Formal planning rationality in public sector professional work: between discourse and practice

Although rational models of formal planning have been seriously criticized by strategy literature, they not only remain a widely used organizational practice in private firms, but they have increasingly been entering public, professional organizations too, as part of public sector managerial reforms. This research addresses this apparent paradox, exploring the meaning of formal planning in public sector professional work. Curiously, this is an issue that remains under-investigated in the literature: the long debate on formal planning in strategy research devoted scant attention to its diffusion in the public sector, and public sector studies have scrutinized the introduction of other management tools in professional work, but very limitedly formal planning itself. In fact, little is known on the actual meaning of formal planning in public, professional services. This research is based upon a case of adoption of formal planning tools in a public hospital. Embracing a discourse analytical lens, it examines which formal planning discourse entered professional work, to what extent, and how professionals interpret it and engage with it in their practice. The analysis uncovers dynamics of social construction of meaning where, eventually, a formal planning discourse both shapes and is shaped by professional practice. In particular, it is found that formal planning rationality largely penetrated professional work, but not to the detriment of professional values. Morevover, formal planning ‘fails’ as a tool for rational decision making, but it takes up a knowledge work and a social value in professional work, as a tool for explicitation of action courses and for dialogue between otherwise more disconnected parts of the organization.

Regulating State Aid: Inter-jurisdictional competition, public choice, and corporate governance

Depending on the regulatory regime they are subject to, governments may or may not be allowed to hand out state aid to private firms. The economic justification for state aid can address several issues present in the competition for capital and the competition for transfers from the state. First, there are principal-agent problems involved at several stages. Self-interested politicians might enter state aid deals that are the result of extensive rent-seeking activities of organized interest groups. Thus the institutional design of political systems will have an effect on the propensity of a jurisdiction to award state aid. Secondly, fierce competition for firm locations can lead to over-spending. This effect is stronger if the politicians do not take into account the entirety of the costs created by their participation in the firm location race. Thirdly, state aid deals can be incomplete and not in the interest of the citizens. This applies if there are no sanctions if firms do not meet their obligations from receiving aid, such as creating a certain number of jobs or not relocating again for a certain amount of time. The separation of ownership and control in modern corporations leads to principal-agent problems on the side of the aid recipient as well. Managers might receive personal benefits from subsidies, the use of which is sometimes less monitored than private finance. This can eventually be to the detriment of the shareholders. Overall, it can be concluded that state aid control should also serve the purpose of regulating the contracting between governments and firms. An extended mandate for supervision by the European Commission could include requirements to disincentive the misuse of state aid. The Commission should also focus on the corporate governance regime in place in the jurisdiction that awards the aid as well as in the recipient firm.