Governing by Network: The New Shape of the Public Sector

Canadian Journal of Administrative Sciences, Jun 2006 by McNiven, James

Governing by Network: The New Shape of the Public Sector Stephen Goldsmith and William D. Eggers. Forward by Professor Donald F. Kettl. (2004). Washington DC: Brookings Institution Press, vii - 182 pp. ISBN 0-8157-23129.9

Fifteen years ago, Bill Clinton and Al Gore collaborated to move the US Democratic Party into a more centrist stance. One of the ideas that came with this move was that government could be re-energized to become more efficient and effective in providing services to people. A similar concept began to pervade the parliamentary systems in Great Britain, Australia, New Zealand, and, to some extent, Canada. In these countries it was called New Public Management. While the approaches in these countries had a number of different points of emphasis, they shared the idea that government stood to gain by incorporating a number of private sector practices and attitudes such as business planning, entrepreneurship, results management, and customer relationship management.

One of the main concerns of the American approach was that governments were too caught up in administering programs (rowing) and too little concerned with the nature of governance and policy (steering). A book by David Osborne and Ted Gaebler, Reinventing Government1, led the change toward the more effective public provision of services. It was written in a plain, clean style, with lists of ideas and lots of examples of some government agencies being more businesslike.

Governing by Network builds on a lot of the basic ideas found in Reinventing Government, including its style and its extensive use of examples. Where it adds a lot of value is in addressing a phenomenon of both business and government that has quietly gained great importance: that of developing networks to accomplish tasks that used to be done in-house by hierarchical managements. In the private sector, less dominated by geography, this is best seen in outsourcing. In the public sector, it is done more locally and is called partnering. The most obvious example in business is the development of sophisticated supply chains, which integrate businesses from raw material production through to retail outlets. In government, the most conspicuous examples have been in community or social services where many governments have turned over a variety of functions to nonprofit and for-profit organizations. Networks seem to have allowed government to focus more on 'steering', though their management problems with networks, as noted below, suggest that there may be a different type of 'rowing' needed today.

Many analysts trace the rise of networks in business and government to an observation made by Ronald Coase in the 1930s on the rationale for large corporations. He considered the need to lower transaction costs between various business activities as the driving force behind these structures. Because transaction costs can comprise as much as half the total cost of a good or service, lowering them has a considerable impact on efficiency. The advent of the computer and the internet in the 1990s has led to a dismemberment of the large, hierarchical corporation in favour of networks of specialist organizations bound together by a common information process, thus lowering transaction costs while allowing the flexibility that the large organization lacked. This has its attractions for both competitive enterprises and budget-constrained governments.

As Goldsmith and Eggers indicate, the rise of networks in government can be understood in this respect. Governments have been under pressure not only to deliver more services, but also to limit tax revenues and expenditures. Efficiency and effectiveness have become higher priorities than ever before and networks appear as a way to combine the effectiveness of specialist and expert organizations with the policy goals demanded of government.

A confluence of four trends has produced this result:

1. Third-party government, or the use of private or notfor-profit organizations to accomplish public purposes;

2. Joined-up government, a British term referring to the practice of multiple agencies from different levels of governments cooperating to meet a complex challenge or provide an integrated service;

3. The digital revolution that allows for real-time collaboration and information flows, and

4. Consumer choice or consumer democracy pressures that want customized service provision, more control, and more choices from government similar to what they are accustomed to receiving from the private sector.

Governing by Network is largely a how-to handbook for those considering networking within and outside government organizations. The book focuses on the management of such networks and upon the specific problems that public sector organizations have when dealing with external partners. Obvious examples of challenges are those of accountability and agency theory. The Canadian HRDC scandal of 20002 and the American Hurricane Katrina scandal, still unfolding, are testaments to the need for careful structuring of both execution and accountability methods in government networks.