The Rise and Fall of Bureaucracy:
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The Rise and Fall of Bureaucracy: WHY A NEW PUBLIC MANAGEMENT; WHY NOW? http://www.willamette.edu/~fthompso/MgmtCon/Fordism_%26_Postfordism.html. Transaction Cost Analysis. Markets and organizations are alternative venues for exchange

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The Rise and Fall of Bureaucracy:WHY A NEW PUBLIC MANAGEMENT; WHY NOW?http://www.willamette.edu/~fthompso/MgmtCon/Fordism_%26_Postfordism.html


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Transaction Cost Analysis

  • Markets and organizations are alternative venues for exchange

  • That the choice of venue boils down to a question of information costs

    • search costs

    • negotiation costs

    • monitoring and enforcement costs

  • Reducing information costs can radically affect organizational designs and market structures


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Economic Revolutions of the 20th Century

  • Bureaucratic revolution -- turn of the century

  • Managerialism -- mid-century

  • Information revolution -- NOW


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Bureaucratic Revolution

  • The efficacy of government provision and control increased relative to the market, decreasing the payoffs to free markets, secure property rights, and minimal government intervention;

  • The efficacy of hierarchically coordinated systems increased relative to the market and other self-organizing systems, increasing the payoff to hierarchy and vertical integration;

  • The efficacy of centralized allocation and ex-ante control increased relative to decentralized allocation of resources and ex-post control, increasing the payoff to scale; and

  • The efficacy of functional structures increased relative to process-oriented structures, increasing the payoff to scope.


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BASIC ELEMENTS OF BUREAUCRATIC ORGANIZATIONS

  • Centralized materials requirements and logistical planning,

  • Coordination by rules and standard operating procedures

  • The merit principle

  • Functional design

  • Decomposition of tasks

  • Sequential processing


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Figure 1

1950


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Figure 2

1950


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Progressive Movement in US

  • War Department under Root

  • USDA Forest Service

  • Municipal Reform

  • Contracting out of services replaced by in-house production

    For example: NYC Dept. of Sanitation


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Elements: Bureaucracy/hierarchy/managerialism

  • Professionalization, expertise,

  • Regimentation/task specialization

  • Functional specialization

  • Divisionalization

  • Differentiation of staff from line functions--planning and control

  • Specialization of clerical functions--planning and control

  • Accrual accounting (annualization)

  • Cost accounting

  • Donaldson Brown’s system of corporate control

  • Internal allocation of capitol


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Impact of the Information Revolution on Business and Government

The market restored?

Versus hierarchy -- virtual organizations

Versus government -- deregulation & privatization

Organizations transformed

Radical downsizing, decentralization, and de-specialization

Time-based structures, process focused designs, Networked organizational structures


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EVENTS THAT TRIGGER INSTITUTIONAL INNOVATION GovernmentDemographic changesNew knowledgeGap between expected and actual events or outcomes— i.e., unanticipated or surprising success or failureChronic dissatisfaction with actual outcomesMood or fashion changes


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Exhibit A Government