Property Services Agency: Privatisation and Beyond - Essay Example

The Property Services Agency-Privatisation and beyond The process of privatisation has been on the top list of importantly discussed issues among thegovernments and numerous organisations in United Kingdom over the last and current century. The use of private firms is believed to raise the level of services provided, reduce costs, and provide a greater range of services to clients. It also allows governments the flexibility to initiate and terminate programs, as well as respond to changing needs, without start-up costs associated with such changes. One of the agencies privatised by government is a topic for discussion in current study. Using the example of Property Services Agency privatisation already embarked upon in the United Kingdom, the report will review the issue of organisational change and leadership, while giving a thorough analysis of the agency, conducting empirical research of the problem within the limits of current time period, and in accordance to established legislation. The end of the report will identify the ultimate conclusions on the effectiveness of the privatisation processes for both, the government that has taken the object to its privacy, and for the object of privatisation itself that has either started to perform more successfully, or experienced to meet the downfall in its operational activity. When speaking of organisational change - n important tool in management that is aimed to provide sustainable development and constant growth, - it is worth to mention leadership which is vital quality of manager who is eager to come with the best solution and outcome for the planned change or innovation. Being a private organisation, PSA aims to provide, manage, maintain, and furnish the property used by the government, including defence establishments, offices, courts, research laboratories, training centres and land until restructure and organisational change have come into play and imposed PSA to government's privacy. Before taking into consideration leadership management in a specific organization it is needed to review the theory regarding the issue. Within the leadership literature, researchers have sought to identify and describe effective leadership from various perspectives. Universal theories proposed that the same leader traits (e.g., for a review, see Bass, 1990) or behaviors (e.g., Bowers & Seashore) create favorable results in all situations. An inability to consistently predict effectiveness (for a review, see Yukl, 1989) led to the development of situation-contingent theories. Researchers postulated that a leader's effectiveness would be moderated by situational variables that either intensified or decreased the effects of a leader's traits (e.g., Fiedler, 1967) and behaviors (e.g., House, 1971; Vroom & Yetton, 1973). Research testing the utility and predictive value of this real-trait, real-behavior research has produced mixed results ( Yuki, 1989). More recently, an alternative, cognitive-attribution approach has been developed to explain the link between leader performance and perceptual processes ( Lord & Maher, 1990). Research suggests that leadership perceptions, indeed, may often be based on both traits ( Lord, De Vader, & Alliger, 1986) and behaviors and events ( Calder, 1977; Meindl & Ehrlich, 1987; Meindl, Ehrlich, & Dukerich, 1985). Rather than attempting to understand a leader's effectiveness in terms of real traits and behaviors, however, this interpretation is based on observers' subjective realities, as described by more general accounts of person perception and information processing ( Lord, 1985) or attribution theory ( Calder, 1977). In other words, leadership is in the eye of the beholder. A leader may assert influence stemming from several different bases of power (e.g., French & Raven, 1959). The success or failure of an influence attempt depends, however, on whether the influence target actually accords such power to the leader. Without follower responsiveness, leader power is meaningless. The specific relationship between leaders and their followers, as well as the intervening perceptual processes, explains a situational contingency that is a critical determinant of a leader's effectiveness. Throughout the times there have been described a number of leadership theories. As long as it makes no sense to review all of them within the frames of current study I will shortly describe few of them. Transactional model of leadership (e.g., Graen & Cashman, 1975; Ridgeway, 1981) focuses on the interaction between leaders and followers, including their changing perceptions of one another. For many kinds of groups, followers expect leaders to conform to their leader-role expectations and to secure rewards for the group. Fulfillment of such expectations is "reciprocated in the form of status, esteem, and heightened influence" (Hollander & Julian, 1969 , p. 390). This process characterizes the social exchange found in leader-follower relations. Previous studies exploring implicit leadership theory (e.g., Lord et al., 1984; Phillips & Lord, 1982) have found that people use categories of behavior to differentiate between leaders and nonleaders and between effective and ineffective leaders. Within each of these contexts, many factors contribute to effective, functional leadership ( Lord, 1977), one important component being followers' willingness to be influenced by the leader. A direct, empirical study of this specific feature does not exist within ILT research. A separate line of research, however, has identified behaviors and traits of leaders that seem important for individuals' decisions to allow a new leader to influence them ( Hollander, 1958, 1961; Ridgeway, 1981, 1982; Sorrentino & Field, 1986). If a leader exhibits those characteristics, followers seem willing to be influenced (i.e., followers perceive the leader as being worthy or deserving of influence). To date, however, no one has explored the possibility that group members have an organized set of criteria and expectations (i.e., prototypes) to which they compare a new eader's actions. Leadership categorization theory suggests that group members do possess such an organized, schematic set of criteria and expectations in other contexts. Nonetheless, leadership categorization studies have not focused on the special case of the influential new leader, despite past research indicating that followers possess different expectations for new versus established leaders (e.g., Hollander, 1958, 1961, 1964; Kenney, Blascovich, & Schwartz-Kenney, 1993). The first objective of the present research, therefore, was to assess observers' expectations for a "new leader," one with no history in the group but who will eventually be able to influence followers. Cantor and Mischel ( 1979 ) maintained that people's descriptions of examples of a category (e.g., new leaders or new leader behaviors) reflect underlying category prototypes -- the most typical instances or most representative examples of the category. Therefore, asking subjects to describe the characteristics of a new leader that are necessary if he or she is to be accepted by the group should elicit components of a new-leader prototype. Early studies (e.g., Hollander, 1958, 1961) identified potential elements of a leader prototype indirectly -- for example, by providing subjects with prescriptive lists of leader behaviors or traits and subsequently measuring the extent to which subjects would be influenced by such a leader. Our goal here was to elicit these features more directly, and with less constraint, by explicitly asking subjects what characteristics a new leader should exhibit if he or she is to be accepted by a group. These characteristics are important to identify, because they could help new leaders behave effectively and establish legitimacy in what is likely to be a crucial phase of leadership (e.g., Hollander, 1958). In 1988, the Secretary of State for the Environment stated that the PSA would have to operate as a commercial concern and bid for government work, on the same basis as the private sector. This, in effect, sounded the death knell of the PSA. In 1989, the Secretary of State for the Environment announced that the PSA would be privatised. The privatisation was carried out in two phases: 1. December 1992: selling of PSA Projects; 2. September-October, 1993: splitting PSA Building Management into five separate companies and selling to four different private sector companies. To understand why government departments were so keen to abandon the PSA and take responsibility for their own construction activities, it is necessary to examine how the PSA operated as well as to take a look at the most market-oriented mode of privatisation. The most market-oriented mode of privatisation is through the use of vouchers or subsidies. At a government level, food stamps, medical care, and public housing are examples of voucher or subsidies options. One of the key arguments in favour of privatisation is that it results in reduced costs. This has been empirically demonstrated in the literature and substantiated by the U.K. Audit Commission, which reported savings of 20 percent to 25 percent through government contracting of public services. The Audit Commission later concluded that privatised management of public housing could result in annual savings of 200 million. Opponents of privatisation and Social Services have been concerned on several fronts about its negative impact. Nather (2000) expressed concern regarding confidentiality issues and privacy of client records. Privatised social services provide access to sensitive client information and no protection from a professional code of ethics, such as that which exists in the social work profession. Contrary to the cost-effectiveness arguments put forth by privatisation advocates, opponents accuse privatised social service agencies of charging excessive fees for services, having hidden costs, and reducing the scope of services provided to clients (Lucken, 1997). The sole purpose of private providers is to maximise their profits, with client service being the low priority item (Kelly & LeGrand, 2000). Kuttner (2000) illustrated this point by highlighting a privatised developmental disability agency in the USA that was willing to radically slash their costs at the expense of clients. When competing for a state contract, they negotiated a reimbursement rate so low, that their competition--who were conscientious and ethically minded public providers--were driven out of the market. A similar phenomenon is occurring at the government level, whereby provider reimbursements have been reduced; the result is that doctors and nurses are providing less treatment. Other criticisms of privatisation involve the lack of public accountability and reduced levels of monitoring and oversight; the greater potential it presents for political corruption, favouritism, and collusion in the competitive bidding process; and the fact that it represents a weakening of public institutions at a time when political participation is already decreasing. Finally, women and members of ethnic minority groups are disproportionately affected by privatisation because they rely more on public employment as a means of social and economic advancement. The process of privatisation of PSA involved six stages throughout which the agencies successively went to completely to government privacy. The short description of each stage is given in below: - Stage 1. In 1986 the government hired consultancy firm Deloitte in order to increase commercial efficiency of the PSA. As a result the accounting and management information systems were introduced and new systems were designed to allow the PSA operating along private sector lines and to abandon public sector practices which were seen as non-commercial. - Stage 2. In 1987, it was announced that, from April 1988, civilian departments of government could take responsibility for commissioning their own construction projects with a value of over 150,000. The Ministry of Defence was allowed to follow suit in April 1990. In effect, this meant that the PSA had to bid alongside private sector companies for government work. - Stage 3. In 1988, the Secretary of State for the Environment announced that the PSA will further operate on a commercial basis. That implied that its income and therefore survival would depend on gaining work from other government departments, in the face of private sector competition. To facilitate this, the PSA was restructured into a number of separate business functions, the main ones being property ownership, property services (major contracts and new work) and estate services (minor works and maintenance). In addition, a Business Development Directorate was established within the PSA so that commercial orientation of the company ha been promoted. The consultants were hired to cooperate with the new Directorate and assist the PSA's commercial development either training staff in business accounting and financial management or conducting business planning, human resource management and covering the marketing manager's responsibilities when taking care of customers and elaborating marketing policy for the company. - Stage 4. In September 1989, UK Government proclaimed the PSA to be privatised. In June 1990, the legislation referring to eligibility of privatisation process has been endorsed. - Stage 5. In October 1990 while preparing for privatisation, the PSA was restructured into three main businesses: PSA Projects, PSA Building Management (which was eventually split into five separate companies), and PSA International (which, in the end, was closed down rather than sold). - Stage 6. 1992, privatisation of PSA Projects. This was followed by the sale of five companies in 1993, that used to be consistent parts of PSA Building Management These stages of PSA privatisation reflect quite straightforward and structured process. However, the material in above is believed to be far from what had happened in reality as the supposed situation and evident facts, which had been hidden for some reason, would differently appraise the privatisation process. It must be recognised, for the beginning, that most of the above actions were enforced on the PSA rather than arisen from the decisions of its own management. Next, the six stages are presented as those focused on changes to structures and procedures whilst paying little attention to the reaction of the PSA's staff to the notion of privatisation. Finally, the shift to PSA privatisation was far slower and much messier than either the government or the PSA's management had allowed for. It is generally agreed that the privatisation process was longer and more painful than expected. As a director of one of the privatised companies remarked: The privatisation process was a very lengthy process. It was much longer than it was originally intended to be and meant that the natural unease and nervousness that occurs during such periods was prolonged. Further in the report the text will emphasise a literature review on the topic of privatisation, organisational change and leadership. That the report indicates input greatly in to identifying the reasons of the issue of PSA privatisation and will ultimately help to identify conclusions of why government found it effective for the agencies to be privatised. Government, in the situation with PSA favoured privatisation whilst also sharing an important assumption: that private businesses, spurred by competition and the profit motive and operated with entrepreneurial flexibility and ingenuity, can provide superior goods and services more inexpensively than government. However, it is not difficult to imagine circumstances in which the private sector would be a far less effective and more expensive provider of public services than the public sector. It is therefore crucial that we ask: Under what conditions can privatisation fulfil social needs more effectively and cheaply A related question is how government may best help this privatisation to succeed. Traditional organisational theory discusses tools such as program evaluation and performance measurement, and the changes they bring about within the realm of managerial goals as presented by the rational model and its modern variants. Deeply rooted in the tradition of scientific management, modern variants of the rational model emphasise that the purpose of managers is to replace "irrationality" with technically rational actions. Evaluation is a scientific or technological task (Miller, 1982). With the case of PSA privatisation and its organisational change, the adoption and implementation of performance measures are purely technical issues. As a final outcome, it can be modified by applying rational planning based on scientific analysis to achieve the efficiency of the whole. The report considers the rational factors that have implications for the utilisation of performance measures, -adoption and implementation--of the utilisation process. However, when the political/cultural aspects of change are considered, It will identify a clear distinction in the way the rational factors behave at each stage of the utilisation process. Resources. Public organisations that have experimented with performance measurement have called attention to the importance of committing resources, having staff devoted to evaluation of performance measures, and collecting adequate data. Given this evidence from the field, one would expect to find this resource factor would have a strong impact on the utilisation process--adoption and implementation. Information. Consistent with the rational view, the Office of the Deputy Prime Minister and the DTI learned that having the technical knowledge of how to conduct and implement performance measurement was critical to its success. This knowledge can be acquired through training or access to adequate information on performance measurement. Thus, we expect this factor to have an important impact on the two stages of utilisation. Goal Orientation. In the experience of some public organisations, goals and strategies for achieving the goals are often developed and modified because of the organisation's interest in performance measurement. Katz and Kahn (1978) have stated that for evaluation to be useful, there must be a consensus on program goals. Thus, if there is a goal orientation in the organisation, adoption and implementation of performance measures is more likely to occur. External Requirements. Another key assumption of the rational view, is the belief that because organisational change is a matter of rationality, policy decisions or directives will automatically elicit desired behaviours. If preparing annual performance reports were required by law, it would compel follow-through in spite of initial difficulties. Therefore, one would expect that an external requirement to use performance measures, should lead to both adoption and implementation. While we recognise the importance of each of the rational/technocratic factors described above, it is also important to recognise they do not operate in a vacuum. Those factors may be necessary, but they are not sufficient to elicit utilisation. They need to be placed within the context of a political framework. Critics of rational view, state that the perspective neglects the role of context and powerful groups within organisations, leading to myths about the rational nature of problem-solving processes in organisations. Carnall (1995) argues that in order to understand how organisations are managed, experienced, and changed, it is necessary to understand the politics of organisations. Change in the organisation produces conflicts, which are often resolved by internal political processes, such as the formation of interest groups and coalitions, bargaining, and side payments. While the literature and experiences from the field suggest that resources and access to information are indeed important for utilisation to occur, the role of requirements and goal orientation have been criticised by theorists in the political tradition. First, when we consider external requirements, we find the formal or legal authority that public organisations are subject to always operates in a political context, which may weaken or bolster it in practical terms. This implies that even when a policy requirement is formulated, its implementation is not necessarily assured. Furthermore, policy makers do not necessarily expect policies for change to be implemented. Therefore, organisations may satisfy a law or administrative regulation (external requirement) for using performance measures, by focusing only on policy adoption (developing the measures), without effectively implementing (or using the information)--a phenomenon we know as "symbolic action." In conclusion, the political/cultural perspective does not discard the importance of the rational perspective, but places it within a political context. We now address the factors that are emphasised in the political/cultural perspective. Internal Interest Groups. The experience of the Government drive for privatisation in the mid 80s shows that fear is a typical reaction of line staff. However, "when they understand that performance measurement can help them accomplish their job and do it more efficiently, they often become more interested in its potential" (Hanks, 1990). In another example, the failure of the mandated "performance reporting law" in the public sector, has been attributed to managers not supporting the effort, because the law was passed without the agency head's input. Mumford and Ward (1968) have discussed how the need to adapt to change and innovation is also felt by managers. They may see change as highly ambiguous, and their reactions depend on their perceptions of how change and innovation will affect their job, status, and personal ambitions. In his study of the utilisation of evaluation research, Patton asserts that if evaluation results are to be utilised, the evaluation process must include the identification and organisation (involvement) of relevant decision makers and information users. This includes individuals for whom information makes a difference, who are willing to share responsibility for the evaluation and its utilisation, who can use the information, and who have questions they want to have answered. Miller, (1982) concludes that involving internal stakeholders (such as management and staff) in the performance-measurement efforts can lead to a greater understanding of the reasons for undertaking the effort and the consequences. However, given that implementing performance-measurement information could have an adverse effect on employees, we could expect to find a stronger positive effect of this factor, on adoption than on implementation. External Interest Groups and Unions. According to the political model, the influence of external interest groups is just as important in the utilisation process of performance measurement as internal factors. Organisations experimenting with performance measures have asserted that the success of a performance-measurement system also depends on the support of elected officials and the continued support from the public. Carnall (1995) cites the use of outside experts, working with external groups and stakeholders, as an important means of influence. In particular, we would expect that, given the external consequences of actually using performance measures, support from citizens and elected officials (external interest groups) would be essential for implementation. The support from elected officials and citizens may come in two ways: first, by allowing the organisation to devote resources to the effort, and second, by using the information even when the results contravene a political agenda. Unions may be considered an external interest group because of their affiliation with larger external organisations. Although unionisation is often sited as a deterrent to innovation and change, there are examples that suggest a more complicated role. For example, The Department of Transportation learned that support from unions can be gained by keeping them involved and informed of changes. Fiscal and performance pressures may also lead to union cooperation in reform efforts. In the London Borough of Westminster, the municipal unions have long cooperated on productivity improvements as a function of fiscal pressures. Other examples suggest the effect of unions can be positive or negative, depending on the circumstances. In New York (USA), for example, cooperation between the unions and the schools has improved substantially since the appointment of Harold Levy as chancellor of the New York City School system. Such co-operation is in marked contrast to the generally hostile relationship previously evident under former chancellors, who deferred to Mayor Rudolf Giuliani or who were forced out because they resisted the mayor's confrontational policies. Unions may also feel justified in opposing change when it may bring about negative consequences to its members. For example, the implementation of performance measures by The Department of Transportation eliminated one third of all management positions--a favourable outcome for the agency, but not so for the employees involved. Taken together, these examples highlight Fischer's (1994) warning against the philosophy of portraying management as agents of co-operation, and unions as the embodiment of social and political conflict. If unions have a tendency to oppose practices that could disrupt or threaten employees, we would expect to find the level of unionisation to be negatively related to both stages of utilisation of performance measures, but this negative effect should be particularly strong at the implementation stage. Risk Taking and Attitudes. Related to internal politics is the issue of organisational culture. In relating the experience of West Yorkshire Police Authority (1996) asserts that managing for results requires a cultural change. Culture refers to the dominating beliefs or ideologies prevalent in organisations, which can shape and reflect organisational power relationships and their response to change. Taking Tushman, (1996) argument that culture also represents visible structures and processes, one can explore organisations' potential to manage for results by looking at how open they are to change. This may be assessed by the presence of systems that reward innovation and risk taking, and by evaluating the perceptions and attitudes of management and non management employees toward innovation, change, and performance measures. Quinn, (1980) asserts that organisational incentive systems can be used to control and facilitate the use of information. Thus, we would expect these factors to have an important and positive effect on both adoption and implementation; given the stronger consequences of actually using the information, the effect will be greater on implementation. Two managerial implications emerge as primary from the preceding discussions. Clearly managers in new ventures must learn to cope effectively in contexts of high organisational change as well as frequently rapid environmental change. Such coping necessarily requires a high degree of responsiveness on the manager's part, that is, a willingness to embrace change and commit to the organisational system adaptations, necessary to keep the firm well aligned with its environment and functioning smoothly on an internal basis. In open systems parlance, the entropy battle must constantly be fought by entrepreneurs in high-growth ventures as well as by entrepreneurs in ventures, where environmental turbulence is dictating that major organisational system changes be made. The cycle time minimisation process advocated above represents, in essence, a means for the efficient utilisation of energy that must be expended over time in fighting inevitable system entropy. The managerial need for responsiveness and continuous change, however, is counterbalanced by a second need to avoid the perpetuation of inefficiencies through making changes to organisational system elements, as if the timing of their enactment does not matter. It is important to recognise that by changing elements in the organisational "equation" in an Ad hoc fashion managers may be contributing to the ongoing misalignment and inefficiency of the organisational system. Transitions are essential, but transitions to more viable organisational gestalts in entrepreneurial firms, where extensive modifications to competencies, structures, and/or processes are required, are best accomplished through rapid changes, that maintain needed complementarities between the firm and its environment as well as within the firm. Unfortunately, new venture managers often operate in much more of a fire-fighting mode, where the most pressing problems are addressed sequentially, independently of other problems, and with "band aid" solutions. To get out of this dysfunctional adaptation mode, new venture managers must be able to simultaneously envisage their likely future operating environments, as well as achievable organisational gestalts that provide good fits in those environments. The development of "strategic visioning" skills may thus be of particular value to new venture managers operating in rapidly changing organisational or environmental contexts. The presence of general management skills relating to corporate transformation or, more generally, the implementation of change could then enable new venture managers to create the envisaged gestalts. Working purposefully and quickly toward the creation of these potentially high-performing gestalts, will minimise the costs of change to the organisation and maximise the organisation's ability, to rapidly and efficiently address market and other environmental needs. To conclude, the organisational change of Private Service Agencies in UK have changed their organisational structure, while greatly influencing on its performance and changing managing styles. Though the change has been not of agencies approval it has brought its fine effect, as any change that takes place within organisational environment and is an initiative of leadership, moves the company to progress and positive changes. Bibliography: 1. Bass, B. M. ( 1990 ). Bass and Stogdill's handbook of leadership: Theory, research, and managerial applications (3rd ed.). New York: Free Press. 2. Bowers, D. G., & Seashore, S. E. ( 1966 ). "Predicting organizational effectiveness with a four-factor theory of leadership". Administrative Science Quarterly, 11, 238-263. 3. Calder, B. J. ( 1977 ). "An attribution theory of leadership". In B. Staw & G. Salancik (Eds.), New directions in organizational behavior (pp. 179-204). Chicago: St. Clair Press. 4. Campbell, G. J., & McCarthy, E. (2000). Conveying mission through outcome measurement:. Policy Studies Journal, 28, 338-352. 5. Carnall, C. A. (1990). Managing change in organisations: Prentice Hall. 6. French, J. R. P., & Raven, B. ( 1959 ). The bases of social power. In D. Cartwright (Ed.), Studies in social power (pp. 150-167). Ann Arbor: University of Michigan Press 7. Greiner, L. E. (1972). Evolution and revolution as organisations grow. Harvard Business Review, 50(4), 37-46. 8. Graen, G., & Cashman, J. F. ( 1975 ). "A role-making model of leadership in formal organizations: A developmental approach". In J. G. Hunt & L. L. Larson (Eds.), Leadership frontiers (pp. 143-165). Kent, OH: Kent State University Press. 9. Hambrick, D.C., &, Crozier, L. M. (1985). Stumblers and stars in the management of rapid growth. Journal of Business Venturing, 1(1), 31-45. 10. Hanks, S. H. (1990). The organisation life cycle: Integrating content and process. Journal of Small Business Strategy, 1(1), 1-12. 11. Hollander, E. P., & Julian, J. W. ( 1969 ). "Contemporary trends in the analysis of leadership processes". Psychological Bulletin, 71, 387-397. 12. Katz, D., &, Kahn, R. L. (1978). The social psychology of organisations: John Wiley and Sons. 13. Kilmann, R. H., &, Covin, T.J. (1988). Corporate transformation: Revitalising organisations for a competitive world. San Francisco: Jossey-Bass. 14. Kuttner, R. (2000). Care, charity, and profit. American Prospect, 11, 4-5. 15. Lord, R., De C. Vader, & Alliger, G. ( 1986 ). "A meta-analysis of the relation between personality traits and leadership perceptions: An application of validity generalization procedures". Journal of Applied Psychology, 71, 402-410. 16. Lord, R., & Maher, K. ( 1990 ). Perceptions of leadership and their implications in organizations. In J. S. Carroll (Ed.), Applied social psychology and organizational settings (pp. 129-154). Hillsdale, NJ: Lawrence Erlbaum Associates, Inc. 17. Miller, D. (1982). Evolution and revolution: A quantum view of structural change in organisations. Journal of Management Studies, 19(2), 131-150. 18. Katz, Kahn (1978 ). Evolution and revolution: A quantum view of structural change in organisations. Journal of Management Studies, 19(2), 131-150. 19. Quinn, J. B. (1980). Managing strategic change. Sloan Management Review, 21 (4), 3-17. 20. Ridgeway, C. ( 1982 ). "Status in groups: The importance of motivation". American Sociological Review, 47, 76-88. 21. Tushman, M. L., &, O'Reilly, C. A. III (1996). Ambidextrous organisations; managing evolutionary and revolutionary change.Management Review, 38(4), 8-30. 22. Yukl, G. ( 1989 ). Leadership in organizations (2nd ed.). Englewood Cliffs, NJ: Prentice-Hall. Read More