Monday, March 19, 2012

The Science of 'Muddling Through'

C. E. Lindblom, 'The science of "muddling through"', Public Administration Review, American Society for Public Administration, Washington D.C., vol. 19, spring 1959, pp. 79-88.

Suppose an administrator is given responsibility for formulating policy with respect to inflation. He might start by trying to list all related values in order of importance, for example, full employment and reasonable business profit, protection of small savings and prevention of a stock market crash. Then all possible policy outcomes could be rated as more or less efficient in attaining a maximum for these values. This would of course require a prodigious inquiry into values held by members of society and an equally prodigious set of calculations on how much of each value is equal to how much of each other value. He could then proceed to outline all possible policy alternatives. In a third step, he would undertake systematic comparison of his multitude of alternatives to determine which attains the greatest amount of values.

In comparing policies, he would take advantage of any theory available that generalized about classes of policies. In considering inflation, for example, he would compare all policies in the light of the theory of prices. Since no alternatives are beyond his investigation, he would consider strict central control and the abolition of all prices and markets on the one hand, and elimination of all public controls with reliance completely on the free market on the other, both in the light of whatever theoretical generalizations he could find on such hypothetical economies.

Finally, he would try to make the choice that would in fact maximize his values.

An alternative line of attack would be to set as his principal objective, either explicitly or without conscious thought, the relatively simple goal of keeping prices level. This objective might be compromised or complicated by only a few other goals, such as full employment. He would in fact disregard most other social values as beyond his present interest, and he would for the moment not even attempt to rank the few values that he regarded as immediately relevant. Were he pressed, he would quickly admit that he was ignoring many related values and many possible important consequences of his policies.

As a second step, he would outline those relatively few policy alternatives that occurred to him. He would then compare them. In comparing his limited number of alternatives, most of them familiar from past controversies, he would not ordinarily find a body of theory precise enough to carry him through a comparison of the respective consequences. Instead he would rely heavily on the record of past experience with small policy steps to predict the consequences of similar steps extended into the future.

Moreover, he would find that the policy alternatives combined objectives or values in different ways. For example, one policy might offer price-level stability at the cost of some risk of unemployment; another might offer less price stability but also less risk of unemployment. Hence, the next step in his approach —the final selection — would combine into one the choice among values and the choice among instruments for reaching values. It would not, as in the first method of policy-making, approximate a more mechanical process of choosing the means that best satisfied goals that were previously clarified and ranked. Because practitioners of the second approach expect to achieve their goals only partially, they would expect to repeat endlessly the sequence just described, as conditions and aspirations changed and as accuracy of prediction improved.

Marketing Summary and Future Work

In the preceding pages we have focused attention on three aspects of strategy.

(1) The manner in which management attention is directed to the needs and opportunities for strategic change.

(2) The chronological steps in the logistic process by which strategic change is conceived and implemented, and the management actions which accompany this process.

(3) Two basic types of strategic change: expansion, which is an extension of the current dynamics of the firm, and diversification which is a radical departure. In analyzing these our concern has been with the importance of top management commitment and participation and with their respective effect on the organizational structure.

In summary, our concern has been with the organizational process by which the firm handles strategic change. An earlier work (6, Chapter 5) explored the information process by which objectives and strategy of the firm are formulated. Both works contain descriptive and normative hypotheses. In this paper the hypotheses are addressed to the process of management involvement in strategy; the former work dealt with management decision-making given the involvement.

Neither set of hypotheses is fully operational at present. They specify the important variables and the types of dependencies among variables, but not the specific relationships among them. The next major step will be to make the relationship specific enough to permit computer simulation of the overall process.

This is now being attempted in two related ways. One is a large-scale empirical study of past behavior aimed at relating the strategic behavior of firms to their financial performance. The other is a theoretical formulation of relationships among the variables, based on an extension of A Behavioral Theory of the Firm by Cyert and March (1). This extension will have to include the following features:

(1) Broadening descriptive behavior from a single typical firm to describe behavior of different firms in different environments;

(2) Consequent broadening of an essentially conservative behavior regime to include planning and entrepreneurial types of behavior;

(3) Replacement of operating decisions (price, quantity) with appropriate strategic decisions (objectives, strategy, project selection, project divestment).

A complete strategic theory of the firm must model two distinctive phenomena: (a) the relation between external and internal stimuli on the firm and the resulting strategic action; (b) the relation between a given strategic action and the consequent performance of the firm. For a purely descriptive study of management behavior, the first model would be sufficient. However, prescriptive insights can be derived only if strategic actions can be related to their consequent success or failure. Modeling and testing the outcome of strategic moves presents some special problems. One major problem stems from the fact that data on strategic activity is usually not a part of permanent record in firms. Another problem is posed by the long lag times between strategic actions and their outcomes. It remains to be seen whether a current effort' to overcome these problems through a combination of questionnaires and historical analysis will be successful.