Current Challenges in Strategy and Public Policy

In the very unpredictable world of the early 21st century, the analysis of both public policy and strategy has come under challenge. Simplistic assumptions about public policy formulation using a top-down analysis are redundant, given the array of stakeholders involved in policy making, including local communities, citizen groups, and multiple economic interests. Public service delivery has also been subject to radical change through e-government, digitisation, and co-production. Knowledge about public policy and management reform is now rapidly circulated and transferred between states, while at the same time, there have been calls for the professionalisation and credentialism of public servants.

As a result of growing environmental complexity, including greater stakeholder vigilance and multiple modes of public service delivery and levels of governance, the tools of strategy are now in greater demand in the analysis of public policy. However, this has created issues of governance and accountability as traditional bureaucratic mechanisms come under strain. The articles in this Special Issue, in various ways, consider how a ‘strategic lens’ can be used to inform better policy making and to offer new insights into navigating the analysis of public policy and management.

Although the debate about whether strategy in public policy and management is relevant is well worn due to the political environment, which assumes it is the politicians that ‘decide’ strategy, in a world of increasing instability, useful inferences can be drawn from the ‘traditional home’ of strategy in the business studies literature (Mintzberg et al., 2001). However, the Wilsonian distinction between politics and administration is constantly reasserted by politicians; for instance, we are witnessing the current rhetoric around the creation of ‘DOGE’ in the US, a populist approach which is being replicated elsewhere across the globe. Restoring the primacy of elected politicians has also been a familiar refrain since the emergence of New Public Management (NPM) at the end of the 20th century; this is the idea that politicians can and should reassert themselves over bureaucratic waste and idleness.

Although strategy differs from business in the public sector due to the political environment, public managers themselves are required to work in complex networks that consist of various and competing stakeholders. More often than not, they are also held accountable via media scrutiny in addition to a range of interest groups and citizens. Strategic management offers us a toolkit for stakeholder analysis, which is of value to the public manager. There also remains the pressure for short-termism as a result of electoral cycles or sudden events. For instance, Comprehensive Spending Reviews in the UK, designed to make public budgeting strategic rather than on an annualised cycle, are often delayed or abandoned due to political exigencies.

Despite the differences between how strategy is conceived in the public and private sectors, standard models of strategic change can be applied to the public sector. In this Special Issue, Chaitrali Anil Bhoi et al. apply Kotter’s now classic strategic change model to India’s Ministry of Education in their assessment of Holacracy as a potential response to strategic change. While Chaitrali Anil Bhoi et al. imply that the persistence of bureaucracy is a structural impediment to strategic change, the creation of public value (Moore, 1995) arguably has the highest profile in the literature when considering strategy in the public sector.

Public value is the idea that, in parallel with the private sector notion of ‘shareholder value’, public managers create ‘public value’ (Moore, 1995). Moore posited a strategic triangle consisting of legitimacy and support, public value and operational capabilities. If any of the three elements are missing, public value is compromised. Public value is also analogous to the resource-based view of strategy (RBV) (Barney, 1991) (performance is based on the resources at an organisation’s disposal). The article by Katalin Lipták in this Special Issue analyses social cooperatives in Hungary and regards Moore’s concept as key in understanding how social enterprise creates public value and social cohesion but at odds with the market-based approaches favoured by the government.

The public value concept also regards stakeholder mapping as an important step in strategic management in the public sector. This is also a key tool in strategic decision making and of equal applicability in any organisational context. However, unlike business and the private sector, stakeholders in the public sector include interest groups. Interest groups are seen as an essential part of a ‘pluralist’ democracy; in the UK, for instance, there is a huge variety of active groups, ranging from the British Medical Association to local campaigns against housing developments. Strategic decision makers in government cannot ignore them. The article by Francisca Alvarez-Figueroa and Christopher J. Rees takes a stakeholder approach when analysing policy in the education sector of Chile. However, the article notes the challenges faced by stakeholder engagement within certain political and economic contexts. It also shares a similar conclusion to Katalin Lipták’s article in this Special Issue about the challenges of strategic decision-making under marketized policy-making.

Public governance was partly a reaction to the shortcomings of the largely market-driven NPM of the late 20th century. Its main premise, which was to challenge bureaucratic structures to achieve policy outcomes, was seen as an alternative to traditional hierarchical and market-based approaches to public administration. At the core of governance is the idea of establishing relationships with different organisations and bodies to reach shared policy objectives. The appearance of the ‘New’ Public Governance at the start of the 21st century reignited the interest around strategy in the public sector, especially with the renewed emphasis on policy networks and stakeholders.

Although not considered part of the governance movement, there is some resonance with the work of Willian Ouchi (1980), whose institutional theory created an organisational evaluation based on markets, bureaucracies and clans. His research was based on the problem of ‘shared objectives’ within organisations, which is often difficult within the public sector, whose organisations tend to have multiple and often conflicting objectives (hospitals, schools, prisons, etc.). Markets are regarded as an efficient form of control and have dominated the strategic landscape of the public sector, with waves of NPM reforms. Bureaucracies remain the organising principle for the public sector. Processes can be observed in the public sector, but ‘outcomes’ not so easily; this means that bureaucracy is over-emphasised in public sector organisations. From the perspective of strategy, corruption and a lack of trust become organisational problems related to bureaucratic systems. In this Special Issue, the article by Jessica Nguyen et al. focuses on these aspects in relation to economic crises and government responses.

Ouchi also identifies the establishment of clan-based organisations, which appear to stress informal relationships; yet there is the difficulty of building clans within public sector organisations with ‘performance ambiguity’. While this can be achieved through socialisation or the building of positive cultures, many public agencies lack a sense of mission (one motivation for the creation of ‘executive agencies’ in the UK in the 1980s). The management of culture in organisations also offers a powerful countervailing force in relation to the implementation of strategy. In the public sector, administrative cultures are seen as a deterrent to lasting and meaningful organisational change. The article by Artan Karini focuses on this issue in Kazakhstan and the persistence of institutional features in Kazakhstan and wider Central Asia that mitigate against the kind of international public management reforms adapted elsewhere. As Peter Drucker famously remarked, ‘culture eats strategy for breakfast’.

Another emerging area to be addressed by strategy is digitisation and the use of artificial intelligence (AI), the latter offering a countervailing trend to the kind of strategic planning which emerged from the predictable organisational environments of the 20th century. In this Special Issue, this aspect is addressed by Ceray Aldemir and Tuğba Uçma Uysal, who examine the impact of AI on public financial management in three countries: Estonia, Singapore and Finland. The effect of AI on strategic management is still in its infancy.

Inevitably, strategy results in organisational change, and this is where the task of leadership comes in. This aspect of strategic management has gained attention coterminously with NPM, as senior public managers are increasingly expected to behave analogously to private sector CEOs to ensure that organisations achieve their objectives. The promotion of good governance has also driven the stakeholder approach to public management and is seen as a key attribute of leadership. For senior managers, leadership involves envisioning future strategy, aligning the organisation with that strategy and embodying change in a way that is visible to stakeholders (Whittington et al., 2020, p. 466).

The article by Katja K. Hleb et al. addresses the application of leadership to the public sector by analysing leadership in the health care systems of the UK and Slovenia through the concept of responsible leadership. It also examines the set of personal characteristics needed to lead complex organisations and the HRM challenges associated with that. While the business literature tends to extol the ‘heroic’ variant of leadership found in airport bookshops (Common & Gheorghe-Common, 2023), public sector leadership, although open to media scrutiny, is less visible and driven by process.

While this Special Issue contains interesting and challenging articles that scrutinise strategy in the public sector, in addition to AI and the digital revolution, the strategic environment is facing a raft of new challenges. While volumes such as the one edited by Ferlie and Ongaro (2022) help to raise theoretical awareness and the practical application of strategic management, the current literature on the topic remains lacking. This is in part a reaction to the dominance of politics in relation to strategy and the persistence of business perspectives as the dominant narrative in strategy (with some notable exceptions). Flynn and Asquer (2024, p. 58) write that ‘strategy in public sector organisations is moderately related to strategy in business firms’; instead of strategy being directed at gaining competitive advantage, strategy is about policy implementation and delivering public value. Market growth and profitability are not the concerns of public organisations but related to improvements in service outcomes (better health, better education, etc.). Both sectors are concerned with managing resources efficiently and effectively. The UK’s Comprehensive Spending Reviews, mentioned above, assumed this kind of rational, strategic planning in stable and predictable environments.

New directions in strategic management in the public sector should include the international dimension. Business strategy is concerned with the external business environment and managing the ‘global factory’ (Buckley et al., 2022), but the international environment is rarely considered in the public administration literature, except in the growing area of policy learning and transfer. The latest edition by Ferlie and Ongaro (2022) explicitly takes an international and comparative perspective and builds on their earlier work. As policy making is highly internationalised and several articles in this Special Issue acknowledge this aspect, their contribution is valuable and comprehensive. However, there is the supra-national level to consider, focussing on the capacity of international organisations such as the EU, World Bank and the World Trade Organisation to shape domestic public policy. Strategy in the public sector needs to take that into account, along with the actions of individual states (witness Trump’s new mercantilism), which can also have considerable policy impacts despite the strategic intent of domestic policy-makers.

Strategy formulation also includes learning from abroad. The idea of policy learning leading to policy transfer has gained currency, and any strategic assessment needs to consider whether a particular country is sufficiently compatible for policy learning and transfer to take place. From the perspective of public governance, policy networks have international reach and operate on different policy levels. Many studies have analysed how policy transfer shapes decision-making across or between national and sub-national governments, but such studies tend to be rooted in the political science literature.

In 2010, Bryson et al. called for new research directions in strategic management. This included the following:

• Models of public strategic management are further developed so that they attend more fully to the nature of practice;
• Increased attention is focused on the structuring and facilitation of organizational learning and knowledge management as an integral part of strategic management;
• Greater attention is devoted to how strategy knowledge develops and is used in practice;
• More attention is paid to integrating information and communication technologies into public strategic management models and practice (Bryson et al., 2010, p. 506).

Bryson et al.’s concerns have only been partially addressed in recent years. However, there is a focus on organisational learning and how that assists with policy evaluation; the latter point concerning ICT has been addressed in the literature, particularly with the move to digital-era governance. Although absent from this list, Bryson et al. (2010, p. 506) also acknowledge the growing importance of understanding leadership. However, it is hoped that this Special Issue has addressed some gaps in theory and research regarding strategic management in the public sector. It is clear that, despite the vicissitudes of politics, strategic management is critical in enabling public sector organisations to reach their goals and create public value.