Successive Comparison as a System

Successive limited comparisons is, then, indeed a method or system; it is not a failure of method for which administrators ought to apologize. None the less, its imperfections, which have not been explored in this paper, are many. For example, the method is without a built-in safeguard for all relevant values, and it also may lead the decision-maker to overlook excellent policies for no other reason than that they are not suggested by the chain of successive policy steps leading up to the present. Hence, it ought to be said that under this method, as well as under some of the most sophisticated variants of the root method — operations research, for example — policies will continue to be as foolish as they are wise.

Why then bother to describe the method in all the above detail? Because it is in fact a common method of policy formulation, and is, for complex problems, the principal reliance of administrators as well as of other policy analysts.' And because it will be superior to any other decision-making method available for complex problems in many circumstances, certainly superior to a futile attempt at superhuman comprehensiveness. The reaction of the public administrator to the exposition of method doubtless will be less a discovery of a new method than a better acquaintance with an old. But by becoming more conscious of their practice of this method, administrators might practice it with more skill and know when to extend or constrict its use. (That they sometimes practice it effectively and sometimes not may explain the extremes of opinion on 'muddling through', which is both praised as a highly sophisticated form of problem-solving and denounced as no method at all. For I suspect that in so far as there is a system in what is known as 'muddling through', this method is it.)

One of the noteworthy incidental consequences of clarification of the method is the light it throws on the suspicion an administrator sometimes entertains that a consultant or adviser is not speaking relevantly and responsibly when in fact by all ordinary objective evidence he is. The trouble lies in the fact that most of us approach policy problems within a framework given by our view of a chain of successive policy choices made up to the present. One's thinking about appropriate policies with respect, say, to urban traffic control is greatly influenced by one's knowledge of the incremental steps taken up to the present. An administrator enjoys an intimate knowledge of his past sequences that 'outsiders' do not share, and his thinking and that of the `outsider' will consequently be different in ways that may puzzle both. Both may appear to be talking intelligently, yet each may find the other unsatisfactory. The relevance of the policy chain of succession is even more clear when an American tries to discuss, say, antitrust policy with a Swiss, for the chains of policy in the two countries are strikingly different and the two individuals consequently have organized their knowledge in quite different ways.

If this phenomenon is a barrier to communication, an understanding of it promises an enrichment of intellectual interaction in policy formulation. Once the source of difference is understood, it will sometimes be stimulating for an administrator to seek out a policy analyst whose recent experience is with a policy chain different from his own.

This raises again a question only briefly discussed above on the merits of like-mindedness among government administrators. While much of organization theory argues the virtues of common values and agreed organizational objectives, for complex problems in which the root method is inapplicable, agencies will want among their own personnel two types of diversification: administrators whose thinking is organized by reference to policy chains other than those familiar to most members of the organization and, even more commonly, administrators whose professional or personal values or interests create diversity of view (perhaps coming from different specialties, social classes, geographical areas) so that, even within a single agency, decision-making can be fragmented and parts of the agency can serve as watchdogs for other parts.

Rational-Comprehensive (Root)

1a Clarification of values or objectives distinct from and usually prerequisite to empirical analysis of alternative policies.

2a Policy-formulation is therefore approached through means-end analysis: First the ends are isolated, then the means to achieve them are sought.

3a The test of a 'good' policy is that it can be shown to be the most appropriate means to desired ends.

4a Analysis is comprehensive: every important relevant factor is taken into account.

5a Theory is often heavily relied upon.

Succession of Comparisons (5b)

The final distinctive element in the branch method is that the comparisons, together with the policy choice, proceed in a chronological series. Policy is not made once and for all; it is made and re-made endlessly. Policy-making is a process of successive approximation to some desired objectives in which what is desired itself continues to change under reconsideration.

Making policy is at best a very rough process. Neither social scientists, nor politicians, nor public administrators yet know enough about the social world to avoid repeated error in predicting the consequences of policy moves. A wise policy-maker consequently expects that his policies will achieve only part of what he hopes and at the same time will produce unanticipated consequences he would have preferred to avoid. If he proceeds through a succession of incremental changes, he avoids serious lasting mistakes in several ways.

In the first place, past sequences of policy steps have given him knowledge about the probable consequences of further similar steps. Second, he need not attempt big jumps toward his goals that would require predictions beyond his or anyone else's knowledge, because he never expects his policy to be a final resolution of a problem. His decision is only one step, one that if successful can quickly be followed by another. Third, he is in effect able to test his previous predictions as he moves on to each further step. Lastly, he often can remedy a past error fairly quickly — more quickly than if policy proceeded through more distinct steps widely spaced in time.

Compare this comparative analysis of incremental changes with the aspiration to employ theory in the root method. Man cannot think without classifying, without subsuming one experience under a more general category of experiences. The attempt to push categorization as far as possible and to find general propositions which can be applied to specific situations is what I refer to with the word ' theory '. Where root analysis often leans heavily on theory in this sense, the branch method does not.

The assumption of root analysts is that theory is the most systematic and economical way to bring relevant knowledge to bear on a specific problem. Granting the assumption, an unhappy fact is that we do not have adequate theory to apply to problems in any policy area, although theory is more adequate in some areas — monetary policy, for example — than in others. Comparative analysis, as in the branch method, is sometimes a systematic alternative to theory.

Suppose an administrator must choose among a small group of policies that differ only incrementally from each other and from present policy. He might aspire to 'understand' each of the alternatives — for example, to know all the consequences of each aspect of each policy. If so, he would indeed require theory. In fact, however, he would usually decide that, for policy-making purposes, he need know, as explained above, only the consequences of each of those aspects of the policies in which they differed from one another. For this much more modest aspiration, he requires no theory (although it might be helpful, if available), for he can proceed to isolate probable differences by examining the differences in consequences associated with past differences in policies, a feasible program because he can take his observations from a long sequence of incremental changes.

For example, without a more comprehensive social theory about juvenile delinquency than scholars have yet produced, one cannot possibly understand the ways in which a variety of public policies — say on education, housing, recreation, employment, race relations, and policing — might encourage or discourage delinquency. And one needs such an understanding if he undertakes the comprehensive overview of the problem prescribed in the models of the root method. If, however, one merely wants to mobilize knowledge sufficient to assist in a choice among a small group of similar policies — alternative policies on juvenile court procedures, for example — he can do so by comparative analysis of the results of similar past policy moves.

Theorists and Practitioners

This difference explains — in some cases at least — why the administrator often feels that the outside expert or academic problem-solver is sometimes not helpful and why they in turn often urge more theory on him. And it explains why an administrator often feels more confident when 'flying by the seat of his pants' than when following the advice of theorists. Theorists often ask the administrator to go the long way round to the solution of his problems, in effect ask him to follow the best canons of the scientific method, when the administrator knows that the best available theory will work less well than more modest incremental comparisons. Theorists do not realize that the administrator is often in fact practicing a systematic method. It would be foolish to push this explanation too far, for sometimes practical decision-makers are pursuing neither a theoretical approach nor successive comparisons, nor any other systematic method.

It may be worth emphasizing that theory is sometimes of extremely limited helpfulness in policy-making for at least two rather different reasons. It is greedy for facts; it can be constructed only through a great collection of observations. And it is typically insufficiently precise for application to a policy process that moves through small changes. In contrast, the comparative method both economizes on the need for facts and directs the analyst's attention to just those facts that are relevant to the fine choices faced by the decision-maker.

With respect to precision of theory, economic theory serves as an example. It predicts that an economy without money or prices would in certain specified ways misallocate resources, but this finding pertains to an alternative far removed from the kind of policies on which administrators need help. On the other hand, it is not precise enough to predict the consequences of policies restricting business mergers, and this is the kind of issue on which the administrators need help. Only in relatively restricted areas does economic theory achieve sufficient precision to go far in resolving policy questions; its helpfulness in policy-making is always so limited that it requires supplementation through comparative analysis.

By Root or by Branch

For complex problems, the first of these two approaches is of course impossible. Although such an approach can be described, it cannot be practiced except for relatively simple problems and even then only in a somewhat modified form. It assumes intellectual capacities and sources of information that men simply do not possess, and it is even more absurd as an approach to policy when the time and money that can be allocated to a policy problem is limited, as is always the case. Of particular importance to public administrators is the fact that public agencies are in effect instructed not to practice the first method. That is to say, their prescribed functions and constraints - the politically or legally possible - restrict their attention to relatively few values and relatively few alternative policies among the countless alternatives that might be imagined. It is the second method that is practiced.

Curiously, however, the literatures of decision-making, policy formulation, planning, and public administration formalize the first approach rather than the second, leaving public administrators who handle complex decisions in the position of practicing what few preach. For emphasis I run some risk of over-statement. True enough, the literature is well aware of limits on man's capacities and of the inevitability that policies will be approached in some such style as the second. But attempts to formalize rational policy formulation - to lay out explicitly the necessary steps in the process - usually describe the first approach and not the second.'

The common tendency to describe policy formulation even for complex problems as though it followed the first approach has been strengthened by the attention given to, and successes enjoyed by, operations research, statistical decision theory, and systems analysis. The hallmarks of these procedures, typical of the first approach, are clarity of objective, explicitness of evaluation, a high degree of comprehensiveness of overview, and, wherever possible, quantification of values for mathematical analysis. But these advanced procedures remain largely the appropriate techniques of relatively small-scale problem-solving where the total number of variables to be considered is small and value problems restricted. Charles Hitch, head of the Economics Division of RAND Corporation, one of the leading centers for application of these techniques, has written:

I would make the empirical generalization from my experience at RAND and elsewhere that operations research is the art of sub-optimizing, that is, of solving some lower-level problems, and that difficulties increase and our special competence diminishes by an order of magnitude with every level of decision-making we attempt to ascend. The sort of simple explicit model which operations researchers are so proficient in using can certainly reflect most of the significant factors influencing traffic control on the George Washington Bridge, but the proportion of the relevant reality which we can represent by any such model or models in studying, say, a major foreign-policy decision, appears to be almost trivial.2

Accordingly, I propose in this paper to clarify and formalize the second method, much neglected in the literature. This might be described as the method of successive limited comparisons. I will contrast it with the first approach, which might be called the rational-comprehensive method.' More impressionistically and briefly - and therefore generally used in this article - they could be characterized as the branch method and root method, the former continually building out from the current situation, step-by-step and by small degrees; the latter starting from fundamentals anew each time, building on the past only as experience is embodied in a theory, and always prepared to start completely from the ground up.

Let us put the characteristics of the two methods side by side in simplest terms.

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.