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PSC 207: Public Administration

Osborne & Gaebler, Reinventing Government (1992)

Entire text, Workbook Outlines

Fill in these outlines with your own notes.  Revised 3 Sep 2003, by Dr. Jeremy Lewis

Overview | Preface | Intro | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | Appendix A | App'x B |

Entrepreneurial public organizations:

1. steer more than they row.

2. empower communities rather than simply delivering services.

3. encourage competition rather than monopoly.

4. are driven by their missions, not their rules.

5. fund outcomes rather than inputs.

6. meet customer needs, not bureaucracy's.

7. concentrate on earning, not just spending.

8. invest in prevention rather than cure.

9. decentralize authority.

10. solve problems by leveraging the marketplace, rather than simply creating public programs.

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These organ'ns are deemed better than Weber's hierarchies for the post-industrial, info age.


responsive to citizens


flatten hierarchy

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Authors' Beliefs:

Entrepreneurial gov't: shifting resources to higher productivity areas (after J.B. Say, 1800.)

Focus on means, not ends; and all levels of gov't.

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Introduction: Perestroika.

Confidence in gov't has fallen.

1990 deficit and tax revolts.

Visalia, CA: 75,000, rural, cons.
1978 Prop 13 cut tax base 25%.
Expenditure Control Budget.
Block budgeting.
Saved $60,000 for new pool.
retention of savings.
pocketing 15% 1st yr.
Profit centers, etc.

East Harlem School District 4.

DOD Model Installations.

Machines: e.g. Boss Tweed, NYC 1870.

Progressive Movement 1890s:

But current environment is knowledge based. Do smaller gov'ts mean weaker?
No: steering means more decisions & regulating.
Large gov't system does not ensure control (e.g. health care.)

Gov't role in infrastructure more imp't now.
Educ, research, regulator, operator.

Global competition requires educated workers and health care cost limits.

Improvement requires changes in "powerful interest groups":
teachers, unions [!], doctors, hospitals.

Less money for Government.

More demand for Governance: leading society.

e.g. Community Redevelopment in Tampa for rehab housing loans. Halved staff to 22 workers, switched from 37 direct loans to 1,000 challenge loans.

Steering bodies:

Job Training Partnership Act: Private Ind Ccls.

Best social service performers? non-profits.

Sectors: H. Cleveland: "glory in the blurring"

Voluntary sector growing:

8% of workers, 14% of service workers.

Over 90M volunteered.

delivers half of social services, job training & health care. -- L. Salamon

Largest 3d sector organs have professional workforce and make "gains" e.g. Red Cross.

Public sector better at:

Business better at:

Third sector better at:

[Problems with business: [Problems with voluntary sector:

[Does use of private & volunteer orgs depend on strength of scientific performance analysis?]

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Chapter 2: Empowering Community.

Community Policing: storefronts, outreach etc

Lee Brown in Houston '82.

Drew Diamond in Tulsa.

300 other cities.

18,000 neighborhood watch groups.

[BUT not new: common in W.Europe.]

Civic cultural tradition in US. [points of light.]

Avoidance of clienthood, dependency.

[BUT applies to contractors, also.]

1970s social movements:

welfare rights

tenants' rights

open government laws


government responses:

community policing

boat people resettled by [volags]

Seattle recycling block captains

parents in education

Chicago public schools: parent/teacher ctees.

New Haven/Yale school management teams.

Ark. HIPPY learnfare program for reading.

MA Industrial Services Program

(retrained workers staff own offices.)

Criminal Justice System:

SF mediating boards settle more cases than municipal court, helping prevent violence.

FL paroles into Salvation Army care.

MA put juvenile offenders in group homes.

Phila: Umoja House rehabs gang members.

Health care:

L.A. & S.F. AIDS hospices cost 40% less than trad care

Public Housing:

Began as worker housing in Slump.

1950s: poor black migrants from South.

Congress denied welfare if father present

denied rent subsidy if mom worked.

Kenilworth-Parkside housing in NE D.C.

Disrepair, drugs.

1970s: Kimi Gray's tutoring project.

1982 tenant owned.

Building captains to enforce rules.

Hired absentee fathers.

Evicted for non-payment of rent.

Contracted or set up own businesses.

Maintenance men lived in.

Turned in drug dealers & harrassed.

Model used for Fed Housing Act & Kemp's HUD program of training tenant groups.

Communities are committed, understanding, solve problems, caring, creative, cheaper.

They enforce standards of behavior better.

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Chapter 3: Competition in Services.

Competition, not privatization, is key.

Phoenix: 1978 contracted out garbage.

no-layoff policy

contract for each district:

4 contracts went private.

Public Works bid too, winning 5th contract.

lowball bidder problem rare

saved $20M in decade just on bidding gap.

Scholarly studies:

Savas: public service at least 1/3 more costly.

JQ Wilson: often true, but where sectors compete, costs are similar. Private monopolies are costly like public ones.

USPS beaten by private parcel services.

Air NZ suddenly improved when Ansett air competed on domestic routes.

Competition rewards innovation, boosts pride.

Varieties of Competition:


NY Sani Vehicles.

USPS: contracts on rural routes and small offices cost only 1/2.


load shedding gives up control,

procurement, e.g. Health plans - but DOD.

contracting most difficult, admin costs 1/5, lowball bids, price fixing, payoffs

1989 Commission survey: 72% favorable, saved 15 - 30% for local gov'ts.

Internal Competition

MN Dept of Admin split computer services from computer policy -- i.e. rowing from steering.

Public Education. Other countries have Cath or private schools or university entrance exams.

IA & others have limited choice of district.

May need rules on minority % to prevent resegregation.

MN full choice system popular w/teachers as well as parents. 5 - 10% of students have switched.

Wealthier parents always had a choice - but creaming off.

Chubb & Moe found family most imp but followed by school autonomy: parental choice & sch mission

[BUT national essay exams needed as a measure of success.]

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Chapter 4: Mission-Driven Government.

Louisville Housing Services: parallel foundation without HUD rules.

Rules from Progressive reforms slow gov't, protect special interest groups.

Mission-driven orgs more eff't, effective, innovative, flexible. Higher morale.

Formal changes less successful:

Sunset laws in most states, since CO pioneered 1976.

But they suffer from inability to measure performance.

Review commissions weed out regs, plan for 5 or 10 yrs.

ZBB too cumbersome, but limited version in Phoenix OK.

Expenditure Control Budget allows savings retention, shifting budget line items in favor of mission.

create right incentives, free up resources, predictable, simpler.

Flexible personnel system for hiring & promotion by merit.

End to headless nail effect on firing.

China Lake Naval Expt: 5 career paths, 5 grades in each. Market salaries. Improved retention of good staff. Performance based -- seniority system cut.

mission statements [BUT superficial, & multiple laws.]

AID had 33 legal objectives, 75 priorities, 288 reporting.

Chunking and Hiving off.

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Chapter 5: Results-oriented Government.

Illinois paid nursing homes by patient needs, found inflation. Switched to paying by quality rating, enforced competition.

Gov'tal Accounting Stds Bd working on performance stds.

vocational educ now often paid by placement, not trainee #.

some courts now rated by jurors, witnesses & lawyers.

some states now reward faster hiway bldg & longevity.

some reward utilities for greater % up-time.

Sunnyvale, CA: entire city on performance goals.

council votes for service level, not input.

multiple measures, surveys, contantly refined.

Municipal Performance Index improved 1/5 in 5 years, with 1/3 fewer workers.

"Measure something & people respond." -- MA welfare.

[BUT can race in wrong direction.]

measuring better than nothing: drug war waste, only raised street price 4% -- RAND.

rewarding A&B pupils raises the grades [BUT inflation?]

welfare system rewards failure to marry & work.

TEE success in MA placing ex-convicts & addicts in jobs: they outperformed Kelly Services in same data entry work.

Measurable performance encourages passing tax hikes.

FL Dept Transport.

BUT "Gaming the numbers" -- FBI studied by JQ Wilson. Many trivial thefts listed, but DAs refused to prosecute.

MBO systems can create internal conflict, pressure.

solution: reward groups, not individuals.

Deming: 85% of low quality caused by broader system.

Several lib dems have moved to unified defense budgets and general budgets, including GB, Australia, NZ, Scandinavia.

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Chapter 6: Customer-Driven.

McD's and Frito-Lay are customer driven

[BUT not exactly a healthy product model for public sector!]


Public agencies don't get funds from customers.

2/3 of workers now use minds, reverse of 1950s.

Trad agencies give one-size-fits-all services.

Methods of TQM:

Surveys, focus groups, choices, e-mail, test marketing, ombudsmen, inspectors, 800 #, complaint tracking.

Closest to customers should be at top of hierarchy.

e.g. Fox Valley Tech College: education tied to job placement.

Advantages: accountability, depoliticize choices, innovation, customer choices, waste less, empower customers, equity.

Holistic approach: simpler from customer's point of view,

e.g. one-stop welfare.

[ BUT: can be superficial, fast-food approach.

Too attractive to politicians.

Customers only see part of operation: crises, not routines.

Customer popularity is not the same as professionalism.]

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Chapter 7: Enterprising Gov't.

L.A. Olympics example.

* User fees, esp. on upper mc services like golf.

* Investing for a return, e.g. Head Start.

* Shared savings & earnings.

* Innovation capital.

* Enterprise funds.

* Profit centers, especially FL.

* True costing of services.

e.g. NZ closed 1/2 post offices.

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Chapter 8: Anticipatory Gov't.

Trad professional bureaus supply services.

But early bureaus: prevention.

Rowing, not steering, causes tunnel vision.

* crime, hazardous waste, infant mortality, interest on nat'l debt.

Toffler: system is future-blind.

20% of G spending is borrowed.

e.g. NJ: loans for rent cheaper than welfare hotels.

e.g. private fire Co: Rural Metro, outside Phoenix

Futures Commissions: tasks p.233 [in pb.]

Long-term budgeting, rainy day funds, regional gov't.

* analysis of internal & external situation.

* diagnosis of key issues.

* mission definition.

* goals articulation.

* vision creation.

* strategy development.

* timetable development.

* results measurement.

** & for public sector: consensus needed.

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Chapter 9: Decentralized Gov't.

Instant comms remove the reason for centralized bureaus.

Decentralized org's are flexible, effective, innovative, & have higher morale.

H. Cleveland: "Leadership of the informed is different:"

persuasion, consultation.

collegial, not command structures.

conferring, networking.

Gifford Pinchot: waste does not call for more controls, but control by people close to problem.

Needs: participatory management, teamwork, champion the innovators, invest in employee skills.

Push decisions down to lowest level org (e.g. local gov't).

Failed Centralization of military:

McNamara & LBJ.

Successful Decentralization of Tac Air Command maintenance: Bill Creech, 1978-84.

Tools: labor-management committees, eliminating middle managers.

Table, pp.266-7.

e.g. Madison police maintenance, & sanitation.

e.g. STEP, Minneapolis bottom-up reform.

e.g. Penn. Challenge Grants, Ben Franklin partnership.

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Chapter 10: Market-Oriented Gov't: Leveraging.

Structuring market:

FHA long-term mortgages;

bottle bills,

1990 Clean Air Act emission trading.

1990 Child care -- tax credits & vouchers.

Set rules of market.

e.g. securities laws, zoning.

Provide info to customers.

e.g. prices & performance measures.

Create or augment demand e.g. GI bill.

(especially among poor.)

Catalyze private sector suppliers.

e.g. to lend to poor.

Create inst'ns to fill gaps in market.

Catalyze new sectors e.g. 1973 HMO Act.

Share risk of expanding supply,

e.g. Tampa redev

Investment /divestment policy (pensions).

Acting as broker between buyers & sellers.

Price activities through:

Tax incentives

Impact fees

e.g. road tax is below full impact cost.

e.g. FL Growth Mangement Act 1985.

User fees to reduce demand. e.g. garbage

Building community.

e.g. coop option upon conversion to condos.

e.g. Fed tax subsidy for charitable giving.

Difficulty of command and control alternative:

EPA sets detailed standards and then sues.

Rigid yet unenforceable because of political opposition.

Prevents innovation in technology.

Some reduction of pollution but at great cost.

Green taxes would force switch to cleaner fuel [BUT depends on elastic demand!]

e.g. 1970s EPA gave limited emission credits. 1982 lead in gas credits. 1990 SO2 credits on coal burning.

Creating Smarter markets: e.g. Green seal.

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Chapter 11: all Together.

US Health care system not as effective as German which steers 1,000 insurance Co.s, at 2/3 the cost of US.

US Education system based on 1910 system of months & course credits, lack of choice.

1980s increased spending 29% but only minor improvements. (More-longer-harder strategy.)

1989 Pres-Govs summit: decentralization, choice, empowered parents.

Crime: costs rising faster even than crime.

Response has been increasing personnel, shovelling in money, feeble attempts at alternative resolution.

New Paradigm (following Thomas Kuhn.)

Factors supportive of change:



Continuity of leadership.

Healthy civic infrastructure.

Shared vision and goals.


Outside Resources.

Models to Follow.

A Global Revolution.

Britain (Con), Sweden (SD), NZ (Lab.)

Australia has budget reform.

School choice debate in numerous countries.

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Appendix A: 36 Alternative Service Options.

Choosing the best:

Savas model, criteria of:

service specificity,

available producers,

eff'y & effectiveness,

scale of service,

whether beneficiaries pay directly

responsiveness to consumers

susceptibility to fraud

economic equity

equity for minorities

responsiveness to gov't direction

size of gov't required.

Recap of each sector's strengths and weaknesses. (Public, private, third.)

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Appendix B: Performance Measurement.

Difference between measuring

process and results.

Eff'y and effectiveness.

Program outputs and outcomes.

Quantity and quality. (do both.)

Watch out for creaming, resistance.

Involve providers and employees.

Review measures annually.

use the right number of them,

avoid perverse incentives

Keep measurement independent.

Use the performance measures actively.