largest phamaceutical company in the country..." The phone call was regarding Medco's need for Sutherland to aid in the creation of a system in which Medco was to deliver prescriptions by mail. Medco was terribly behind schedule, and the Chief Architect of Software thought that Sutherland and his 'Scrum' could help.
Sutherland details Medco's first mistake on page 114: "they thought they could plan everything everything ahead of time." Sutherland's solution to this was sticky notes. He directed everyone to write down everything that needed to be done to complete the project, then break those down to manageable tasks. Then, they would estimate how long each small task would take. They then worked to break the notes into different teams, only then could they begin.
Sutherland's method is attempting to fix the issue of planning a task which has not been completed before, you simply don't know. He suggests refining the plan throughout the project, rather than doing all the planning upfront and sticking to it no matter what.
Sutherland also points to a few more intersting suggestions when deterimining how much an effort with cost, in time and money. His friend, he tells us, used "dog points." He asks: "is this problem a dachshund or a labrador?" The idea behind this, Sutherland points out, is using relative sizing to compare tasks. Sutherland likes to use numbers, something along the lines of the first six or so integers of the Fibonacci Sequence. This places numbers far enough apart so there are clear delineations between them.
Sutherland points out a problem with this, he calls it the 'bandwagon effect.' He spends a page and a half giving examples of group-think and how it is engrained in many various aspects of society. The authors give an example of one way around this, the "Delphi Method" used by the Rand Corp. in the '50s. They asked various experts how many nukes the Russians needed to counter our production of nukes. They conducted anonymous surveys, then produced the results to the group, then surveyed again, et cetera. This brought the estimates of the number of nukes to the same number within only a few surveys.
The authors suggest using a modified Delphi Method, by using playing cards. Using the Fibonacci Sequence, a manager gives each person five cards (1,2,3,5,8, and an Ace or blank card with 13 on it). Then ask them to rate the effort needed for a task; each teammember submits their card. They then see other's cards, and can debate with them on why they would submit that number. Then repeat until all issues are resolved.

# Antagonistic Decision-Making:

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. CH 5: Consider the Opposite

_By: Rodriguez Ranf, Daniela; Farrior, Cheri Nicole; Creedon Jr, John Thomas; Washington, Layvon Q; Swartwood, Hilary Ann_

**How can we systematically evaluate scenarios to avoid biases and identify the best options?**

## CHAPTER 5: _Consider the Opposite_

Sometimes when major corporations are struggling to make growth executives make decisions to buy another company, which can be extremely expensive. CEOs tend to make decisions such as these based off of pride and a confidence that they can work magic with their acquisitions, which ultimately leads them overpaying for their targeted company.

Two business school processors, Mathew Hayward and Donald Hambrick, decided to test this theory by determining if the following factors would boost the egos of inquiring CEOs: 1. Praise by the media 2. Strong recent corporate performance (which the CEO could interpret as evidence of his/her genius) and 3. A sense of self-importance (which was measured by looking at the gap between the CEO’s compensation package and the next highest paid officer). The study showed that CEOS pay a higher premium for an acquisitions when each of the three factors increased. The study also found that CEOs pay lower acquisition premiums when they have people around them who are unconnected to the CEO of the company who are more likely to challenge their thinking.

It is important that CEOS have the courage to seek out disagreement to make good business decisions, because a person’s natural confirmation bias will lead them to hunt for information that flatters their own existing beliefs. Overcoming confirmation bias begins with being willing to spark constructive disagreement. This can include assigning people on the executive team to prepare a case against a high-take proposal or create a safe forum where critics can share their concerns about a particular proposal.

Roger Martins “what would have to be true” strategy is a great technique for organizations to use when dissent is unwelcomed. It allows people to disagree without becoming argumentative.

Digging up disconfirming information can be problematic in situations where we actually want to be sold, because sometimes instead of obtaining information, we are actually asking for support. This comes into play when hiring managers call potential employees references. They want to hire that person, but want affirmation from somebody else that the person is right for the job. However, employers are becoming more strategic about the types of questions they ask and are asking tougher diagnostic questions. By doing so, they are able to collect more quality information

This chapter discusses best practices to systematically evaluate scenarios that avoid biases and identify the best options. Heath and Heath argues that the following will lead in identifying the best options: the practice of asking probing questions, using caution with probing questions backfire, assuming positive intent/ extreme disconfirmation, testing assumptions with a deliberate mistake.

The authors argue that in an attempt to collect unbiased information, it is important for ask probing questions to individuals who have incentives to only tell part of truth, as found in some salesmen, recruiters, and employees with agendas. Thus, to gather more unbiased information, it is important for individuals to ask questions that can be disconfirming, the authors uses the following exemplars: Law students- who were the last three associates to leave the firm? What are they doing now? How can I contact them? iPod Buyers: What problems does the iPod have? These types of open-ended questions aid in receiving information that leaves little room for bias.

Another best practice is being cautious that questions can backfire in situations that may have a power dynamic. Often times, when a doctor is trying to receive information from patients they may ask open-ended questions, that requires further explanation. For instance, a doctor may ask a patient, “what do you mean by dizzy” to receive and better understand information from the patient. This example can be seen in the example with Dr. Barbour and the Patient Joseph, whose statement of feeling dizzy was an indication of other problems to the doctor.

While the author addresses the idea of confirmation bias, the tendency for people to search for or interpret information in a way that may confirm one’s preconception, they argue whether or not it is possible to force ourselves to consider the opposite of our instincts, extreme disconfirmation. The authors offer the example of a marriage diary, as an exemplar of extreme disconfirmation. For instance, a marriage diary is used to help an irritated spouse see that his/her spouse may not always have the issues that he or she may think, such as selfishness. When an individual assumes positive intent, it allows them to view another person’s words or actions in a positive light.

The authors offer this chapter to make individuals cognizant that because it is in human nature to seek self-confirming information, a best practice to systematically evaluate scenarios to avoid biases and identify the best options is to consider the opposite.

## CHAPTER 6: _Zoom Out, Zoom In_

The second villain of decision making is “confirmation bias” where we develop a quick belief about a situation and then we seek information that supports that belief. In order to mitigate this bias, it is important to “reality-test your assumptions”. This involves taking a step back and collect information that you can trust that reflect the broader realities of a situation beyond your own individual impressions. Chapter 6 is about how to zoom out and zoom back in into different situations that involved decision-making.

The first observation the Heath brothers present is that we need to “often trust “**the averages**” over our instincts” in moderation. They explain that often in life we base our decisions trusting our impressions, rather than on the averages. When we make decisions based on reviews we acknowledge that 1) our ability to get the real truth about a product or the full picture is limited and subject to distortion; and 2) because of that we are smarter to trust the averages over our own impressions. Example of taking a job without consulting a sample of people that work there. Reviews from current and former works would be very valuable, as compared to a stranger's assessment of a hotel. The underlying tendency according to the Heath brother is that when we make critical decisions we do less objective research.

The second and key observation when zooming out and zooming back in for decision making is the concept of “inside” and “outside” views, which are categories developed by psychologist to understand perspectives in a situation. **Inside view** is based on one’s own impressions and assessments of a situation. **Outside view** is the opposite, analyzing the broader picture and ignores the particulars. The Heath brothers argue that the outside view is more accurate, as it is a summary of real-world experiences instead of one person’s impressions, yet we are generally drawn to the inside view.

**Take the outside view: **To take the outside view does not mean abandoning understanding or giving up on one’s individual impression, or inside view, in other words, “the outside view doesn’t require defeatism, but it does require respect for the likely outcomes”. The Heath brothers advice is to distrust the inside view and to instead get out of one’s head and consult the experts.

_Caveat: The Heath brothers include an important note: “sometimes people can have access to the perfect set of data, and still manage to ignore it.” So even if you have gathered the information, it does not mean that you will consider the outside view if you are too focused on the inside perspective. _

**Critical point regarding experts: **The simplest advice the Heath brothers can offer when when trying to gather good and reliable information to reality-test assumptions is to go talk to an expert. And an expert does not imply someone who has a “heavily credentialed authority”, rather an expert is simply someone who has more experience in particular area than you do. Seeking an expert is intuitive, but what is less intuitive is having clarity on what to ask them. Experts are bad at predicting, but great as assessing. Asking predictive questions makes people to revert to their inside view. What is important is to extract the knowledge or “base rates” and to avoid “predictions”.

**Keeping the humble approach:** People fall into two categories when confronted with the choice to take the outside view: some accept the idea immediately, while others feel dissatisfied by the analysis because it separates them from passion and trust in their own perspective. The Heath brothers recommend taking a humble approach, asking “what can I reasonably expect to happen if I make this choice?”

Chapter 6 continues to discuss the concept of **inside view** versus **outside view** through the stories of various people making decisions in different situations.

Brian Zikmund-Fisher faced a life-threatening decision to do a risky operation that would either provide him a cure and long, healthy life at the risk of cutting it much shorter or not doing the operation and only living for 5-6 years max. Taking the inside view would have relied upon his presuppositions, his biases, the big glossy sales pitch, instead of honing on asking the right questions, of trusting and interpreting the experiences of others in the situation and gathering data that informed the best decision. Brian researched medical journals, asked questions and analyzed about hospitals, their success rates, and made his decision based on an outside view of broad evidence.

Another concept is the **close-up**. The close-up involves trying to see through the big glossy picture colored by those delivering it to get down to the ground level and to get a real feeling for the types of services you’re providing or the customer’s experience. President Franklin D. Roosevelt employed this by challenging his advisors, going around them to talk to line-level employees, to consider polling and encourage letter-writing from constituents and sending surrogates such as his wife, Eleanor, unannounced to sites to get a real idea of how they were performing. A new Xerox CEO, Anne Mulcahy, also employed the close-up strategy to turn the company’s fortunes around by assigning every executive as the point person with one of their clients and spending at least one day of the year being responsible for fielding all consumer complaints so that they would have a better understanding of their customer’s needs and issues. The Japanese term, **genba**, meaning “the real place” is indicative of the close-up procedure, encouraging decision-makers to go to the store or factory floor and talk directly with people involved to better understand what is going on.

## Self-Control and Focus:

_How does “ego-depletion” affect our ability to make good decisions?_

Wohlenberg, Danielle Irene; Legnetto, Deanna Marguerite; McCully, James I; Hanson, Keely; Hamlin, Madeleine Rose

**Is Willpower a Limited Resource? American Psychological Association.**

In the American Psychological Association’s annual Stress in America survey participants regularly cited lack of willpower as the No. 1 reason for not following through with lifestyle changes. It was also determined that people believe willpower can be learned.

Willpower is defined as the ability to resist short-term temptations in order to meet long-term goals.It is also described as the ability to delay gratification, the capacity to override an unwanted thought, feeling or impulse. The ability to employ a “cool” cognitive system of behavior rather than a “hot” emotional system. The conscious, effortful regulation of the self by the self, and a limited resource capable of being depleted.

Willpower researcher Roy Baumeister, PhD, a psychologist at Florida State University listed three components for achieving objectives; First, an individual needs to establish the motivation for change and set a clear goal. Second, they need to monitor their behavior toward that goal, and the third component is willpower.

Terrie Moffitt PhD from Duke University and her colleagues found that individuals with high self-control in childhood grew into adults with greater physical and mental health, fewer substance-abuse problems and criminal convictions, and better savings behavior and financial security. Self-control scores also correlated with higher grade-point averages, higher self-esteem, less binge eating and alcohol abuse, and better relationship skills.

When willpower and self control is developed at a young age it can lead to positive lifestyle choices as an adult.

**Barnes, W., Gunia, B., & Sah, S. “Morning People are Less Ethical at Night.” Harvard Business Review, June 23, 2014.**

This paper establishes an idea that resisting temptation requires energy and effort, therefore, when an individual’s energy is low, they are more likely to behave unethically. The relationship between energy and ethics vary over time, so one person can act ethically during one part of the day and unethically in another, depending on their energy level.

The author relies on research that demonstrates alertness and energy follow a predictable daily cycle that is aligned to with the circadian process. Given different people have shifts in their circadian rhythms, the author divides them into two groups: “Larks” or “Morning People” who have their circadian rhythm shifted earlier in the day and “Owls” or “Evening People” who are shifted in the opposite direction. Using these two groups the author conducts two studies to see if there is a relationship between low energy levels and unethical behavior.

The first study focused on behavior in the morning. Participants were given a simple matrix task in which they were paid additional money for each additional matrix that they said they solved. Since participants believed that their work was anonymous, and they could earn more money there was an incentive to over-report the number of solved matrices. The results showed that night owls were more likely to cheat than larks given the experiment was conducted in the morning.

The second study was conducted both in the morning and at night. The experiment involved participants rolling a die and reporting the number they rolled with the higher the number paying out more money. Given the average roll should equal 3.5, the reported number rolled by the participants should be close to this number if they were not unethical and exaggerate the number rolled. The results showed that Larks in the morning reported rolls that averaged 3.86 but Larks in the evening reported rolls that averaged 4.55. Similarly, Owls in the evening reported rolls that averaged 3.80 but Owls in the morning reported rolls that averaged 4.23.

The study shows that given the different energy levels of the individuals depending on their circadian cycles would influence them to act unethically when their energy levels are low. The author concludes that managers should be wary of these different individuals and their chronotypes, so that they are not mismatched to the wrong time of day. These ways individual are put into situations to make poor ethical decisions.

**Duhigg, C. (2012). The power of habit: Why we do what we do in life and business (Vol. 34, No. 10). Random House. CH 5: When Willpower Becomes Automatic**

In this chapter, Duhigg describes the concept of willpower and explains how companies and organizations have begun to incorporate willpower into their training programs. Willpower, also known as self-discipline, is a key component of habit. Research shows that willpower is a learnable skill: for example, when children learn to delay gratification in exchange for some reward (eating two marshmallows after fifteen minutes versus one marshmallow immediately), these positive habits spill over into other parts of their life (e.g., better study skills). However, studies also show that willpower works like a muscle: it can be strengthened through practice, but exhausting your willpower resources too quickly in any one situation will leave less remaining for other tasks.

Duhigg provides Starbucks’ training program as a case study of how willpower can be mobilized as an organizational habit. For example, a key component of Starbucks’ employee training program involves teaching baristas how to respond to difficult situations, such as long lines or angry customers. All new employees take a required training course, during which they complete a manual that teaches workers how to respond to specific cues. Workers write out a plan for how they will handle difficult situations and rehearse the plans over and over until they become automatic. Thus, Starbucks teaches new hires how to handle conflictual or stressful scenarios by giving them what Duhigg calls “willpower habit loops” (145). The strategy has proven effective in training employees, boosting employee satisfaction, and improving customer experience, all of which have contributed to making Starbucks a successful enterprise under founder and CEO Howard Schultz. According to Duhigg, these trainings have also made important impacts in employees’ lives, helping them improve their soft skills, which can be applied in many aspects of their life.