Managing Uncertainties in Networks

Public Private Controversies

Joop Koppenjan, Erik-Hans Klijn

• Publisher: Routledge
• Year: 2004
• ISBN:
  9781134202683
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

As public and private sector organizations work more frequently in partnership, managing uncertainties, problems and controversies becomes increasingly difficult. Despite sophisticated technology and knowledge, the strategic networks and games required to solve uncertainties becomes more complex and more important than ever before. This unique text examines such developments in the area of network strategy.

Differentiating itself from other policy network approaches which mainly have a research focus, this text has a managerial orientation, presenting strategies and management recommendations for public and private sector organizations as well as the analytical tools required by practitioners seeking to support their own internal decision-making and strategy formulation.

Tapping into the important and ever-growing area of risk and uncertainty management, this is a vital and long awaited staple for the arena, written by two leading authors in the field, and is key reading for students, scholars and policy makers seeking to understand the complexities of the network society.

Chapter 1

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Uncertainties in dealing with complex problems in the network society

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1.1 Introduction: dealing with complex problems

Government, business and civil society in our contemporary network society are increasingly faced with long-standing controversies over complex societal problems. Decisions on the use of biotechnology, the location of airports or the restructuring of public sector services such as health care, can become the subject of intensive conflict and debate. These problems are characterized by a high degree of wickedness (Radford, 1977; Mason and Mitroff, 1981). This first manifests itself in the fact that the involved parties disagree not only about the solution, but even about the nature of the problem. Research and scholarship are brought in to establish clarity, but these often only increase confusion. Frequently, these attempts result in knowledge conflicts where parties attack each other’s positions with scientific reports containing contradictory findings.

But the wicked nature of these problems cannot only be linked to the complexity or, perhaps, the technologically advanced nature of the issue. A further feature of these issues is that they cut across the traditional jurisdictions of organizations and cross the traditional boundaries between the private and public sector. Governments, businesses and civil society are unable to tackle these issues by themselves. The complexity of these issues gives rise to arenas of interaction: actors are forced to operate in the context of strategic games and networks that are new to them and in which their standard operating procedures are no longer adequate (Marin and Mayntz, 1991; Thompson et al., 1991; Marsh and Rhodes, 1992; Kickert et al., 1997). In the case of Brent Spar, where Greenpeace challenged the decision of Shell to sink an obsolete oil rig into the ocean, Shell found itself suddenly exposed in the world’s media and had to defend itself vigorously against attacks — which had an immediate effect on their sales figures of gasoline in Europe (Rice and Owen, 1999). In addition to substantive uncertainty, there are strategic and institutional uncertainties.

As a consequence, traditional methods of dealing with problems, which often hold complex issues to be an intellectual design question and approach them by giving research and science a central role, no longer suffice. The wicked problems that confront governments, private companies and societal interest groups in a complex society require a different, new approach.

Box 1.1 Example of wicked problems: the greenhouse effect

The difficulties surrounding the reduction of CO₂ and the implementation of the Kyoto Accords are a good example of a wicked problem where both substantive uncertainties and strategic and institutional uncertainties play a role.

The problem of CO₂ concentrations in the air has been one of the most important environmental issues for some time. CO₂ concentrations increase as a result of burning fossil fuels and other human activities. As a consequence, the gradual warming of the earth may have far-reaching consequences for life on earth. While a reasonable consensus has emerged at present about the fact that there is a problem, we know very little about the causal effects of increased CO₂ concentrations, and there is still much uncertainty about the potential environmental effects of increased CO₂ (higher temperature, changes in precipitation and aridness etc.). Furthermore, various actors have different assessments of these effects. So it is not surprising that a lot of discussion is still going on.

But the problem is not only one of information or perception. There are huge decision making and organizational problems because of the large number of actors involved and the absence of strongly developed institutional frameworks for cooperation at an international level. To do something about this problem, agreements must be made at government level about the reduction of CO₂ emissions. This is a difficult process since every state has its own opinions and interests. The Kyoto Accords constituted a first attempt to make international agreements between states in this field.

The decision of President Bush not to ratify the Kyoto Accords has had major consequences for the behaviour of other actors. It not only increases the uncertainty already existing, it also means a major setback in attempts to develop an institutional framework meant to overcome strategic and institutional uncertainties.

The aims of this book are both to argue that uncertainty is an inherent characteristic of modern society which is not simply caused by a shortage of knowledge or information, but also by the strategic and institutional features of the network settings in which these wicked problems are articulated and processed, and also to develop a conceptual framework to help understanding of the nature of these uncertainties and to adequately deal with them.

Therefore, we first discuss the background and the nature of the uncertainties that play a role in complex problems. We will argue that traditional approaches are no longer adequate and suggest the network approach as a source of inspiration for dealing with uncertainties in a more satisfactory manner. Next, we outline the structure of the book, which presents our ideas about how to deal with these uncertainties.

1.2 Problem solving and decision making in the network society

In recent decades the environment in which organizations must operate has become more and more complex. The environment for private companies consists of consumers/buyers and competitors, and also supply companies, support companies, organizations that represent their interests, governments who impose rules, monitors and judges, consumer organizations, and societal interest groups. These all make demands upon products and methods of production (Brandenburger and Nalebuff, 1996; Grabher, 1993). Government organizations not only deal with political officials, but also with citizens, target groups, interest organizations, advisory bodies, experts and judicial bodies.

A high density and a variety of organizational networks characterize society. In doing their work and in solving problems, organizations of various different natures meet. These meetings are rarely non-committal. The organizations ‘want something from each other’. They can no longer fulfil their task alone, whether they like to or not. Problems cannot be solved by organizations on their own. Hence, hierarchy as an organization principle has lost much of its meaning. The model of the ‘lonely organization’ that determines its policy in isolation is obsolete (Miles and Snow, 1986; Alter and Hage, 1993). Equally obsolete is the image of government at the apex of the societal pyramid. The opportunities for steering society from one centre are diminishing (Rhodes, 1997; Hanf and Scharpf, 1978; Van Heffen et al., 2000).

Horizontal networks replace hierarchies. Thus, a double development can be seen. Through processes of specialization, professionalization, decentralization, individualization and informatization, there are increasing numbers of places in society where people, groups, and organizations make important decisions (Castells, 2000). As a result, there is increasing fragmentation. Simultaneously, these local decision makers control limited resources and are influenced by the decisions of others. The mutual dependency between local and central parties increases. Horizontal relationships are formed: networks. These dependencies and novel societal forms are not limited to public and private domains but cross territorial boundaries as well. As a consequence of this paradoxical development of increasing fragmentation on the one hand and growing dependency on the other, society increasingly consists of a web of networks. We live in a network society (Castells, 2000).

Network society and wicked problems: the inevitability of the environment

The wickedness of many societal problems can be connected to a number of characteristics of this network society. Without presuming to be complete, and sketched with very broad strokes, we believe that the following developments are specifically important:

• Increasing intertwinement. Through increased specialization and dynamics in knowledge and product development, greater dependencies are created between organizations. In part because of globalization of the economy and the high-quality knowledge demanded for production and services, the costs for production and service delivery have increased while the period for realizing gains has decreased. Hence, companies may increasingly engage in strategic alliances in order to share costs and knowledge and to spread risks (Faulkner, 1995; Nooteboom, 1997). Governments are also increasingly dependent upon the knowledge, authority and resources of other parties — inside and outside government — for the achievement of their policy goals (Hanf and Scharpf, 1978; Marin and Mayntz, 1991; Rhodes, 1997). Thus, in the public realm there is also an intensification of relations between (levels of ) governments and between governments and private companies.

• Deterritorialization and globalization. Private companies increasingly operate in a worldwide theatre. Economic activities are less bound to geographical places or limited to nations. Economic investments (and financial transactions) span the globe and seek places where profit is highest. Companies, consequently, engage in international cooperation (Faulkner, 1995; Nooteboom, 1997). This also means that economic investments and developments can be less influenced by nation states (Faulkner, 1995; Castells, 2000).

• Turbulent environments. The environment does not leave organizations at rest: organizations cannot ignore their environment. The idea that companies are only focused on profit maximization is less frequently accepted. It is the environment that calls increasing attention to the notion of including the external effects of production as a standard element of company management. By means of private law suits (e.g. court cases against weapons producers in the US where families of victims of violence sue companies) but also through societal pressure (e.g. the opposition to Shell’s decision to sink the oil rig Brent Spar into the ocean), companies are forced to consider externalities. Among private companies, an increasing tendency can be perceived where consideration of these dependencies is pursued through the introduction of corporate governance. As far as governments are concerned, they have always been a focus of societal attempts at influencing. The strategies of interest organizations, the leaking of policy memos, and the ever-present eye of the television camera make it impossible for governments to withdraw from these societal influences by appealing to the general interest or the primacy of politics.

• Value pluralism. Our complex society lacks a simple hierarchy of values. Collective associations lose at least some of their importance. The relationships of individuals and organizations with larger communities and common value patterns are not as self-evident as in the past (for reflections about the disappearance of social capital, see Putnam, 1993). Society has several organizational networks and subcultures, each with its own value system. Furthermore, individuals are more able to choose where they put their support and tend to follow their own value judgements rather than adhere to given value judgements (Castells, 1997; Sociaal Cultureel Planbureau, 2000). Visions of what the general interest is are less commonly shared than they used to be. So it is too simple to say that government represents the general interest: value pluralism in society has become too great for that and government itself is internally fragmented and variable. For public and private organizations, this means that the demands placed upon them vary and change over the course of time: there are diverging and competing values that also change over time.

• Horizontal relations. Ideas about how organizations interact with groups and individuals have changed. Government can no longer automatically rely on the support of companies, citizens or other (levels of ) governments for their policies. Relations become more business-like. Citizens and administrators increasingly base their behaviour on cost-benefit calculations. Companies are also confronted with this increasingly business-like nature of interaction in the production chain and in their contacts with shareholders and competitors (Alter and Hage, 1993; Graeber, 1993; Nooteboom, 1997, 2000). Horizontal relations replace loyalties and authoritative relations: there is a transformation from an authoritative to a negotiating society. This translates into new styles of management and the use of other steering instruments (Rhodes, 1997; Denters et al., 2003). Thus, government increasingly involves companies and target groups in making and implementing policy. Concomitantly, there is a shift in the use of instruments. There is less emphasis on unilateral legal instruments such as legislation and regulation. More frequently, instruments that leave room for consultation and cooperation, such as subsidies, covenants and contracts, are chosen (Richardson, 1982; Kooiman, 1993; Brandenburger and Nalebuff, 1996; Kickert et al., 1997).

• Development of knowledge and technology: new uncertainties and risks. The progress of technology and scientific research has not resulted in a reduction of technological uncertainties. The application of new scientific findings and new technologies not only opens new avenues for problem solving and the pursuit of prosperity, but also creates new problems, new risks and new uncertainties (Beck, 1992). The debate on genetically manipulated food between the US and the European Union is a manifestation of the controversies to which the awareness of these new dangers may lead.

As knowledge grows, we become more aware of the complexities that surround us and new questions are raised. Specialization has also resulted in a high degree of fragmentation of knowledge and methods (Nooteboom, 2000). Furthermore, an awareness is growing that answers provided through scientific research are determined to a large degree by the questions asked and the assumptions used. In applied research, it appears that various research organizations hired by different problem owners also present different research results. Scientific research no longer provides unequivocal and authoritative solutions for dealing with problems (Gibbons et al., 1994; Nowotny et al., 2001).

These developments have important consequences for approaching the complex issues that confront individuals, companies, governments and societal interest groups. Growing individualization, fragmentation and value pluralism mean that consensus about the nature of the problems, the relevant criteria to judge these by, and the desired solutions will not emerge automatically. Growing specialization and network formation also means that complex problems are increasingly resolved in a setting of mutual dependencies. This requires more from the interactions and management efforts aimed at the solution of social problems.

Furthermore, the network society is characterized by a high degree of dynamics and boundary-crossing activities so that the existing institutional frameworks are unable to handle societal problems that arise from this. They may even hinder effective problem solving. In addition to the nature and solutions of problems becoming more difficult to determine, the complexity of how problems are handled is also a result of the inevitable involvement of other parties and the complexity of the involved institutional arrangements. Complex societal issues thus develop into wicked problems that are characterized by substantive, strategic and institutio...

Table of contents

• Cover
• Half Title
• Full Title
• Copyright
• Contents
• List of illustrations
• Preface
• 1 Uncertainties in dealing with complex problems in the network society
• PART 1 Analysis of uncertainties in dealing with complex problems in networks
• PART 2 Management of uncertainties in dealing with complex problems in networks
• Bibliography
• Index
• Back Matter