Arguments in favor of privatization pose what we refer to as Rainey’s conundrum (2003). Rainey notes that one of the key rationales offered for privatization by political elites is a belief that the public sector is poorly managed.
Ironically, however, successful privatization requires outstanding public sector management. In particular, the move from a centralized command and control style bureaucratic structure to contract-based program delivery demands a sophisticated set of managerial skills and structural changes that would challenge the most efficient and effective organization regardless of sector-affiliation (Cooper 2003).
The managerial requirements of privatization for mid-level managers, the focus of this paper, are particularly significant. With regards to contracting out, managers can be involved in preparing requests for proposals, reviewing submitted proposals, providing input into contracting decisions, crafting contract language, and ushering contracts through internal approval processes (Seidenstat 1999:240, Rusten 1999: 190). Once contracts have been signed, mid-level managers may be the primary overseers of contractors, providing direction, monitoring contractual tasks and ensuring compliance with contract terms (Seidenstat 1999:240). While not a technical step in contracting out, building relationships with contractors is a necessary step towards facilitating effective alternative service delivery (Cooper 2003: 101).
Despite their significant contribution to privatization processes, mid-level managers have largely been ignored in studies of privatization’s stakeholders. Rather, more attention has been devoted to the privatization responses of citizens, political leaders, city managers and state agency directors. Studies examining citizen attitudes towards privatization have argued the importance of doing so based on the potential for public opinion to alter political support for privatization and the strategic value of such information (Durant and Legge 2002, Thompson and Elling 2000).
State legislators have been studied for their attitudes towards contracting out, based on the importance of legislative support to administrators in designing alternative service delivery systems (Becker and Mackelprang 1990). Studies of city managers have focused on the relationship between their government reform values and the level of reform activity in their cities (Moon and deLeon 2001), as well as the number of reform recommendations they make to city councils (Kearney, Feldman and Scavo 2000, Kearney and Scavo 2001). Finally, state-level reinvention efforts have been studied as a function of the state agency director’s commitment to customer service and organizational leadership (Brudney, Hebert and Wright 1999).
Taken together, these studies suggest that (1) the attitudes of privatization’s stakeholders matter to the success of implementation efforts and (2) understanding the factors that contribute to stakeholder attitudes may yield information that can be used strategically to improve those attitudes. Considering public managers as one sort of stakeholder, managers who perceive privatization initiatives as detrimental to themselves or the agencies for which they work may fail to adjust to privatization, potentially leading to lower morale and higher turnover (Kettl 1993: 59), a decline in public service ethics (Haque 1996), or sabotage of privatization processes (President’s Commission on Privatization 1988: 136). Alternatively, positive perceptions of privatization may facilitate more successful privatization efforts (Savas 2000). These assertions assume a bottom-up perspective on program implementation, one that assigns significant power to the employees in charge of executing public initiatives (Lipsky 1980, Maynard-Moody and Musheno 2003).
