IntroductionAny organization exists because society needs its service function. Therefore, an organization must regularly reshape its system to adjust to the continuously changing society. Governments, similar to other organizations, are organs of society (Drucker 1973, p. 39). Although society's expectation in general is to have wellness, perception of wellness is changing over time. And factors influencing wellness are also changing. If the government wants to perform, which means fulfilling society's expectation, its organization must be open to changes to be adaptive to its environment. The performance supports the continuity, which is important to balance the change. Innovation is required to make the resources work efficient in achieving high performance. Indeed, innovation creates resources from something valueless (Drucker 1993, p. 30), it is the one that makes one society more productive and richer than another (Helpman 2004, pp.36-46). Peter Drucker, in many of his works, emphasized the importance of well performing government. This paper will argue that organization can perform in changing society if they manage their capacity to be adaptive to the changing organization's environment.
Government Organization
Peter Drucker had many critics. He argues that government organizations, in general, lack performance, are inefficient and ineffective, budget rather than performance oriented, are managed by less capable people (compared to the private sector), and are unclear in result orientation (Drucker 1973, pp. 137-147; Drucker 1988, pp. 131-141; Drucker 1992, pp. 212-218). He applied that argument not only to developing countries, but also developed countries particularly the United States where he spent most of his life. He believes that government is an organ of society, and should not be an end in themselves. The objectives and results of government must lie in its customer in society, outside of organization (Drucker 1973, p. 158; Drucker 1988, pp. 56-57; Drucker 1999, p. 29;38).
Elements of Institutional CapacityEvery government has functions to be delivered to society and its environment. It is the institutional capacity which enables government organizations to perform. As society and the environment are continuously changing, government must manage their capacity to be adaptive. Managing capacity requires an understanding of capacity elements. Capacity elements are factors, within and outside organizations, which work interactively to build the institutional capacity of the organization. Institutional capacity is more than personnel capacity. A government with high skill and knowledge of people will not be able to perform its function without stakeholder support and effective leadership. That means capacity elements must extend beyond skill and knowledge of people. This essay will suggest seven capacity elements; they are: stakeholder support, strategic cycle, job and organization structure, work procedures, facilities and information systems, competency and motivation of people, and leadership.
Stakeholder supportStakeholders' needs, preferences, and priorities are the basis of how government should adapt their capacity. Changes in perception, mood, and meaning are a source of innovation (Drucker 1993, p. 35). Similar to an organism, government interacts with the stakeholders in its environments, who can influence or are influenced by the achievement of government objectives (Freeman 1984, p. 46). In order to ensure the achievement of its objective, government must define who its stakeholders are. Government's stakeholders are not limited to citizens although citizens are legitimate stakeholders who play a multifunction role in society, either as the owner or the customer of the state. Those who have no legitimacy but hold power and possess urgency are also stakeholders with a range of different qualities (Mitchell et al. 1997, pp. 854-874). Ignoring any stakeholder would result in government's failure to achieve their objectives. Government must manage each of its stakeholders in a correct manner according to their interests and potential impact on the objective's achievement. Therefore, customer focus does not mean the customer is the only concern. Without support from all stakeholders, with various importance levels depending on their characteristics, the objective of government will never be achieved.
Strategic cycleStrategy defines the 'theory of business' of government—such as customers and customer expectations, objectives, and results—and plans to convert that into performance (Drucker 1999, p. 43; Drucker 1973, p. 122). Defining 'theory of business' is important to identify the scope of the government business. This is because government should not do everything. Some public issues can be done better by other institutions in society. The main role of government is to 'govern', not to do. Some functions can be better implemented if 'decentralized' to other institution (Drucker 1992, p. 233-5).
Once the scope is clarified, the next step is to develop an action plan (as part of the strategic plan). That will determine programs and services necessary to achieve government's objectives and results. Results must be about change, and describe how government wants a better society in the future. Result formulation must consider opportunities to innovate. Drucker mentions seven sources for innovative opportunity, they are: the unexpected, the incongruity, the process need, changes in industry or market structure, changes in demographics, changes in perception, mood, and meaning, and change in knowledge (1993, p. 35). In order to make a judgment about results achievement, the strategic plan must be equipped with a set of performance indicators. These indicators should help reveal the extent of achievement (effectiveness) and also show how many resources will be used when delivering the program or services (efficiency) (Palfrey et al. 1992, p. 86; Department of Treasury and Finance 2003, pp. 9-10). Organizations can be efficient but do the wrong thing. They can also be effective but do things incorrectly resulting in cost (Drucker 1988, p. 44). Drucker suggested that a strategic plan should not avoid risk because higher risk means higher performance (Drucker 1973, p. 125). However, it is important to identify the risks and to have a plan to overcome these risks. Another important element of the strategy is a budget plan. The budget plan must be integrated and fully coordinated with the action plan. Similarly, the action plan must adjust to financial objectives, such as target on fiscal deficit/surplus.
There is no fixed plan for the future that will be valid forever. Any strategic plan must be treated as an adaptive plan. Regular evaluation and re-planning is necessary. Drucker argues that service institutions need a discipline of 'planned obsolescence' and 'planned abandonment' (1988, p. 149). Therefore the performance indicators are important, and this is why this essay calls the capacity element 'strategic cycle' rather than strategic package.
Job and organization structureThe structure of jobs and organization must fully support the strategy. Strategy follow mission and structure follow strategy (Drucker 1999, p. 8). When a strategy has been defined, organization divisions, job titles, and number of jobs can be identified. A good design of jobs and divisions will provide the correct size organization; not too big and not too small. Government organizations must develop their own structure according to their strategy and conditions to be effective and efficient. Effectiveness could be achieved if all required tasks are allocated to all jobs. Efficient structure is indicated by clear job description and optimum work load in all positions. This will also ensure that each job is unique and no unnecessary task overlap.
The concern on effectiveness and efficiency also applies to divisions. Division is required to decentralize the management within an organization. This is useful to implement a number of different services or functions to produce different outputs or products. Management should be decentralized into autonomous units such as departments or agencies. This is what Drucker calls 'federal decentralization' (1954, p. 207). Decentralization helps organizations shorten the decision making span and reduce the possibility of miscommunication. It will also eliminate resistance from employees and lower level managers over management decisions. Decentralization improves effectiveness through shaping organization resources to accomplish particular tasks and achieve particular results within autonomous units. Therefore, each unit must be responsible and authorized to manage their resources, design and implement their strategy, and also accountable to achieve their results as contribution to the total government. The right size and appropriate description of jobs and divisions of a government organization determines the success of its strategy implementation.
Because the strategy is subject to change, job and organization structure must be adaptive. There is no one right organization structure (Drucker 1999, p. 11). It is necessary to conduct regular evaluations in order to fully support the organization's changing strategy. However, it is also important to guarantee certainty to a certain extent to allow people to have good orientation about their organization. This is because change and continuity need to be balanced (Drucker 1999, pp. 90-93).
Work proceduresAny government organization, as a service institution, needs to clarify and publish the work procedure of all services they deliver. Procedure clarification and transparency is not only important for creating effectiveness and efficiency, but also important to disseminate the service information as the basic right of customers. Each particular service must be equipped with standard operating procedures (SoP). SoP determines the process chain within the service. One link is one unit of processing. It describes how output is produced from input. Each link involves materials, equipment, people, and other resources over a certain time period. Inputs are delivered by people from the previous link, while outputs are delivered to people in the next link.
The people who provide inputs and receive outputs could be from inside or outside the organization. This process will clarify who to coordinate with, for what and when. The end output is the result of the autonomous division and will contribute to the overall government objectives.
By capturing the work process in SoP, each government division could assess their efficiency or productivity by calculating how much output they get per input, or how much output per time or per employee. This is also a way to create service delivery standards such as cost, time and quality of service. Governments from different states who deliver identical services could compare their efficiency and effectiveness. This is a chance to create competition among service institution which could boost their innovation. For example, in business permit services, all 584 local governments in Indonesia could compete on the time needed to process one business permit. Government should regularly update their procedures with new knowledge and technology (innovation) to improve efficiency. This means procedure should not make government organization static—by limiting themselves only to follow the procedure (Drucker 1992, p. 231). Procedure must be treated as a tool to develop sustainable innovation.
Facilities and information systemWithout support of appropriate facilities, even organizations with the most knowledgeable peoples may achieve results, but certainly will not be efficient. Therefore, it is important for any organization to catch up with the latest technology which can boost their efficiency. Otherwise the organization must find their own innovation to compete with others who better equipped. The reason for being equipped is to be efficient, nothing more than that. Worker with facilities and equipment must prove that they are able to produce results with appropriate quality faster than those who do without. Facilities must be provided appropriately. For example, it is not necessary for the boss to be equipped with an expensive computer suitable for graphic design when she/he only has a need to monitor numerical data and create written reports. Conversely, the cost of providing overhead projectors to teachers which can be significantly help students understand the lecture, should not be a deterrent when compared to length of teaching time would suitable enhancing equipment. The challenge here is to be able to identify appropriate facilities for each job.
Information systems (IS) are a type of work facility. IS enables government organizations to interact well both within their organization and with stakeholders outside. This facility is a necessary requirement to maintain the adaptability of government organization against the changing environment. 'Continuous work on information' is a requirement 'to balance the changes and the continuity' (Drucker 1999, p. 91). Moreover, IS also helps government to decentralize their functions (Dean et al. 1992, p. 220). IS is not just a facility, it is a compulsory organ of government organization.
Competency and motivation of peopleGood government requires more than personnel management. Government will only perform if people in the organization are recognized as human resources. They must be seen as assets rather than liabilities. That is what Drucker calls "people management" (Drucker 1973, p. 108). Among other things in people management, managing people's competency and motivation is critical to an organization's performance. Competency is about ability which consists of knowledge, skill and attitude. Motivation enables that ability to work and perform functions.
The aim of managing the competency of people is to ensure that all jobs that are required in order to execute the strategy are filled by the right people. This involves performance and competence evaluation, competency development, and promotion. Recruitment must be well-planned. The manager must know the required qualifications of people for a particular
job. Performance and competence evaluation will identify who is performing and who is not and what the issues are. When there are competency issues, the manager could improve the competency or replace the person by moving the person to a more suitable job. The purpose of organization in people management is to utilize the strength of the people and to make their weakness not relevant (Drucker 1973, p. 307).
Government has a unique characteristic compared to private institutions in terms of managing motivation. Unlike the private sector whose income is derived from the willingness of customers to purchase their products or services, governments gain their revenue mainly from taxes. They are a budget-based institution (Drucker 1988, p. 135). This is a challenge to make them performed. The challenge is how to create motivation in institutional and personnel level. At institutional level, a stable open society and democratic government would help to create motivation. This will enable smooth but critical interaction between society and government. Bad policy will be criticized and good policy will be supported. Motivation at institutional level influences the motivation at individual level. However, that is mainly at upper managerial level. Creating motivation in lower managerial levels, and in the front line employees, is a tricky thing. 'Carrot and stick' is not only insufficient but can be dangerous. It is insufficient because people are not motivated only by reward and punishment, but also by values and culture. It could be dangerous because for knowledge employees, the fear from the 'stick' becomes a demotivator (Drucker 1973, p. 176). 'Carrot' (reward) is important, but defining the most valuable and lowest at cost reward is even more important. This could be different things for different people. Creating motivation for government institution and public servants is not only about increasing salary; it must also be managed in a systemic approach which includes organization culture, leadership, quality and openness of society, and transparency of government.
LeadershipGood leadership will make all capacity elements and their interaction work to build institutional capacity. The focus of leadership is performance of function which is intended to overcome any of society's major issues. Therefore, managers require specific skills such as the ability to communicate within the organization, make decisions under conditions of uncertainty, and undertake strategic planning (Drucker 1973, p. 17). Communication skills are essential in leadership to motivate people to achieve their results. It is also important to gain stakeholders support particularly when the organization needs resources and political support from outside. Managers must also be able to make decisions in a changing environment. Managers must lead to find opportunities for innovation from symptoms assessed within and outside organization (Drucker 1993, pp. 30-129).
Good government leaders will not spend all their time behind the desk, assessing finance and writing report. Controlling the organization's resources is important, that is indeed the manager's responsibility. However, managing performance is more than that. Leaders must divide themselves between organization and society. This is how they will be able to identify the 'right changes' (Drucker 1999, p. 73).
Conclusion'The only thing that is constant is change'. That expression was written about 100 years before Plato (thedailyphilosopher n.d.). All government organizations are in the middle of a changing environment and changing society. However, at the same time, they require continuity which will be achieved if the government performs well. Managing performance in a changing environment requires understanding of capacity elements; that is all the factors which interact to build institutional capacity. Innovation is essential in most of the elements to improve the value of resources which are often limited, and also to exploit any opportunities which often not seem important for common people. This essay has discussed seven institutional capacity elements. Any government organization which systematically employs these elements and ensures their effectiveness will be able to manage performance in a continuously changing environment and society.
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