Governing Hybrid Organisations

Exploring Diversity of Institutional Life

Jan-Erik Johanson, Jarmo Vakkuri

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317222576
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Intuitively, organisations can easily be categorised as 'public' or 'private'. However, this book questions such a black and white dichotomy between public and private, and seeks a deeper understanding of hybrid organisations. These organisations can be found at micro, meso and macro levels of societal activity, consisting of networks between companies, public agencies and other entities. The line between these two realms is increasingly blurred — giving rise to hybrid organisations.

Governing Hybrid Organisations presents an engaging discussion around hybrid organisations, highlighting them as important and fascinating examples of modern institutional diversity. Chapters examine the changing landscape of service delivery and the nature and governance of hybrid organisations, using international examples and cases from different service contexts. The authors put forward a clear analytical framework for understanding hybrid governance, looking at strategy and performance management.

This text will be valuable for students of public management, public administration, business management and organisational studies, and will also be illuminating for practising managers.

1
Monsters on the Run

Introduction to governing hybrid organisations

This book is about hybrid forms of governance and hybridity in social life. We are particularly interested in the hybridity of organisational and institutional systems, which are used to fulfil some important functions and activities in society that have important value to citizens. On a fundamental level, a sustainable environment is a precondition for human existence. People need to commute from place A to place B. People have ambitions to educate themselves, and societies wish to maintain a sufficient level of health for their citizens. Economic activities and transactions are built upon the premise of undisturbed energy supply. There is no one definite way these necessities should be organised. This book discusses the forms, processes, and mechanisms of organising such activities from a specific viewpoint.

Hybridity is an ambiguous concept. It is very easy to see hybridity everywhere. For us, hybridity refers to an impure existence in between pure types. More specifically, we are interested in the intersection and boundaries between the private and public sector forms of organisations. This is why we discuss hybridity through hybrid forms of governance and hybrid organisations. The problem in naming and categorising objects is that our thought processes imprison us. We lose our ability to think differently. With respect to pursuing important societal goals, it is sometimes difficult to disentangle public organisations and activities from private efforts.

One reason for black-and-white dichotomies of public and private organisations is the normative stance of discussions. The distinction may be indicative of opinions concerning how public and private organisations should be, not how they actually are. People presume social life to include certain properties and virtues that are pertinent to specific modes of organisations, spheres of influence, and institutional actions. It is possible to render this argumentation without actually acknowledging the particulars of organisational action and activities. These arguments are often prescriptions, not descriptions (Van der Wal et al. 2008). One important and intellectually powerful example is the distinction between two syndromes offered by Jane Jacobs: the guardian moral syndrome and the commercial moral syndrome. The guardian moral syndrome refers, to some extent, to obsolete virtues of government activities that respect hierarchy, adhere to traditions, treasure honour, and show fortitude. The commercial moral syndrome is associated with ideal-type morals and the ethics of business activities that evade the use of force and instead encourage competition, efficiency, initiative, and collaboration. Both of these syndromes are necessary to run modern societies. Interestingly enough, a dialogue between Kate and Jasper in Jacobs’s book (Jacobs 1992) offers a provocative policy recommendation of not mixing these two completely separate and unrelated domains of social activities. This is because mixing these two syndromes creates new and unexperienced types of moral abysses, functional perversions, corruption, and dysfunctional modes of organisations that are sources of institutional impurity. Jacobs calls these mixed forms monstrous hybrids, which either compromise the neutrality of government or distort the efficiency of business operations.

Our view of hybridity and hybrid organisations is a more sympathetic one. Hybrid organisations resemble a labradoodle, which is a cross-breed between a golden retriever and a poodle. It is enormously cute and causes very little allergies, but it may suffer from genetic illnesses and behavioural problems, and it lacks institutional recognition from all-breed purebred dog registries. Hybrid organisations struggle with similar problems. Not only do they mix features of pure types, but they are also poorly understood and understudied, and they are regulated haphazardly. In a more formal tone, this book raises the need for a more comprehensive understanding of hybrid activities and organisations, not as if they are residuals of public and private but as if they have an institutional space of their own (Skelcher and Smith 2015). We should then be able to relate hybrid activities and contexts to something that also, in a more general fashion, epitomises institutional action in society. For us, as students of public administration, it is comfortable to do this by using two concepts of purposive institutional action: strategy and performance. Broadly speaking, this book treats strategy as a system for exploring goals, performance, and the future as mechanisms for understanding and demonstrating past achievements and accountabilities. In both cases, we are dealing with the important and fundamental aspects of the institutional actions of governments, business firms, and nonprofits.

Characteristics of hybrids

Hybridity refers to ambiguous types of social organising. It is possible to discuss hybridity as a demarcation from the original ‘pure’ public and private species. Within the context of administration, impurity can take place within public and private activity or between them. Discrepancies between politics and administration within government produce hybridity similar to the organisational forms created by the friction between the ownership and control of private enterprises. The focus of our book is the relationship between public administration and business activity, the aim of ‘doing well by doing good’ (Kreps and Monin 2011). We seek understanding on hybridity not merely as demarcation or deviation but rather as an ‘Archimedean point’ where ‘a robust theoretical platform can be introduced from which it is possible to develop, test, and analyse different models of hybridity’ (Skelcher and Smith 2015, 444).

Within studies of business organisations, many scholars have criticised the dichotomous view of markets and hierarchies (e.g. Powell 1990). Critical remarks and speculations have sought to understand social activities as a continuum-like system in which discrete market transactions are located at one end and highly centralised hierarchical forms are located at the other. Descriptively speaking, in real life, intermediate forms of organising resemble something from both extremes, as is the case, for instance, with hybrid forms of organising (Powell 1987; Bartlett et al. 1994). In the context of sociology, economic sociology, and institutional economics, hybridity has clearly posed a dilemma to scholars and the conceptual systems and frameworks scholars use. For example, Ménard (2004) discusses hybrids as a ‘collection of weirdos’ that needs to be systematically theorised further, and, if not, cases of hybridity should be returned to analytical discussions in which the traditional market-hierarchy dichotomy can be used.

Looking at hybrids from the perspective of public administration research, we refer to institutional settings in which corporations with both public and private owners may operate according to public interest or activity, or in which private (for-profit or nonprofit) firms increasingly take care of public service provisions. In practice, hybrid forms of governance may thus assume many forms: government-owned corporations, public-private partnerships (PPPs), social enterprises, commissions, public procurement, purchaser-provider models, and contracting out. More specifically, the notion of hybridity can be considered to cover the following:

1. Mixed ownership. Consider the current forms of organising important societal functions, such as energy delivery and supply and the infrastructure in different countries of the world. These societal functions are often organised as state-owned enterprises (SOEs) that aim to combine the politically driven goals of modern nation states while exploiting business logics and operating on global financial markets (Thynne 2011). In many cases, public ownership is also seen as a solution to grievances among customer groups (Hansmann 1996). Mixed ownership can be seen as another form of hybrid arrangement, which is seen in entities aiming to combine the best of both worlds between public and private actors. This is why societies, especially government systems, have thought it important to control these combinations through ownership.
2. Goal incongruence and competing institutional logics. Think about institutions that aim to balance the logic of profit seeking vis-à-vis the logic of societal effectiveness. While these organisations – in terms of ownership – may quite often be purely private firms, their activities are shaped by different forms of ambiguity and ambivalence. They should be able to employ different but parallel institutional logics. They should be able to provide financial value for their shareholders but also social impacts on society and citizens. Consider health care firms operating in the area of outsourced health care services, where the impetus is to use business logics while supplementing or replacing the public provision of health care. Alternatively, consider social enterprises, the objective of which is to ‘do well by doing good,’ where ‘good’ refers to legitimate social aims, and ‘well’ is understood as being profitable (Reay and Hinings 2009; Kreps and Monin 2011; Pache and Santos 2013; Ebrahim et al. 2014).
3. Multiplicity of funding arrangements. Think about modern megaprojects such as the International Space Station, the Beijing–Shanghai High-Speed Railway, the Airbus A380 aircraft, or the Channel Tunnel connecting the UK and continental Europe. These projects not only take time and massive amounts of financial and intellectual resources but also institutional collaboration between public and private actors. These arrangements may include private investors and financiers as well as taxpayers who all have different interests and stakes in a project and its arrangement. Despite all the complexities in the valuation and measurement of the returns and paybacks of such activities, all parties are necessary to make these projects possible (Greve and Hodge 2007).
4. Public and private forms of financial and social control. There can be different types of control systems applied to systems of service delivery. In general, forms of control may include, for instance, the regulatory control of markets, professional self- (or clan-) control, and customer-driven market control within a single system of service delivery (Power 1997; Kickert 2001; Jordana and Levi-Faur 2004; Kelly 2005). In fact, it is difficult to distinguish public forms of control from private ones. Instead, modern control systems are defined by the simultaneity of different dimensions of control. Private business firms are controlled by public institutions, whereas public agencies may be controlled by private firms operating in the markets of public sector audits (Vakkuri et al. 2006). Instead of having a public vs. private mentality, it is probably more important to understand whether control is exercised by an external or internal party. In hybrid settings, we argue, forms of control are usually mixed. These organisations and arrangements are influenced by multiple pressures of control from both inside and outside forces.

Tricky problems of governance arising

The issues of ownership, institutional logics, funding, and control provide a broad framework for hybrid activity situated in between market competition and politics within government. In our thinking, hybridity is a space in between governments and markets that is populated by hybrid organisations, compilations of organisations, industries, and systems which seek the simultaneous advancement of public policy goals and business aims with the use of both public and private resources. With such a definition, hybridity covers research objects such as PPPs, nonprofits, SOEs, universities, hospitals, and health policy systems.

Hybrid activities and organisations are not easy objects of governance. It is complicated to understand what drives and facilitates hybrid action, what kinds of institutional processes produce hybrid forms of governance in society, and how hybrid organisations can be governed and controlled. Consider the tricky questions that the task of governance confronts:

1. How should we understand the space in between public and private? In a public-private interface, hybridity can take a variety of forms. First, hybrids can be entities with a particular organisational form. Second, hybrids appear as governance structures. Third, hybrids represent relationships among actors in a network. The following discussion of hybrid organisations as entities, governance structures, and compilations of relationships is based on a very simple separation. The hybrid as entity is an approach that takes hybrids as singular beings. Most notably, hybrid entities refer to a specific type of organisational forms and structures that combine one way or another the features of purely public and private organisational forms. The governance structures perspective views hybrids as arrangements that efficiently solve the cost of business interactions, and the relational view sees hybrids as part of social structures and networks. One possibility is to see hybrids as a meso-level construct which is disentangled from the idiosyncrasies of singular micro forms of organisations but distinct from highly abstract macro forms of the aggregation of wholes, such as countries, industries, or national economies. Real-life developments and theoretical advancement suggest that organisations themselves are in the flux of transformation. ‘Organisation’ refers not only to a single entity regulated by a single manager or single authority structure within private enterprise or government hierarchy; it also refers to pairwise interaction patterns and to multiparty alliances among a number of organisations representing various public, private, and mixed organisational forms.
2. What kind of empirical categorisations are used to classify hybridity? One of the main reasons to study hybridity is related to the existing ideas and mental models of public and private spheres. Deviations from the deeply-rooted distinction between government activity and business endeavours are a nuisance for heuristic simplifications. In this sense, hybridity poses a threat to the image of how societies are constructed. The dichotomy of the public and private sectors is in itself a fragile distinction which is upheld by existing measurement and calculation systems and theoretical assumptions of the nature of public and private goods. This distinction makes it difficult to include additional categories in existing classifications. Hybrids appear as conceptual waste which does not have a proper place in existing measurement categories. Furthermore, private producers to a large extent take care of many of the duties previously performed by public agencies. Likewise, within private enterprises, some practices (such as corporate social responsibility policies) emphasise the nature of the firm as part of their environing societies. There is, however, no need to overestimate the purposiveness in populating the grey area between the public and private spheres. Many of the developments in the increasing of the space in between existing categories result from ad hoc solutions to administrative problems rather than planned change. Uncertainty is a powerful mechanism that instigates processes of choice and imitation. Inadequate understandings of decision-making environments, ambiguous processes of setting goals and objectives, and loose links between means and ends in making choices contribute to different variations of uncertainties that institutional actors aim to alleviate (DiMaggio and Powell 1983; Powell and DiMaggio 1991). Societal actors need to learn to ‘muddle through’ in different institutional environments. Quite often, traditional trial and error will do (Lindblom 1959).
3. How do hybrid organisations legitimate their activities? Any organisation needs support for its actions. In the case of hybrid organisations, there is a genuine institutional deficit of approval. Hybrids need to acquire support for their existence from multiple sources, but there are hardly any universal principles for acquiring approval from multiple audiences. Institutional structures of industrialised societies give a different role not only to public and private activity but also to the nature of action between existing categories. Both government-assisted solutions and market-enabled hybrid solutions exist, but, in the developing world in particular, hybrid activity might represent the only viable option in organising large-scale economic activity. The position of hybrids is not only embedded in societal institutions; it is also temporally bound.
   Ideal public bureaucracy typically emphasises control and reporting relationships in the vertical line between managers and subordinates, which does not take the needs of the citizens as its first priority. Within government ranks, the existence of powerful professional groups and the distinction between elected politicians and appointed officials are some features which do not always respect straightforward vertical accountability structures. There is no need to belittle the bureaucratic nature of private enterprises, which aim at avoiding market anomalies by constituting top-down-oriented management structures not relaxed by democratic political debate or professional allegiances. Within hybrid settings, accountability structures are inherently ambiguous. In a hybrid context, the distinction between responsibility to shareholders of a typical stock-hold company and responsibility to electoral constituencies in political systems cannot be easily made. The mixing of politics and markets within the same administrative structures might be a problem for an external observer trying to apply existing principles of accountability to hybrid activities. From the viewpoint of hybrid activity, the ambiguity of accountability opens up possibilities to evade obligating responsibilities and exploit dual commitments to the public and private spheres.
4. How are hybrid activities valued in society? The distinction between profit seeking and evaluation is relevant in separating the achievements of private and public activities. One option is to see public value creation as a broader category of value generation than profit seeking with private enterprises (Moore 1995). In this respect, effectiveness and legitimation considerations in hybrid activities come to the fore in the public sphere. However, the distinction between financial value in terms of calculable currencies and value as important aspects of human life is not as clear as it seems. The discussion of worth is not only a language game which combines financial and social values; it also puts forward that these values are two sides of the same coin. The valuation of finances is dependent upon the values we hold dear in our lives (Stark 2009). The principles of valuation can contradict one another, and, within the hybrid context, the valuation of performance relates to multiple and possibly conflicting perspectives. Yet another option is to see hybridity in terms of classic economic theory and thus as falling between public and private goods. With our collection of case illustrations of hybrid activities, we aim to provide extensive understanding of different mechanisms of value creation among hybrid activities. The level of ambiguity in demonstrating, measuring, and creating value may vary in different contexts of hybrid organisations.

Governing hybrid organisations entails problems at different levels. We are not able to fully grasp the i...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Preface
• Acknowledgements
• 1 Monsters on the run: introduction to governing hybrid organisations
• 2 Why do monsters exist? Public, private, and hybrid organisations in perspective
• 3 How to tame monsters: hybridity and its variants
• 4 Setting the path for monsters: how do hybrids explore their strategic options and objectives?
• 5 Tracing the footprints of monsters: the performative orientation of organisations
• 6 Chartering the terrain of monsters: exploring strategy-performance interfaces in hybrid activities
• 7 Are they monsters after all? Understanding the governance of hybrid organisations
• References
• Index