Public-sector strategy formulation.
While a great deal has been written about strategy and strategic planning in the private sector, researchers have been slow to apply their insights to government organizations (Llewellyn and Tappin 2003; Stewart 2004). The need for adapting strategic approaches developed for private firms to the public sector has long been recognized (Karagozoglu and Seglund 1989), but the form this approach should take is still the subject of debate (Plant 2009). The disjuncture between the two sectors has deprived the public sector of some analytic concepts and evaluative tools that could help illuminate how public institutions conceive and execute their approaches to social problems.
One of the most pervasive debates in the literature on strategic management has been the contrast between deliberate approaches, characterized by extensive research and formal planning, and emergent strategies that are crafted through a series of responses to environmental change. While these modes of strategy formulation are often presented in opposition, more recent work has raised the possibility that they may be complementary. A proposed hybrid model that integrates the two approaches may be useful both for understanding how public-sector bodies approach their tasks and as a set of tools for confronting the strategic challenges they face.
Deliberate and emergent views of strategy formation
The study of strategy was originally undertaken by military officers who used historical events to formulate plans for future campaigns. The complexity of events during the Second World War gave rise to more systematic analyses that eventually led to a variety of formalized procedures. In part because of the complex planning efforts that occurred during that conflict and the development of techniques to support them and in part because of the rise of large international firms, strategic planning gained the attention of top-level managers and eventually of academic researchers. Originally the focus was on the specific steps that managers, especially those at the very top of the organization, could take to ensure an effective outcome both in terms of the structure of the plan and its ultimate goals. Although the relative benevolence of the post-war environment for American firms contrasted sharply with the circumstances under which the original techniques were developed, the logic underlying concepts such as "operational planning" and "critical path analysis" lent themselves to formalizing approaches to strategic planning. As domestic and foreign competition increased and the commercial environment became more dynamic, a new view of strategy that focused more on the constant evolution of strategic thinking emerged.
A 2003 survey of American and European firms reported that eighty-nine per cent employed a strategic planning process (Bain and Co. 2003). In the context of this survey, strategic planning refers to a deliberate analytic and planning approach designed to create a framework to guide a firm's actions over a given period. For H. Igor Ansoff, an advocate of the structured, deliberate approach, "corporate strategic planning is simple: using a time horizon of several years, top management reassesses the current strategy by looking for opportunities and threats in the environment and by analysing the company's resources to identify its strengths and weaknesses. Management may draw up several alternative scenarios and appraise them against the long-term objectives of the organization" (1991: 81).
There are three implicit assumptions built into this view of strategic planning. First, it implies that managers are able to predict future states with enough accuracy that plans can anticipate these emerging circumstances. Second, it assumes that the organization is able to rearrange its internal structure to meet these requirements. Third, while such an approach is not built on environmental stability, it does presume that changes will occur within parameters anticipated through the generation of scenarios or other variants of the central plan. Strategy conceived of in this way is a master plan to cover several years and allows for adjustments over time but with no anticipation of major changes until the next planning cycle begins. In this view, strategic planning and strategy formulation are seen as identical.
For many theorists, notably Henry Mintzberg (1977, 1990), and with James Waters (1985), the deliberate view allocates too much foresight to managers who face a complex and increasingly dynamic environment. For advocates of the emergent view, strategy evolves through a series of decisions taken by managers in light of threats or opportunities. Strategy is "a pattern in a stream of decisions. In other words, when a series of decisions related to some aspect of an organization exhibits some consistency over time, a strategy will have been considered to have formed" (Mintzberg 1977: 28). Mintzberg and Waters later revised this definition to focus on a stream of actions, noting that decisions were more closely aligned with what managers intended rather than the actions that actually occurred (1985). Advocates of this view argue that strategy development is an evolutionary process that is realized through specific actions taken rather than by the generation of long-term plans.
In the emergent view, there is no formal planning process, with careful projections and varied scenarios. In fact, its advocates see such exercises as little more than corporate ritual, futile if not misleading (Mintzberg 1990). This does not mean that managers who depend on emergent strategies do not anticipate future developments; rather, they do so on a continuous basis free from the constraints of an overriding plan. Besides the obvious contrast in the formality of their processes and their time horizons, there is another implicit contrast between the two approaches. In the deliberate approach, strategies are typically generated at the top levels of the organization and the requirements for their execution communicated to those below. In the emergent view, shifts in strategy may be initiated at other managerial levels. For example, a sales manager may pursue an emerging market, thus committing the firm to a change in (or addition to) the existing strategy.
While the conflict between advocates of the deliberate and emergent views of strategy continues, some theorists have more recently argued that both have validity and that both approaches may be useful to managers (Andersen 2004; Harrington et al. 2004). If an organization does not formally plan and articulate its strategy, at least in broad strokes, the various actors and units can act independently. The lack of a shared focus would inevitably lead to confusion, wasted resources, and internal conflict that would negatively affect the organization as a whole. Alternatively, if the organization's strategy is so rigid that it does not allow the flexibility implicit in the emergent view, the organization might find itself committed to an unprofitable or even destructive course of action, with little ability to alter course (Mintzberg 1990).
Our analysis suggests that deliberate and emergent approaches may actually form a single, two-part strategy development process. Initially, an organization deliberately plans its strategy after an assessment of its internal strengths, weaknesses and competencies, and the external opportunities and threats found in the environment. The strategy is articulated in enough detail to provide clear guidance to the various actors and units within the organization that will be involved in its implementation. Strategic guidance is structured to provide enough flexibility to allow decision-makers to react to environmental changes as they occur. Subsequently, operations continue within the strategic parameters, but the strategy is allowed to evolve as the organization's internal capacities and external context shift. At the beginning of the next cycle, the evolved strategy provides the baseline for the next iteration of planning and implementation.
One of the key issues arising from this proposed amalgamation lies in the limits of flexibility. Several theorists have argued that strategic flexibility is required, given the dynamic political and economic conditions faced by most organizations (Teece, Pisano, and Shuen 1997). The recent fiscal issues triggered by the subprime crisis are an excellent example of how organizations, both public and private, must be able to alter policies quickly. At the same time, unplanned change makes program delivery problematic, since organizational structures are designed to pursue specific strategic goals. Abrupt changes also influence both the types of knowledge required and the planning structures required. Changes that are discontinuous, rather than simply alterations in existing trends (e.g., the introduction of an innovative product versus an increase in interest rates), may require not only a shift in strategy but a change in the strategic process. While flexibility is partly dictated by managerial attitudes, mechanisms such as increased environmental scanning, knowledge-sharing, and loosely coupled structures help minimize the disruptions produced by environmental change (Zhang, Vonderembse, and Lim 2006).
Strategy formation in the public sector
Many researchers have noted significant differences between the public and private sectors with respect to factors that affect strategy formulation (among others, see Ferlie 1992; Lindblom 1977; Richardson 1995). To put the differences into context for the Canadian federal government, one could consider a large private-sector organization that goes through an approximately four-year cycle, at the end of which all leadership above the rank of corporate senior vice-president (i.e., ministers and the prime minister) potentially depart at the same time. Although the opposition will have shadow ministers familiar with the issues, their critical stance almost inevitably yields a change in emphasis when they take office. Adding to the strategic uncertainty is the possibility that the replacement cadre of senior leaders may come from a group holding a different philosophical mindset, contrasting priorities, and hence advocating altered or even opposed strategies.
Further compounding these challenges, managers in the next echelon (i.e., deputy ministers and assistant deputy ministers) frequently change roles in the Canadian system. Of course, private-sector firms may undergo significant changes in management when faced with a crisis, but in general the criteria for success remain static and programs are relatively unaffected. Canadian public-sector organizations have one advantage over the private sector in that the civil service provides a mechanism for continuing the routine work of the government. Wholesale changes at the operational level are unlikely, at least until a new government implements its programs.
The threat of leadership change is only one of the challenges facing public-sector managers in their complex and demanding environment. Unlike commercial firms, which are free to produce only those goods that managers feel will be profitable, "the public sector continues to produce core goods and services that are of major significance to society as a whole: health, education, social security, defence and criminal justice" (Ferlie 1992: 80). Despite the complexity of services or the issues faced, the public sector has no choice but to continue with its mandate, although there is some room for innovation in how services are delivered.
The challenges that distinguish public-sector organizations from their private counterparts are briefly described below. In what follows, we are not arguing that senior managers in the two sectors do not share problems regarding planning and executing strategy. There are, however, important differences in emphasis and context that provide unique challenges to those formulating strategy in the public sector.
Challenges in the public sector
The four- or five-year election cycle in the Canadian federal system poses a considerable challenge to public-sector managers. While new governments are elected with a mandate from the voters to govern through appropriate decisions, the reality is that a government has only a portion of its term to effect substantial change. After this initial period, the government becomes increasingly concerned with public perception and its impact on voters in the upcoming election. This situation is exacerbated for minority governments, which continually face the possibility of a near-term election. The threat of an imminent change of the party in power implies that major initiatives must be undertaken early in the term to ensure implementation is complete before possible priority reassessment or resource reallocation by a new government. Further, governments are more reluctant to take controversial or tough action as they move through their mandates and come closer to election campaigns (Montanari and Bracker 1986; Richardson 1995).
The cycle of leadership change poses a significant obstacle to government strategy formulation and implementation (Montanari and Bracker 1986; Richardson 1995). The federal government is led by politicians who often have little experience with the substantive issues included in their portfolios. For examples, ministers of health are seldom medical doctors and ministers of defence often have no military experience. After an election, ministers require some time to become familiar with their department's personnel and subject matter. This may be frustrating because they are eager to implement new policies but limited in the knowledge they need. The briefings that take place for new ministers are an attempt to convey the requisite knowledge, but the strategy process is slowed nevertheless. Where the incumbent wishes to initiate substantially new policies as a result of election platforms the strategy process may, for a time, be at a standstill.
Although the issues most affecting the public are often clear to the professionals in the civil service, these may not be the most important issues for the political leadership in power. The politicized nature of the strategy formulation process is an ever-present and significant challenge faced by public-sector managers (Richardson 1995). Political considerations, which are always present, may become more intrusive when an election campaign is looming. Political exigencies must be factored into the strategy formulation process to ensure that resources are allocated appropriately. For the public-sector manager, effective strategy formulation depends on balancing the claims of interested groups. A thorough understanding of the stakeholders involved and their views on a particular initiative is crucial to formulating a strategy that will receive sufficient support.
In commercial firms, strategy formulation is normally discussed in private sessions, with the realization that what is said would be of great interest to their competition. Shielded from critical view, managers can examine various perspectives and alternative strategies that might pose considerable challenges to groups inside or outside of the organization. Speculative directions can be explored with minimal fear of public scrutiny since little but the final conclusions are revealed to those outside the top management team. In the public sector, all documents not formally designated as classified information are open to the media and public through the Freedom of Information Act. This can limit, both in a political and a practical sense, the freewheeling exploration that is so useful in strategy formulation. The constraints imposed by the threat of public disclosure dampen this type of speculative analysis in public-sector strategic planning.
While all organizations have competing strategic objectives, those in the private sector are generally measured against a small number of common standards, including revenue, profit and return on investment. In the public sector, measures tend to be less universal and differ from program to program and department to department. Audit programs designed to insure effective use of public funds focus on department-specific goals rather than on overall measures of success. Contrasting standards make it difficult to evaluate strategic success across units.
Conflicting policy objectives are the norm in public-sector strategy formulation (Richardson 1995) and add a level of complexity to the process. Deciding which strategies to pursue and which stakeholders to accommodate or disappoint is a constant factor in making such decisions. When added to the constraints imposed by the election cycle, this can result in an impasse during which policies are postponed or have no real impact. A closely aligned issue is the difficulty in measuring progress towards goals. This may arise because some outcomes are inherently difficult to quantify (e.g., improved education) or because stakeholder groups often have differing definitions of what constitutes success. A tax on gasoline designed to reduce carbon dioxide emissions would be viewed positively by environmental groups but negatively by oil companies and taxpayers in general. Public-sector managers must constantly balance between the desire to implement effective policies and the electoral concerns of their political masters.
Difficulty in defining relevant customers provides another contrast between public-sector planning and that undertaken by commercial firms. Since government policies often have multiple impacts that affect a large number of diverse interests, crafting a specific strategy becomes extremely complex. Possible consumers and clients include current departmental ministers, the affected portions of the general public, and various interest groups. From the perspective of high-level civil servants, the approaching end of the mandate may even have them trying to anticipate the wishes of their post-election masters. Stakeholders with conflicting goals include different socio-economic strata, politicians, representatives of the media, lobbyists and their employers, other special-interest groups, Treasury Board, public servants, foreign governments and international bodies such as the WTO and United Nations (Montanari and Bracker 1986; Richardson 1995). It is critical to analyse and understand each of these groups and how they will perceive various initiatives, what effect initiatives will have on government resource allocations, and which aspects of a particular initiative will have the greatest impact (Boal and Bryson 1987; Montanari and Bracker 1986).
Finally, there is the challenge of dealing with powerful bureaucracies that resist change and that have a high degree of cynicism fostered by the experience of frequent changes in policy (Richardson 1995). Mid-level and senior personnel will generally have been members of the public service long enough to have experienced frustration stemming from the challenges outlined above. Many will have been excited by new initiatives only to have them undone by resource starvation, policy shifts, or changes in the party in power. Public-sector managers have to face barriers in the form of widespread cynicism and the consequent lack of motivation towards strategic change. This cynicism towards new initiatives may be coupled with a type of idealism in which civil servants view themselves as custodians of certain ideals that politicians ignore. If new programs do not fit with these ideals they may be subverted or ignored.
The additional considerations required in the public sector complicate policy formation and implementation in terms of selecting overarching goals, the individuals and groups involved, and calculation of possible consequences contributing to a complex and time-consuming process. When these considerations are added to the issues raised by election cycles, institutional cynicism, and the need to balance political and operational concerns, the process of strategy formulation within government institutions appears to be considerably more complex than equivalent processes in commercial firms. We now turn our attention to the means available for surmounting these difficulties.
Meeting the challenges
One of the keys to successful strategic planning in the public sector is planning around the election cycle whenever practicable (Montanari and Bracker 1986; Richardson 1995). This implies that deliberate strategic planning activity should be completed relatively soon after the arrival of a new government and reviewed at frequent intervals to incorporate emergent factors. As discussed above, the deliberate strategy formulation component should be timed to permit the launch of new initiatives in the first quarter of the government's mandate. The process would include a major strategy review at the midpoint of its term in office, but emergent conditions may compel more frequent and less formal adjustments. The strategy formulation exercise at the beginning of the term and the midpoint review can be thought of as the deliberate portions of strategy. Emergent changes may be large or small, depending on the changes in circumstances. A review should be undertaken during the final few months of the government's mandate so that options can be prepared for the incoming ministers.
Given the constraints discussed above, initial strategic planning should focus on defining a few central issues (Richardson 1995). The resultant strategy and associated objectives are informed by external and internal analyses to identify keys to success and map out appropriate action plans. Richardson suggests that, due to dynamic conditions, these plans should have short time horizons and adequate resources to ensure quick and effective implementation. Action plans should be robust and not tied to particular situational outcomes such as budget levels for their success. The plans should be flexible as an acknowledgment of the emergent and evolving nature of strategies in the complex public-sector environment and to allow them to proceed in a wide variety of circumstances. In practice, this may mean targeting several possible levels of outcome depending on such factors as the availability of funding.
As part of the deliberate strategic planning component, John Montanari and Jeffrey Bracker propose a variation on the private-sector "strengths, weaknesses, opportunities and threats" (SWOT) framework (1986). Their approach, which they call SWAA, examines strengths and weakness in much the same way as SWOT but includes an emphasis on barriers such as budgets, policy constraints, and the number of competing initiatives underway. The "AA" refers to "advocates" and "adversaries" in the form of stakeholder groups. In analysing each of these groups, Montanari and Bracker stress the importance of potential changes in their leadership and their possible impact on initiatives. They suggest that the greater their possible impact and the faster their rate of leadership change, the greater their importance as key stakeholders. The rate of leadership change is important in that more frequent leadership change requires increased monitoring to determine a group's position on a particular issue. Identifying rising leaders helps to anticipate emergent elements of strategy or at least their possible sources.
Most large commercial companies have come to realize that strategies will only be effective if they are accepted and implemented by employees at all levels. In the public sector, the multiplicity and interconnection of interested parties heightens the importance of communication not just in the implementation phase but in all segments of the strategy process. Communication is crucial in the public-sector environment and must target key stakeholders (Boal and Bryson 1987; Montanari and Bracker 1986). These efforts must be effective, focused and frequent to keep a particular initiative prominent in the minds of stakeholders. In particular, Kimberley Boal and John Bryson argue that communication should focus specifically on articulating goals, seeking goal acceptance, and engendering support from stakeholders.
Communication is especially important when considering the emergent portion of the strategy process. One aspect of an emergent strategy is that it grows out of the decisions and actions taken by actors at various levels of the organization. On the one hand, a deliberate strategy is designed to constrain the activities at lower levels of the organization. On the other, too high a degree of control frustrates individuals and groups that must react to emerging problems or opportunities, often within a short time frame. Leaving some latitude within the strategic framework allows identification of the emerging aspects as an effective means of dealing with issues. If only the deliberate elements of the strategy are communicated--a common occurrence when interested groups want definitive answers and politicians wish to seem effective--any subsequent change is seen as backsliding or an admission of error. If the strategy can be framed with an explicit emergent component, the possibility of incremental policy changes is highlighted and those implementing the strategy as well as those affected by the policies understand that adjustments are both necessary and desired. In this way, communication with all interested parties plays an important role throughout the formulation and implementation processes.
While both deliberate and emergent strategy formulation are extremely challenging in the public-sector environment, the use of mitigating approaches such as those outlined above can help make the process more manageable. Another, often under-appreciated factor that may assist in the successful application of policy is the occurrence of real or perceived crises.
The role of crises in public-sector strategy formulation
Public-sector organizations are often mired in regulations and processes to the point where senior executives may have very limited ability to effect change. Opportunities to take substantive action must be recognized quickly or, if possible, predicted for maximum effect. John Bryson argues that crises provide change opportunities and notes that they occur "when a system is required or expected to handle a situation for which existing resources, procedures, laws, structures, and/or mechanisms, and so forth, are inadequate" (1981: 181). He points to Saul Alinsky's comment that the Chinese symbol for crisis has two components, one representing danger and the other opportunity (1971). The astute public-sector manager must be able not only to alleviate the danger but also to seize the opportunity. If the possibility of future crises can be anticipated during a deliberate planning process and the strategy is flexible enough to allow the exploitation of emergent aspects when a crisis actually occurs, the result may be an opportunity to take positive substantive action for the benefit of the public.
Bryson points out that crises open up opportunity space when normal structures, regulations, political dynamics, and resource constraints are temporarily suspended. Greater visibility increases the scope of an issue during a crisis, pulling in interests and resources that may have previously been unavailable or unengaged. As the media dramatize an issue and public cries for action gain intensity, the perceived scale of the crisis broadens and government's latitude to act increases. The devastation caused by hurricane Katrina and the failure of initial relief efforts focused attention on the agencies involved and led to reforms that had been resisted despite earlier reports that had emphasized the inadequacy of existing structures.
Consensus is often difficult to achieve at higher levels of government due to the large number of groups concerned with and involved in any change in policy (Bryson 1981). One need look no further than the current debate over environmental issues for an illustration. Interest groups include the auto industry, the off industry, diverse environmental groups both domestic and international, the manufacturing sector, and, increasingly, the general public. Any new federal proposal will face significant opposition from groups claiming that it goes too far, not far enough, or moves in the wrong direction. As the government tries to balance the needs and wants of all groups, it has very limited options available. However, if a dramatic environmental crisis were to occur, whether real or perceived, the government would find increased opportunities for significant action. If this were taken from a purely emergent approach, it would take considerable time and energy to craft a new strategy. If, however, the existing strategy allowed for such a development, much of the work for altering or advancing strategic goals would already be in place and would allow for a more rapid response. In other words, executing the deliberate phase of strategy formulation with the emergent phase in mind would lead to quicker, more effective strategic shifts.
Policy areas in western governments tend to act in relative isolation from one another (Wildavsky 1979). In Canada, for example, the Department of National Defence is concerned with military issues, Industry Canada is concerned with the commercial sector, and Health Canada is concerned with public health. Each department tends to protect its programs and resources and cooperates only if actions are seen to enhance its interests. When crises occur, there is pressure on separate government departments to act more as a team with others to solve significant issues, including resource reallocation and more whole-hearted cooperation (Bryson 1981). This lowering of internal political barriers through the demands to confront a crisis facilitates a cooperative approach to change that would not normally be available.
Crises by their nature are not predictable, at least not with any certainty of their timing or severity. It is possible, however, to anticipate that a crisis may occur within general parameters. This allows public-sector managers to prepare plans to be implemented when a crisis occurs. The building sentiment towards climate change is a good example of a crisis that could be exploited to the benefit of the general public. If Environment Canada is truly prepared prior to the next environmental crisis, the federal government will be in a position to significantly and positively change environmental policy. While this type of advance preparation is visible in some units, in others, plans are often focused only on immediate responses. A more proactive and flexible approach would represent a new level of strategic planning for most departments. However, aspects of both the deliberate and the emergent strategy formulation processes must be included. With respect to climate change, Environment Canada's deliberate planning must contain appropriate contingencies for potential crises, and the resultant strategic plan must contain the flexibility necessary for new strategic elements to emerge as the crisis evolves.
The issue of strategy in the public sector is one that suffers from two related problems. First, the context within which public policy is generated involves a number of factors that are less pressing or non-existent in other types of organizations. The election cycle, conflicting demands by numerous interest groups, and diverse measures of success all contribute to the complexity of the strategy formulation process and its subsequent implementation. This has contributed to the second issue, a relative lack of research bearing on the particular features of strategy generation in the public sector. Although the need for strategy in public organizations is widely recognized, the form that it should take and how the process of strategy formation should be organized are still being debated (Plant 2009).
In this article, we have tried to outline some of the more salient issues for public-sector managers tasked with developing strategy at the departmental or organizational level. Underlying these varied considerations is the nature of the political process, with its shifting balance of power among multiple groups and factions. This complicates the formulation of strategy and often interrupts its execution. Strategies that have been composed to balance competing interests may be undermined by a change in party, the sudden emergence of a new leader, or the need to support a particular initiative. Links that have been forged between politicians and civil servants, partners in crafting and delivering strategy, can be disrupted by elections or changes in ministerial assignments. These problems give rise to uncertainty and even cynicism regarding the utility of developing a strategic vision, much less trying to implement it.
We have suggested that an appreciation of the deliberate and emergent aspects of strategy formulation may assist public-sector managers in dealing with these issues. A deliberate approach yields a strategic framework based on a thorough analysis of internal and external factors affecting the organization. It provides goals that orient the department as a whole and sets guidelines for decisions made at lower levels. In the dynamic world that most organizations face, generating multiple scenarios within this overarching framework has become a regular feature of strategy formulation.
Even the flexibility generated through scenario planning may be insufficient as new elements intrude on the organization's context and mission. The emergent view sees the reaction to such events as the essence of strategy, but this leaves managers and their subordinates with a constantly shifting view of what the organization is trying to accomplish, a state that can be confusing and demoralizing. It may be more appropriate to think of deliberate and emergent strategy formulation methodologies as two related portions of a single process. If the strategy as originally crafted is flexible enough to allow the evolution and incorporation of new ideas during its implementation, it takes on the positive aspects of deliberate emergence (Harrington et al. 2004) or planned emergence (Grant 2003). At the end of the strategy implementation cycle, the evolved strategy forms the basis for the formal planning that will occur in the next iteration.
An approach that combines deliberate and emergent elements can assist organizations in adapting to the disruptions and crises that confront managers in the public sector. Properly constructed, such a framework can provide the guidance necessary for decisive action under trying circumstances. Building and understanding strategy through this integrated approach can help managers accept necessary changes in programs without giving rise to resistance and cynicism. It can also habituate those at lower levels of the organization to an acceptance of changes that are both inevitable and necessary. Moving in a direction that consciously embraces both deliberate and emergent elements requires alterations to both systems and attitudes, but it promises results that can bring consistency and effectiveness to strategy formulation in the public sector.
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Wade Rose is a strategy instructor in the MBA program and David Cray is an associate professor, both in the Sprott School of Business, Carleton University. They wish to gratefully acknowledge the helpful comments made by the Journal's anonymous reviewers.
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|Author:||Roce, Wade R.; Cray, David|
|Publication:||Canadian Public Administration|
|Date:||Dec 1, 2010|
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