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The Public Manager in 2010: Managing Public SectorNetworked OrganizationsP. M. Jackson & L. Stainsby aa Management Centre , University of LeicesterPublished online: 15 Mar 2010.

To cite this article: P. M. Jackson & L. Stainsby (2000) The Public Manager in 2010: Managing Public Sector NetworkedOrganizations, Public Money & Management, 20:1, 11-16

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The boundary between public sector and privatesector provision has shifted dramatically over thepast 20 years. Various policy initiatives shifted thesupply of public services out of public sectorbureaucracies into the market place. Privatizationof utility assets, the sale of council houses,contracting out, increasing forms of regulation,and the introduction of internal markets are allexamples of this trend.

Simple market failure arguments, which neo-classical economic theory had employed to justifypublic bureaucratic provision, were countered bythe public choice theorist’s appeal to governmentfailure defined in terms of poor representation ofusers’ preferences; rule by the interests ofmonopoly professional groups; and bloatedbureaucracy. When taken together these wereseen to indicate poor value for taxpayers’money.

This blurring of the boundaries between themarket and the state is likely to continue in theearly 21st century. What will emerge are networksof public and private sector agencies, includingthird sector voluntary organizations. Currentpublic sector trends are, therefore, feeding themore general movement towards a networksociety—an increasingly complex set ofrelationships of mutuality.

What are Networks?Network is a vague concept, but it is gainingincreasing currency in the academic literature.Networks are clusters of relationships which spanindefinite ranges of space and time. Like opensystems (Katz and Khan, 1965) networks have no

clear boundaries—there is no definitive beginningor end. Business organizations are increasinglybeing organized in networked forms, andhierarchies are frequently viewed as comprised ofnetworks. Thus, networking is seen as a newindustrial order (Best, 1990; Reed, 1992; Castellsand Hall, 1994). Production depends uponcontinuous collaboration with external sources ofknowledge and expertise.

In order to understand more clearly theconcept of a network it is useful to place it withina much wider discussion of the relationships thatmight exist between organizations. These can bethought of as four possibilities:

•Co-operation.•Competition.•Co-ordination.•Co-evolution

Co-operation reflects, ‘enlightened self-interest inan uncertain environment’. This is typical of theclassic prisoner’s dilemma game. The pursuit ofindividual goals in a highly uncertain decisionenvironment produces for each player a pay-offwhich is less than that which could be achieved byco-operating. In other words, co-operation wouldproduce a ‘win–win’ outcome for the co-operatingparties.

Competition involves the pursuit ofindividualistic goals as in tournaments. There is aclear consensus on what constitutes success (highperformance) and there are no agreements norcommunication between the players. Therelationship is one of independence. This

Managing Public SectorNetworked OrganizationsP. M. Jackson and L. Stainsby

The authors argue that we are in the age of the networked society. Lying betweenthe governance structures of markets and hierarchies, networks have emerged asan organizational form which seeks to confront many of the ‘wicked problems’faced by public and private organizations. While the precise architecture ofnetworks remains vague, much is claimed for them in terms of their potentialcontribution to adding value and enhancing performance. This article exploresthe use of networks in the delivery of public services and the problems and issuesthat arise for their management. Public service managers need to be aware of thecosts and benefits of alternative network architectures and how these might beactively managed. The treatment of public sector networks here is also intended tocontribute to the current debate on ‘joined-up’ government.

The Public Manager in 2010

Peter M. Jackson isDirector of theManagement Centre atthe University ofLeicester.

Lynn Stainsby isLecturer in Marketing,at the ManagementCentre, University ofLeicester.

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characterizes contestable markets.Co-ordination (or collaboration) arises when the

goals being pursued are collective and the decisionenvironment is relatively stable and predictable.In this case organizations will form joint venturesand alliances in the pursuit of shared goals.

Finally, co-evolution involves the pursuit ofcollective goals, but in ambiguous andunpredictable environments. This is where‘wicked problems’ lurk. Co-evolution, as the namesuggests, requires a search for new joint solutionsto wicked or intractable problems. The preciseorganizational forms will be emergent and needto be sufficiently flexible to be effective in thediscovery process.

Both co-operation and competitionacknowledge the pursuit of individual goals. Theydo not, therefore, reflect the nature of networksexcept in the weakest sense of the word, meaninga pattern of relationships. The concept of thenetwork as referred to earlier is more usefullythought of as incorporating the notions of co-ordination and co-evolution. Networks, therefore,pursue joint goals in either predictable orambiguous environments. Indeed, a range ofdifferent types of networks will exist dependingupon how ambiguous the environment is.

Examples of networks within the public sectorare collaborations between primary and socialcare in the health service; joint boards; actionzones in employment, education and health andthe Private Finance Initiative (PFI). These requirenew networked supporting forms of organizationin the pursuit of collective goals: joint ventures,strategic alliances or partnerships. Thesenetworked forms of organization are aneffective means of achieving improved socialoutcomes, greater public participation andsocial inclusions.

Why Network?Collaboration or joint venturing brings with it

•Poverty.•Unemployment.

These are extreme forms of market failure whichcompetition, through the pursuit of individualgoals, is unable to cope with. Equally, co-operation,because it requires the pursuit of individual goals,is unable to deal with wicked problems. Solutionsto wicked problems have significant systems-wideexternalities that require co-ordination if they areto be effectively captured.

Wicked problems permeate large systemsand their solution requires the co-ordinated effortsof many different agencies and departments. Co-ordination and the establishment of networkscapture the thinking that underpins the notion ofjoined-up government.

The rationale for networking and the benefitsit bestows can, therefore, be summed up inKanter’s (1994) phrase, ‘collaborative advantage’,which was applied to joint venturing in the privatesector. Traditional command and controlorganizations, such as hierarchy/bureaucracy, areunable to cope with the informational demandsof ambiguity, complexity and uncertainty. Hayek(1940) pointed this out years ago in his attackupon central planning. To be able to commandand control with authority it is necessary to havean incredible amount of information andknowledge, otherwise decisions will be incompleteand imperfect. Most knowledge, however, is highlylocalized within a system, especially tacitknowledge. Improvements in efficiency andeffectiveness, therefore, require this localizedknowledge to be joined up both between andwithin organizations. Following the view of Cyertand March (1963), that organizations are sets ofcoalitions of competing interests, thenorganizations can readily be seen as networks oflocalized knowledge sites.

Networks are neither markets norhierarchies—they lie between markets and

problems of co-ordination. The general theory ofco-ordination focuses upon two principalgovernance systems to solve the co-ordinationproblem. These are the market and hierarchy (Coase,1937; Williamson, 1975). Recently, however, athird mechanism has been advocated—the network.Lying at the heart of the co-ordination problem isthe issue of information and how it is accessed anddistributed throughout the system. Networksenable a sharing of information and knowledgebases. Knowledge is leveraged through jointventures. Since networks (like markets andhierarchies) exist to solve problems, this expandedinformation and knowledge base increases theprobability of successfully solving problems.

In the sphere of public policy, networks areseen as improving the chances of getting closer tosolving wicked problems. Examples of wickedproblems are:

•Inner city housing problems.•Rising crime rates.

hierarchies and there are overlaps between theconcepts. These areas of overlap, however,encapsulate the notions of co-operation andcompetition since it is individual goals whichdrive decisions. Networks are defined in terms oftheir shared values. Economic exchange within anetwork is on a different basis to economicexchange within a market. Also, the network isdifferent from hierarchy because it is based uponinformal mutuality of shared norms, not on aformal authority relationship. Because networksare relationships of mutuality, information shouldflow more freely because there are lowertransactions costs (Fukuyama, 1999).

This discussion, so far, is firmly based uponthe rational paradigm of collective action. Itassumes that the net benefits of positive sum co-operative games are self evident and that mutualinterest networks will automatically emerge. Also,pursuing a Weberian approach to civic duty itwould be concluded that if the interests of thecommunity are better served by mutual co-

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ordination then that form of governance wouldautomatically emerge.

While this normative approach informs therationale for the existence of networks it saysnothing about how networks emerge or areformed. It leaves out the political struggles andnegotiations pre- and post network formation.Forming a consensus about joint goals isproblematic as too is agreeing upon thedistribution of power and the benefits of mutuality.Identification of the positive sum game of jointventuring is only the beginning of the process ofrealizing its benefits. Moreover, the issues ofmanaging networks are ignored.

Managing NetworksNetworks, while more prevalent than in the past,are not particularly new. There have been inter-agency partnerships in the past. These have oftenfailed because of rivalry, lack of common purposeand lack of shared vision. Squabbles over thedistribution of power, control and resources havefractured the relationships of mutuality. As theacademic literature on private sector jointventuring reveals, ‘smart alliances’ demandcareful management (Segil, 1996).

Within the context of alliances powerfulpolitical, managerial, and professional interestshave to be managed and negotiated. To beeffective, co-ordinated joint ventures need tohave a clear idea of the basis of mutuality—why isco-ordination required and what might reasonablybe achieved jointly? That is, what are the strategicbenefits and what is the value added? What isinvolved is much more than simply the co-ordination of planning and budgeting, thoughthe desirability of this should not beunderestimated. Necessary as co-ordination is itis not sufficient. Coherence requires the effectiveexchange of information. Promotion of coherenceby managers requires:

•Building trust.•Opening channels of communication—what

behaviours will produce net joint benefits?•Creating a sense of the future—ensuring that

individual futures are linked.•Information provision—individuals in the

alliance need to know who has been co-operating or defecting.

•Design of incentives—establishing a pay-offstructure that rewards those who co-operatewhile penalizing those who don’t.

Lack of trust will undermine any alliancerelationship. While a strong sense of commonpurpose (collective goals) is the source ofcoherence, trust is the essential bonding agent.The leadership task expected of managers in anetwork is to create the conditions that will ensurethat the individual constituent elements of thenetwork take responsibility for the behaviour ofthe whole as well as their own individual behaviour.This often requires a change in mental maps.

Individuals need to see themselves as part of thewhole and to resist shifting blame from one partof the system to another. An holistic approach tiestogether individuals’ futures.

In order to achieve these holistic goals, publicsector network managers will need to be skilledboth in relationship management and in managinggroups that come from a variety of professionaland organizational backgrounds, each with theirown specific interests, values and beliefs. Acommonly used phrase is, ‘the devil is in thedetail’. Lack of appreciation of detail usuallyresults in implementation failures. In this contextthere are many demons in the network.

Networks pose a number of problems formanagers in the constituent organizations (Kickertand Koppenjan, 1997). Managing a network is ameans of achieving joint problem solving in asituation of mutual dependency. It is a search forco-ordination but it is also a quest for co-governance. This means that when settingstrategies for their own organization managerswill need to take into account the actions of theother organizations within the network and indeedtheir reactions to the strategies chosen by others.

Who will, however, play the role of networkmanager? The network is a common good to itsmembers. Why should any constituent membertake on the role of managing the network?Everyone has something to gain from networkmanagement, but the person who takes on therole will incur transaction costs. If the number ofmembers within the network is sufficiently smallthen members can agree to apportion thesemanagement costs among themselves, as in thecase of a voluntary network. The public sector,however, has the authority to form networks andmanage them on behalf of the beneficiaries.

Skills for Managing NetworksNetworks are complex organizational forms. Theirarchitecture is described by the relationshipsbetween their constituent parts. This architectureis, however, likely to evolve over time. The initialconditions define a negotiated order which formsthe foundation from which subsequentdevelopments of the networked relationships willbecome established.

The evolutionary nature of networkrelationships poses problems for networkmanagers. Shifting patterns of relationships willmost likely be the result of power shifts within thenetwork. Network managers will need to have theskills of diplomacy to foresee potential conflicts ofinterest within the network and to manage conflictswhen they arise. They must also be prepared tostand back to find patterns and meaning in whatwill often, close up, appear to be a chaotic set ofrelationships. Unless such meaning can be foundit will be difficult to design, communicate andimplement action plans for the network as awhole.

Because networks are likely to evolve, theprecise nature of the relationships between the

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elements of the network are likely to be ambiguous.The managers of networks will, therefore, berequired to have a high tolerance for ambiguityand uncertainty.

Along with a tolerance for ambiguity anduncertainty, there will also be a need to abandonlinear thinking. Networks by nature are a myriadof connections and relationships. They evolve ina kaleidoscopic fashion. Linear managerialthinking, starting with strategy and moving toimplementation and review is too simplistic forthe task. Managing a network’s life cycle requiresacknowledgement that in the early stagesrelationships will be ambiguous and fuzzy. Overtime, more stable patterns are likely to emerge. Itis at this stage that linear thinking and theintroduction of management systems to guide thenext stage in the development of the network willbe effective. How long this stage will last isunknown. Networks, like all organizational forms,develop through crises. They reinvent and renewthemselves, reconfiguring the architecture ofrelationships to meet new and often unexpectedchallenges. How should network managers initiateand manage such change? The metaphor of the‘controlled burn’ has been suggested, i.e. theprocess used by foresters to clear deadwood andthereby head off uncontrollable wildfires thatwould destroy the whole forest. By analogy,network managers will need to continuously prunetheir networks.

Networks are constellations of centres ofpower. Network managers will manage throughthese power centres. Learning within and onbehalf of the network requires information locatedin each power centre to be made available to thenetwork as a whole. Knowledge managers arethose who are able to see new relationships (i.e.new knowledge) between the information bitsscattered throughout the network. Networkmanagers will need to negotiate information outof power centres and encourage informationsharing for the benefit of the whole network interms of learning and knowledge creation.

Information and knowledge are the sourcesof power and many of the constituent elementswithin a network will not wish to share informationfor fear of losing their power base.‘Communication gridlock’, a feature of manylarge organizations is likely to result. Withinnetworks the different constituent elements arelikely to have different perceptions regarding thedecision problems that are to be solved. Networkmanagers must have the skills to create ‘mediateddialogues’ to build up a better understanding ofthe nature of the common problems facing thenetwork as a whole and to search for consensusabout how best to solve them. Network managersare, therefore, sense makers.

Klijn et al. (1995) distinguish two dimensionsof network management:

•Game management, i.e. managing interactionswithin the network.

•Network restructuring, i.e. building and changingthe institutional arrangements of the network.

There are four elements of game managementthat might be considered:

•Network activation, i.e. bringing together the actorsin the network to solve their mutual problem.

•Arranging, i.e. organizing in an ad hoc way inorder to support network interaction.

•Brokerage, i.e. bringing together actors, problemsand solutions.

•Mediation arbitration and facilitation, i.e. creatingthe conditions for strategic consensus building.

Network ActivationThe network manager needs to bring togetherthe relevant actors to solve a mutual problem.Who should be involved? Who is willing to beinvolved? Given the transaction costs involved,why will actors be willing to participate and whymight others be willing to sit on the sidelines?Moreover, there are many different networkarchitectures—ways of structuring therelationships. Should this design be considered asan ex ante exercise or does the most effectivearchitecture emerge over time?

ArrangingGiven the possible high transaction costs andfree-rider problems that permeate networks thenetwork manager needs to be able to get therelevant actors together and to agree to participate.Moreover, in order to ensure stability of thenetwork it is necessary to set up an agreed conflictresolution mechanism to cope with disagreementsamong network members. Arranging differs fromnetwork structuring and is more to do withestablishing the culture of the network—the valuesand norms.

BrokerageAttention has been drawn to the fragmentednature of the policy process (Kingdon, 1984).Indeed this lies at the heart of the ‘garbage can’model of decision-making (March and Olsen,1984). Someone within the system has to bringtogether participants, problems and solutions.Kingdon (1984) suggests that this brokerage rolewill be carried out by, ‘people willing to investtheir resources in return for future policies intheir favour’ (p. 214). Such brokers fulfil the roleof the ‘political entrepreneur’.

The broker in a network performs a similarrole to that of the auctioneer in neo-classicaleconomics. However, the broker is more than justan heuristic fiction that is required to bring aboutequilibrium and stability. Without the broker thenetwork will not emerge into existence. Who,therefore, will play the role of broker? Thisquestion has already been answered. It is thegovernment. Modern governments, therefore,take on the role of brokering networks to dealwith society’s wicked problems.

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Mediation, Arbitration and FacilitationThe network manager acts as a facilitator bypromoting favourable conditions for joint action.Time spent on facilitation and consensus buildingby establishing a common view about feasiblesolutions will reduce the likelihood of conflictlater. Helping members of the network tounderstand the issues and problems and buildingcommitment and dedication on the part of themembers can be facilitated through, organizingworkshops; prompting questions to enhanceunderstanding; conducting surveys; andbrainstorming sessions. Each requires creativethinking and an open exchange of ideas. Solutionsemerge and the facilitator’s role in this context isto establish the conditions for a learningorganization.

Mediation and arbitration arise when conflictoccurs or when there is a stalemate in discussions.To be effective the mediator or arbitrator needsto be independent. The functions of the mediatorare:

•To ensure that relationships between networkmembers are maintained. This requiresopening up and keeping open channels ofcommunication and assisting parties torecognize and respect the interests of others.

•To make sure that procedures are observed.•To identify the resources required to resolve

conflict, for example using resources to produceinformation through research.

•To explore possible solutions. This can involveshuttle diplomacy.

•To confront the parties with views from theoutside world and to call into questionunreasonable claims. It also requires takinginto account the position of unrepresented orunder-represented interests, for example thoseof future generations.

•To get the parties motivated and committed toaccepting the proposed solution.

Arbitration arises when the parties ask a thirdperson to intervene and impose a solution uponthem. The conflict is then no longer in the parties’hands (binding arbitration). In the case of a non-binding arbitration, a solution is suggested.

Network StructuringNetwork structuring is similar to a paradigmchange or double loop learning. If problemscannot be solved within the existing networkstructure then the network must be changed. Thewrong structure can be a contributing factor toimplementation and policy failure. Care, however,needs to be exercised not to search for the chimeraof the ‘ideal network structure’. There is no suchthing as the one best way to organize, ascontingency theory has taught in other contexts.Rather, the best structure is that which is fit forpurpose and which minimizes losses (costs). Thisrequires a deep understanding of the purpose ofthe network.

Reorganization can be expensive and,moreover, it takes time. Usually much longerthan originally anticipated. Change, unless itbecomes destructive, requires carefulmanagement. Reorganization can destroy existingknowledge bases which greatly constrains theeffectiveness of the network. Effective changedoes not displace the social capital of the networkin one fell swoop. Rather changes are introducedincrementally rather than radically.

It has been suggested by Ostrom (1990) thatwhile simple networks require a manager,complex networks require a network mediator.The activities that a network mediator pursuesinclude: reframing the network; changingresources, relations and rules; and changingculture, perceptions and behaviour. However, asOstrom points out, there have been few empiricalstudies of network management. Clearly as theN-form organization (network) becomes moreprevalent, a deeper understanding of networkmanagement will become essential.

ConclusionPublic sector managers of the next century willface the exciting challenges of managing neworganizational forms effectively in order to solvethe increasingly intractable problems presentedby a society becoming ever more complex. Thedominant emerging organizational architectureis likely to be that of the network organization. Asthe argument above has demonstrated, N-formmanagers will require skills over and above thoserequired to manage other more traditionalorganization types. They will need a much greatertolerance for ambiguity, a willingness to takeconsiderable risks, and to manage a myriad ofdifferent professional cultures in their searchfor co-operation between the constituentelements of the network. Moreover, they willneed to be expert brokers of contracts andbuilders of trust. This will require them to bediplomats and mediators. Unless public sectororganizations and their managers are preparedto embrace these changes enthusiastically, socialorder as we have known it in the 20th centuryis likely to decay in the next. ■

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