Organization for Programme Management

Organization for Program Management

Organization for Program Management C . Davies National Coal Board, London

A. Demb Management Consultant R. Espejo The Management Centre, Aston University

A Wiley-1nterscience Publication

JOHN WILEY & SONS Chichester - New York

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- Toronto

Copyright @ 1979 by John Wiey & Sons Ltd. All rights resewed. No part of this book may be reproduced by any means, nor transmitted, nor translated into a machine language without the written permission of the publisher. Library of Congress C-loging

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Davies, Cyril. Organization for program management. 'A Wiley-Interscience public tion ' ~ I n c l u d e s ~ b , i - , \ i ~ ~ ~ ~a -~. Atc !y .e ~ J 1. Economic development projects-Managpment. Industrial project management.4. Demb, Ada, joint author!^^. E s ~ e i o Raul. . ioint author!^^^. Title. J

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Typeset by Preface Ltd, Salisbury, Wilts Printed in Great Britain by Unwin Brothers Ltd., The Gresham Press, Old Woking, Surrey

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Acknowledgments

The book could not have been conceived without the support and opportunities created by the International Institute for Applied Systems Analysis (IIASA) and its growing role in the international scientific world. Although the conceptual framework is the result of the authors' research, its development and examination were possible only in the context of IIASA's research on case studies of large-scale programs. Particularly, we thank Professor Hans Knop who established our team and supported the research. The framework became more meaningful through application and testing on on-going activities such as the Bratsk-Ilimsk territorial production complex (BITPC) and Scottish development related to North Sea oil exploitation. The BITPC Case research was undertaken in the context of a wider IIASA case study. The State Committee for Science and Technology and the USSR Academy of Sciences played key roles in the preparation of background material and in arranging for the field study. Being involved in this project we were able to interview and discuss with Soviet scientists and administrative leaders many aspects of the case study. We are particularly grateful for the contribution of Professor V. Smirnov, Dr. V. P. Gukov, and Dr. G. I. Fishin with whom we had long and vely productive discussions both in the Soviet Union and at IIASA. The Scottish case was organized on our initiative and we thank the British Royal Society for its support and Mr. G. Edwards of the Scottish Council (Development and Industry) for his personal efforts on our behalf. We appreciate the time and attention given by the many scientists and administrators in Scotland and England, without whose willing cooperation the study would not have been possible. The bulk of this work was done at IIASA. Interaction with our colleagues and with the wider scientific community of the Institute aided us in the selection of relevant points and illustrations, and certainly improved the quality of our work. In this regard we would like to mention the role of Professor I. Hamilton, who found it possible to review our early drafts of the two case studies. We wish to acknowledge the role of the Survey Project at IIASA, the Executive Director, Dr. E. Quade, and Editor Ms. Jeannette Lindsay. Under

the leadership of Dr. Quade support was provided for the meetings in the spring of 1977 which resulted in this book. These meetings provided us with the opportunity to consolidate and to synthesize our previous work. It would not have been possible otherwise. In elaborating the framework we greatly benefited from constant discussions with Dr. Roman Ostrowski of the Polish Academy of Sciences, who was attached to IIASA at the time of this research and who was involved with the authors in carrying out the field studies. While the authors must naturally take responsibility for the material included here, the contribution of Dr. Ostrowski to this work cannot be exaggerated. In particular we should mention the special role he played in the Soviet case study where his fluency in Russian and familiarity (relative to the authors) with the Soviet system of planning was invaluable. Chapters 8 and 9 on the Soviet case are largely identical to the chapter on P l a ~ i n gand Organisation in the IIASA Report on the Soviet case (Knop et al., 1978). That chapter was written by the authors together with Dr. Ostrowski.

Contents Preface

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Chapter I Introduction Chapter 2 Systems Concepts for Organizational Analysis Chapter 3 From Institutions to the Model System Chapter 4 The Model System in Action Chapter 5 An Approach to Effectiveness

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Chapter 6 Scottish Development and North Sea O i l : Background Description Chapter 7 Seottiih Development and North Sea Oil: Framework Application Chapter 8 The Bratsk-Ilimsk Territorial Production Complex (BITPC): Background Description

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Chapter 9 Bratsk-llimsk Territorial Production Complex: Framework Application Chapter 10 Insights from Abstraction Chapter 11 From Abstraction to Policy References . Bibliography Index

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vii

Preface Our purpose in this volume is to present and demonstrate a conceptual framework for the analysis of the organizational dimension of development programs. The conceptual framework is intended to provide a method for deriving the organizational implications of program objectives and assessing the capacity of existing or planned institutional resources in terms of those implications. It can be utilized either to generate alternative organizational strategies or to evaluate policy proposals in terms of their contribution to effective program management. Research on the organizational dimension of program management was begun in the context of examining the management of regional development. It became apparent that regional development was only one example of a development strategy where organizational problems were a consequence of the overall complexity of the 'program' strategy rather than of the particular objectives. Development programs addressing a wide variety of societal goals-education, medical care, agriculture-share these organizational dilemmas. Furthermore, no single nation appears to have a monopoly on either dilemmas or solutions. From our experience the USSR, Poland, the United Kingdom, the United States, and Venezuela all appear to share the need for analytic support which can provide organizational strategies adequate to the complexity of development programs. We sought, thus, to develop an analytic approach that could be applied in settings as diverse as these. The task represents an exciting challenge, and this volume reports on progress towards that goal. The research is the work of an international and interdisciplinary team that was active full-time from January 1976 to January 1977 at the International Institute for Applied Systems Analysis. The book itself was written during the late spring of 1977 using case material prepared during 1976. Together we combine experiences from three diverse national settings and three different and complementary research perspectives on organization and management. While many observers regard the field of organization studies as unified, researchers will be acutely aware of the specialization within this broad area. As a team we integrated perspectives from operations research, organization behaviour, cybernetics, and control

systems into a framework for studying the organizational dimension of the management of development programs. We are aware of the voluminous research addressing issues related to program management. Much of this research, focusing particularly on 'project management', addresses issues of planning and control techniques for the management of finite projects. Our concern here, by contrast, is the analysis and design of organizational strategies for continuing program management. The conceptual framework is intended to provide a meta-logic with which to structure and relate the many techniques and theories of project management to one another and to the dimensions of program management which they best address. Where appropriate, reference is made to such techniques and theories. These references, however, serve only to illustrate. We make neither an attempt nor a claim to survey the 'organization literature' in this field or to identlfy all research relevant to our framework. We will assume that our audience is aware of approaches to project management from their own experiences and is cognizant of their value and limitations. Details of related approaches are therefore not presented. Our purpose is to demonstrate a conceptual framework to support the analysis of the organizational dimensions of program management. For the decision maker, researcher, and policy analyst concerned with program system design, we hope to outline an approach which contributes to work in this area. The work is aimed at these several audiences, and various chapters are written accordingly. Overall, our intent is to provide policy makers and managers in development agencies and development programs with a sense of the analytic support available for this dimension of program design. The introduction, conceptual language, case material, and summary chapters are written in a style and language that require little 'scholarly' background in organization theory. These sections are intended for practitioners at upper management levels. By contrast, the elaboration of the framework and discussion of effectiveness are provided for the researcher and analyst with a more specialized background in the field. Hopefully, readers from both audiences will he interested in both sets of materials. The problem and basic concepts used in the framework are introduced in Chapters 1and 2. Elements of the analytic process and the role of this type of research are examined and described in these sections. Chapters 3, 4, and 5 elaborate the conceptual framework and present the criteria for effectiveness which underlie this approach. Application of the analytic approach is illustrated in two case studies of regional development and is presented in Chapters 6, 7, 8, and 9. Together the two cases demonstrate the flexibility of the approach as well as its analytic strength. There are important differences in the values governing institutional management and behaviour in the two settings. While each represents an instance of development in an industrialized nation, in Scotland program activities constitute a disturbance in on-going institutional activities and rela-

tionships while in the Soviet Union the program initiated activity where none had existed before. Yet the fundamental challenge was the same in each setting: to provide for the effective organization of institutional resources for the management of program activities. In the Scottish case study we examine the organization dimensions of the response to the development of oil resources in the North Sea. Research for this case was initiated and undertaken by the authors. The Soviet case focuses on the management of a multi-sectoral industrial complex in Siberia that is designed to be largely self-contained in terms of labour, food supply, educational and medical facilities, and secondary industries. In this case, research was undertaken by the authors in the context of a larger field study which involved some twenty scientists from eleven countries (Knop et al., 1978). The status of conclusions and the nature of the data base in the two cases differ accordingly. In addition to these case studies, we draw upon less comprehensive studies of three other programs of regional development. While findings are not included from these cases, the integrated framework evolved as a result of examining programs in these five national settings. Scotland (UK) and Bratsk (USSR) are reported fully in this volume. In addition, one of the authors was involved in a larger field study of the Tennessee Valley Authority in the United States; all three visited Poland where planning is now underway for the development of a major settlement and industrial complex in the coal basin of Luhlin; and the published material on the Guayana development in Venezuela was examined as a fifth case. The outputs of this type of analysis, the nature of the results, and the status of strategy alternatives are outlined in Chapters 10 and 11. The final chapter (chapte;i 1) summarizes the nature of theinsights to be gained and explores the more general implications for the management of programs in many fields of endeavour. Cyril Davies Ada Demb Raul Espejo

CHAPTER 1

Introduction If there is a single dimension that characterizes the significant problems of the twentieth century it is their complexity. It is an inescapable complexity imposed by technology, resources, economics, and politics. Throughout the world, complex problems confront policy makers and demand solution: industrialization, food production, energy distribution, the provision of clean water. In one way or another, all are problems of development, be it from a state of underdevelopment to industrialization or from industrialization to postindustrial stabilization. While different issues come to the fore in different parts of the world, policies directed at their solution often take the form of development 'programs'. As a strategy, a program generally permits a more comprehensive concentration of resources and attention than that which can be achieved through usual management processes. The term 'program management' has been chosen to distinguish between program and project and between management and implementation. 'Project management' or 'project impementation' is used to denote undertakings of a nature similar to those which are the subject here. They are similar, but different, in important aspects. Usually, 'projects' refers to an undertaking of finite duration whose goal is the production of a specific and tangible product. As it is used in this volume, 'program' refers to undertakings whose product might best be described as a process. The goal of a development program, such as regional development, is the creation of both the physical resources and the management capability for the continuing development of a region. One can define as a goal the achievement of a steady state for the program, by contrast with an earlier period of growth and development, but the definition of a point where the development is 'finished' is an inappropriate formulation of the objective. Programs of this type often involve dozens of subsidiary activities which might appropriately be called projects. The distinction between management and implementation pertains to the phases of program evolution with which the analysis will be concerned. All programs evolve through several stages and while the literature provides a variety of names for them, we can identify at least four: a conceptual phase when objectives are defined, a planning phase when strategies for resources allocation are devised, an implementation phase when plans are put into action, and an evaluation phase where there is some determination of the 1

) 0bObjel;tive definition

1 Management

Evaluation

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Figure 1.I. Management versus implementation degree to which objectives have been achieved (Martini, 1976). There is usually interaction and feedback between phases. Conceived thus, implementation represents a discrete phase when objectives are taken as given and the immediate concern is with the realization of plans. Program management will be used to refer to the entire process of objective definition, planning, implementation, and evaluation (see Figure 1.1). As programs progress through these various stages of development, it is expected that different organizational strategies will be appropriate. This discussion will include, for example, consideration of program objectives and their appropriateness in the context of the institutional resources available for program management. There is no point in defining a set of program objectives which are beyond available resources, whether those resources be physical or managerial. Limitations imposed by physical resources may tend to be more visible; however, the limitations resulting form managerial resources are equally important. One purpose of the conceptual framework is to make the nature of institutional resources and their limitations more visible. Of the many important aspects of program management, this discussion will examine the crucial issues of organization. Organization refers to the structure and use of the institutional resources available for program management. Throughout the book, the terms, organization and institution will be used in the following sense. Institution refers to observable structures in the program setting; organization refers to the relationships between these structures or their sub-units, usually in terms of the relationships among elements of an abstract system, such as the program management system. While there are many techniques and skills to support the technical and economic aspects of development programs, there appear to be few that apply to organization. This has created a gap between the technical and economic definition of program objectives and the capacity to achieve them in particular settings. It is this gap that is largely responsible for the many instances where the success of programs seems to have been less than that merited by the quality of the technical preparation. To remedy this situation there is a need to design management systems whose capacity matches the challenges presented by the development programs. It is towards this end that this discussion is directed: effective organization

for program management. Who should manage the program? Should a new institution be created? How can existing institutions be involved most effectively? Where should decision authority for particular activities rest? On what criteria should these and similar decisions be taken? What are the trade-offs involved? One might well point out that the set of questions posed in the context of program management differ little from the set which might be posed in the context of manufacturing shoes or managing a research institute. The argument would be well taken. However, it is not the set of questions which distinguishes this approach from others but rather the complexity of the organizational issues to which it is addressed. Adequate institutional alternatives have long since been evolved for shoe mahufacture; however, for the management of programs there appears to be no such satisfactory answers. 1.1 Which programs?

The programs for which this approach is most useful and most interesting are development programs which are non-conventional and multi-institutiona1.A non-conventional program is characterized by the nature of the managerial challenge presented by the problem it was conceived to solve. The conceptual framework presented in this volume is particularly useful for analysing programs designed to accomplish goals which are new or have been formulated in a way that requires combinations of activities which are unusual for the program setting. This 'newness' aspect of the program will pose challenges for management which are beyond the capacity of existing managerial processes and structures, and will require organizational support fundamentally different from that which already exists. Programs which pose management challenges are those for which there exist no ready-made set of organizational strategies in the program setting. The challenges presented by any particular set of program objectives, such as regional development, will vary according to the setting in which the program is to be implemented. Thus, programs which represent everyday strategies in one setting, such as the creation of industrial parks, might well be categorized as non-conventional in another. The sophistication of the program setting with respect to program objectives will largely determine the extent of managerial challenges and, thus the potential of the framework to provide new insights. It requires no special expertise to identlfy subject programs. Identification of programs whose non-conventional nature stretch and challenge the managerial capability of a setting will be intuitively obvious to those familiar with the setting. It is important to note, however, that while the conceptual framework would certainly be helpful in the design of a shoe factory, because it was developed specifically to capture the complexity of non-conventional, multi-institutional programs, application in more conventional situations might appear inefficient in terms of the time and energy expended for analysis.

The variety and scale of such programs is limitless. They may involve the provision of medical services to an urban area, the coordination of disaster relief on a world-wide basis, regional development, or the consolidation of efforts to put a man on the moon. Whether the objective is of local or global significance, the intention to integrate a set of activities so that the result is a synergistic combination of the energy and resources invested raises a similar set of complex organizational issues, regardless of program objectives. The same set of organizational questions must be answered whether the program is to integrate handicapped children into the mainstream of an educational system or to develop a harbour area. To be sure, appropriate organizational strategies will differ dramatically from program to program, as well as from setting to setting for similar types of programs. However, in all cases a similar analytic process and criteria of effectiveness of organization can be brought to bear to assess existing institutional capacity and to devise or evalute alternative solutions. In general, programs will have been conceived to integrate activities which are normally managed by multi institutions, which may or may not have interacted prior to the initiation of the program. Organizational issues are particularly critical to the success of such ventures, where the achievement of program objectives depends upon the consolidation of highly interdependent set of activities. There are no obvious answers to questions of the location of discretion over activities, control, or coordination capabilities. In the case of the shoe factory, there is a wealth of conventional wisdom from which strategies can be devised. Most of the conventional wisdom relevant to particular industries cannot be directly transferred to program application, however. Rules of thumb used in managing industrial organizations tend to be overwhelmed by the complexity of relationships to be managed in the program context. Here is the place for a systems approach specifically evolved to address the organization of non-conventional, multi-institutional activity. 1.2 Characteristics of the approach

The organizational challenge presented by these programs may be formulated as that of creating a 'system' where the priority of the overall objective, the program objective, is shared by and consistent with the objectives of oarticioating institutions. Whether or not the institutions are aware of their (intended) role in the program, the actual capacity for program management rests with these institutions. Thev reuresent the institutional resources for managing the program. The quality of program management depends, thus, upon the organization of these resources into a functioning system. A systems approach, such as the one presented here, permits explicit treatment of the interdependence among institutions and activities so essential to the achievement of program objectives. It is intended to aid decision makers in choosing among organizational strategies by identifying alternatives and comparing them in the light of their consequences with

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Policy rnoker analysts

Program object lves strategies

Conceptual framework I

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Organ~zational strategies I

Figure 1.2. Organizational strategy formulation

respect to the achievement of program objectives. It provides a comprehensive and holistic framework for assessing existing institutional resources and alternatives in terms which are both accurate and operational. Figure 1.2 illustrates the process for which the analysis is intended to provide support. Program objectives are an expression of policy and the result of political, as much as analytic, processes. There are a set of activities or tasks which are implicit in the program objectives and which can be identified as essential to achievement of those objectives. There are also a set of institutions which are usually involved in the management of many of those activities and, perhaps, a plan for other institutions to be created specifically for the purpose of managing program activities. The problem is to determine an organizational strategy which best utilizes those resources in the achievement of program objectives. While there is no single best form of organization for program management, there are modes of organization which are more effective in facilitating program objectives than others. Generally speaking, selection of an appropriate instimtional strategy should be a function of the nature of program objectives and activities, existing institutional relationships, and the values governing management and organization in the program setting. At the same time, there does exist a set of principles which can be used to sort or to create strategies which are more effective and appropriate. The conceptual framework provides policy makers, through their analysts,

with the capability for assessing existing institutional resources and strategy alternatives according to a set of criteria which derive from organizational principles. The framework is best used by analysts familiar with, or resident in, the program setting. The outputs of the conceptual framework will need to be transformed by the analyst into a form which is useful for the policy maker. At the same time, as indicated in Figure 1.2, interaction with policy makers throughout the analytic process is critical, for only the policy maker can identify those issues and aspects of organization which are important for policy purposes. Implicit in this process is the assumption that there are two sets of criteria which must be applied in order to select an appropriate institutional strategy. The two sets refer to effectiveness and feasibility. The first, effectiveness, is defined strictly in terms of organizational principles. The conceptual framework relates this set of criteria to the process. The effectiveness criteria aid in identifying the nature of organizational trade-offs resulting from particular institutional alternatives. The purpose of the analysis is to clanfy the consequences of the alternatives in order to provide the policy maker with real choice. The identification of better alternatives and opportunities for improvement is the goal rather than the creation of some 'optimal' organization-whatever that might be. For any given program, more than one (effective) organizational strategy exists. However, selection of a strategy depends upon the values and traditions of the program setting. Criteria will vary and will narrow the range of appropriate organizational strategies. This variance, the result of differences in economic, political, and philosophical approaches to society, precludes the search for a single, optimal, and transferable organizational solution for the management of particular types of program, such as regional development. In addition, for any given organizational strategy, there are a number of institutional alternatives which will satisfy the effectiveness criteria inherent in that organizational strategy. Thus, in any setting, there are a number of institutional alternatives which will be appropriate. The conceptual framework can identify the nature of the trade-offs among them. Choice among these institutional alternatives is a matter of feusibiliv. Feasibility depends not only upon the values and traditions of the program setting but also upon current politics and the preferences of policy makers. Only they can make this last judgement. Thus, it is considered axiomatic that solutions, appropriate institutional alternatives, must be tailor-made to the values of the setting, for institutional structure and behaviour mirror social philosophy. Thus, not only is it expected that organizational strategies appropriate for a planned economy with state ownership would be inappropriate for an economy based on private ownership, but also that the more subtle differences in social norms governing managerial behaviour in either setting precludes the direct transfer of either organizational or institutional alternatives, even for programs dealing with the same objectives.

Description of progmm objectives, activities and institutional resources

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progmm management system

Organ imtional diagnosis md/or generation of insfifutional alternatives

Figure 1.3. Analytic process

At the same time, however, there appears to be a set of organizational principles which can form the basis for designing and evaluating organizational strategies regardless of the institutional forms which they may take or the setting. These principles are independent of the values and social philosophies which distinguish societies. Analysis applied to the question of effectiveness of organization is accomplished in a multi-step process which involves the use of an abstraction of the program objectives and of institutional resources (see Figure 1.3). The descriptions of institutional resources and activities are formalized and transformed into a systemic representation in order to address this issue. The transformation permits a reformulation of issues and construction of a model of the program management system which can be analysed and diagnosed. The systemic nature of the model orders the multiplicity of program activities and institutional relationships with a logic that permits operational consideration of such issues as interdependence, the distribution of discretion and authority planning capability, communication links, and

many others. The use of the abstract language and model frees the approach of the bias and limitations that are inherent in institutional language, thus making it generalizable across programs and national settings. The step from analysis to the creation of organizational proposals requires a translation from the abstraction into institutional alternatives, i.e. forms which are appropriate for the program setting. It is these solutions which vary from setting to setting. It is essential that the generation of specific strategy alternatives be undertaken in close collaboration with, or by, persons intimately familiar with the managerial and institutional traditions and norms of the program setting. In theory, the analysis can generate a wide range of effective alternatives and can identify problem areas in existing proposals. In a process of translation and reanalysis, feasible alternatives or proposals are created from the outputs of the analysis for consideration by policy makers. Analysis should provide an operational understanding of existing organizational strategies and institutional resources which can lead to reformulation of either the organizational strategies or program objectives. However, the analysis must be coupled with a sound and intimate understanding of the values and traditions of the program setting in order to produce the feasible outputs which are of use to policy makers. In the context of international organizational research, it is our view that organizational solutions to program management cannot be prepackaged and transferred from setting to setting. Differences among nations and cultures, the differences that make the world as rich in variety as it is, precludes this sort of packaging. In this context, organizational research is better able to offer an approach which can be packaged and utilized by analysts, managers, and policy makers to find their own best solutions. Such is our intent here. The aim is to transfer a capability for analysis, in the form of the conceptual framework and process, which can be used by others to find appropriate and effective solutions to their organizational problems. 1.3 Case illustrations

Illustrations of the application of this approach and framework are drawn from two case studies of regional development. A brief introduction to program objectives and case settings are provided at this point so that the nature of the research and examples presented in succeeding chapters will be more comprehensible. The research on Scotland focused on the response to oil exploration and development in the North Sea. For purposes of the study, Scotland was defined as the development region and two program objectives (challenges) were identified. In the short term, the objective was to protect and preserve the aualitv of life in local communities while, at the same time, facilitating -a national United Kingdqm policy of rapid oil exploitation. The long-term obiective was to capitahe upon the oil development for the long-term development of the- ScottishAeconorny.A challenge lay the

achievement of consistency between strategies for realizing both short- and long-term objectives. In this case, the objectives as stated here represented shared, but unofficial, attitudes of persons in governmental and private sectors, rather than the specific goals of a unified program for whose implementation resources had been consciously committed. Oil activities can be categorized in three phases, all of which impinge differently upon and demand responses from the region: exploration, development or construction, and production. Construction of oil rigs for exploration and production platforms for later exploitation are one major activity which illustrates the scope of the regional impact. Sites must be approved for construction yards; trained steel workers are needed for construction; and the steel plate which is the building material must be contracted for. These are some primary aspects of the activity. Local accommodation for the working population is required, including services as varied as schools and restaurant, and a transport network to bring in material must be created to handle large and heavy trucking. For this activity alone management decisions must be taken with respect to land use, housing, economic policy, education, and environment. Other oil activities engender similar impacts. Where and how should the oii be brought to land? What degree of harbour development is appropriate to support these many activities? If, when, and where are refining facilities to be built? Who will finance support activities? There are a myriad of decisions to be taken, many of them the responsibility of widely scattered, semi-independent, and independent agencies. All of them affect local (community), regional (Scottish), and national United Kingdom interests. As it is primarily government in Scotland and the United Kingdom which has formulated these objectives and sought various mechanisms to coordinate the collective response in some manner, government was the subject of the organizational analysis. Both private and national industries play integral roles in the achievement of program objectives, however. The study examined governmental response in the context of the two objectives at three levels: United Kingdom, Scotland, and local authorities. Chapters 6 and 7 provide a much fuller description of the region, oil activity, and the nature of the impacts, as well as an examination of the organizational response. The Scottish case was originally undertaken as a first field test of the capability of the concepts which are the foundation of the framework. The discussion therefore emphasizes the first three steps of the research process (Figure 1.3), aiming to illustrate the construction of the model from the data. Analysis and diagnosis are undertaken only to identify broad policy issues, rather than to generate specific institutional proposals. The Soviet case examines the organizational dimension of the management of a regional development strategy called the 'territorial production complex (TPC)'. The development is being undertaken in Siberia, in the region surrounding Bratsk, north of Irkutsk (see Figure 9.1). The creation of TPCs is a

long-term official Soviet strategy for regional development. For each TPC very specific objectives are defined in terms of the industries, population, and service facilities to be created. The overall objective is the creation of multisectoral industrial complexes which are largely setf-contained in terms of labor, food supplies, educational and medical facilities, and secondary industries. Supported by researchers involved in the design of management processes for future TPCs, we examined the comprehensiveness and consistencyof current management processes in order to provide them withinsightsinto Soviet management proposals now under discussion. TPC development represents official unified programs to which vast resources have already been committed; intent to implement is a matter of history. The Bratsk-Ilimsk TPC centres on three settlements; the Bratsk 'node' is now approaching a steady state. At least six national and four republican industrial ministries are involved in managing TPC activities, in conjunction with governmental authorities from several levels--city, region, and republic. Three management challenges were identified as representing key organizational issues. The first chalienge is the choice of the industries of national importance which form the basis of TPC development. The Soviet system of planning carried out by ministries and all territorial governments must accommodate to the complicated justification required of industrial investments which make up an interdependent, multi-sectoral industrial complex. The second challenge involves the synchronization of the construction of industries subordinated to national and republican authorities with infrastructure. In the Siberian wilderness, realization of the potential of these huge investments is critically dependent upon the timely completion of interdependent projects which are under the control of separate sectoral ministries. The third challenge is the design and completion of attractive and selfcontained human settlements in the wilderness. Again, decisions for the different aspects of this challenge rests with a variety of local, republican, and national agencies. Chapters 8 and 9 describe the program strategy, TPC, the challenges, and institutional actors in detail. The purpose of the study was to provide Soviet scientists with an outside view of the organizational issues involved in the strategy. None of the authors is a specialist in Soviet management practices; nonetheless, the analysis identifies issues which can be examined in more depth by specialists. Conclusions discuss three current Soviet proposals for improving the effectiveness of TPC management. This case focuses on policy issues, by contrast with the Scottish case, which places emphasis on an illustration of the use of the concepts. Both cases suffer limitations with respect to the use of the conclusions by policy makers. Logistics, time, and expense precluded an achievement of the level of detail more desirable for specific, policy-relevant analysis. Further, in neither case was it possible to interact with either policy analysts or scientists in the construction of feasible alternatives after the organizational analysis. Such is often the fate of methodological research. This last step would be the

very raison d'2tre for research aimed at the generation of specific organizational strategies. The limitations of the cases with respect to specific policy support are recognized. Far more important is their usefulness in testing and demonstrating a conceptual framework in field applications. The two programs are differently complex; each employs different institutional forms in implementing program activity and each would require a tailor-made strategy. The framework appears to provide an adequate and insightful basis with which to approach the organizational issues for both. The purpose of this volume is to discuss that approach so that others may take it forward in support of policy. 1.4 Presentation strategy

To facilitate communication, the conceptual framework and the process of application have been presented in a somewhat linear mode. The process is, in fact, tightly iterative and, while the linearity of the presentation is helpful, it is a distortion which may tend to obfuscate the synthetic aspects of the process. It is hoped that the presentation, which will take the reader through two full iterations of the framework and process, will make it possible for the reader to experiment with these concepts in his or her own context (see Figure 1.4). Whiie hardly a formula for organizational analysis, the presentation seeks to make the concepts and process as understandable as possible. The first iteration consists of Chapters 2, 3, 4, and 5. In Chapter 2 the systemic concepts which form the basis of the conceptual framework and the model are introduced. The process of constructing a model of the program management system is explained in Chapter 3. The linearity of presentation has been exploited particularly in this chapter; however, in practice this transformation process is almost constantly iterative, resulting in a rich, synthetic understanding of the organizational dimensions of the program. Chapter 4 develops the concept of effectiveness which provides the criteria for -analysing the appropriateness of the organization for program management. All of these concepts are reviewed in Chapter 5 in the more formal language of cybernetics. This is the most abstract of the chapters. The second iteration occurs in the case studies and in Chapter 10. The Scottish case, Chapters 6 and 7, was undertaken as a first field test of the methodology in its early phase of development. The Soviet case, Chapters 8 and 9, examined organizational issues of the TPC strategy in a research mode. We must stress that these two cases do not, in our opinion, exploit the full strength of the framework to support organizational policy for program management. Both, however, are richly illustrative of the concepts and the process. In addition, the cases serve another role. As reports on the experiences of these two countries they provide a different perspective from which to view both oil development in Scotland and integrated regional development in the Soviet Union. Chapter 10 reviews the two cases, adding

First iteration (conceptual presentation)

Analytic proces

Second iteration (case illustrations)

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Chapter 6

Data base

Chapter 3

From Institutions to the Model System

Chapter 2

Systems Concepts for Organizational Analysis

Chapter 4 Chapter 5

Chapter 8

Scottish Background Description Bratsk-llimsk Background Description

Transformation

Chapter 7 Chapter 9

Scottish Framework Application Bratsk-llimsk Framework Application

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The Model System i n Action A n Approach to Effectiveness

Analysis

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Diagnosis Alternatives and

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Chapter 10 Chapter 11

Figure 1.4. Structure of the book related to the analytic process

Insights from Abstraction From Abstract~ont o Policy

the insights which have resulted from later developments of the concepts and a reexamination of the case material. Chapter 11 presents the nature of the results one can expect to achieve utilzing this approach. The need for interface with policy makers and the implications of analytic results are explored, along with a discussion of the potential of this framework in a broader research context.

CHAPTER 2

Systems Concepts for Organizational Analysis 2.1 The systems

It is very much the fashion nowadays for people, in their roles as managers, politicians, or analysts, to talk in terms of systems and to use some of the terminology of systems theory. Sometimes the claim that they are adopting a systems view is legitimate. Unfortunately, at other times the use made of the language is rather empty, and when this happens the language can become somewhat degraded and confused. Following the fashion, it must be said that the approach which will be applied to program management is a systems approach. However, rather than making unjustified claims the danger here is, perhaps, the opposite-that the strictly systems perspective adopted may make some of the issues of management seem unfamiliar. In the opening chapter, for example, it was claimed that successful program management depends on creating a system out of the institutional resources concerned with the program whose goal is the achievement of program objectives. This is not a familar formulation of the problem of managing complex programs involving many different institutions, but it is fundamental to the approach of this book. In this chapter the terms and concepts necessary to support this view will be introduced and the consequences of this approach explored. The understanding that this creates will act as a foundation to be built upon in later chapters, which develop more rigorously the ideas used and their potential. The first need is to define what is meant by 'system'. Very generally a system can be said to be composed of distinguishable parts or elements whose relationship to one another is defined and whose behaviour is mutually supportive towards the achievement of a common objective. This mutual supportive behaviour endows the system with potentials which go beyond the potentials of the elements viewed individually. The behaviour or actions of any element can only be understood fully in the context of the whole system. At this level of generality, characterization of a system is much wider than program management, but the specific features of program management can easily be fitted to this characterization. The elements of the system are what have been called earlier the 'institutional resources'. Some of these may have

existed prior to the program while other elements may be created in the course of program planning and implementation. The relationships between the elements are described in terms of links, executive and informational, between those institutions. The objectives governing overall system behaviour are the program objectives. It is the program objectives that define the basis for membership of the system, i.e. which institutions are considered part of the system. It is all very well to talk loosely about participating institutions but there is a need to define what this means. Because of the complexities which are apparent in industrialized nations any major programs could in one way or another involve very many institutions, and to make analysis tenable some way must be found to identify the ones with which analysis will be centrally wncerned. Consideration of objectives allows this identification. It is only those bodies whose objectives are program objectives or follow from program objectives, or who themselves define program objectives, that are considered part of the system. Thus system membership is confined to what may be a small set of the bodies who are wncerned with the program. Certainly some of those excluded may through their behaviours play a very important part in the success or failure of a program. But it is the objectives underlying actions that are considered in defining the system. The usefulness of these strategies is well illustrated by one of the major cases considered later. The development of Scotland-the provision of jobs and of a good social and physical environment-is essentially an objective of governmental and other public bodies. Yet the realization of these objectives will depend upon the actions of many private bodies. Overwhelmingly the jobs are going to be provided by private industrialists who have a choice to locate in Scotland or not. Clearly they are in some sense central actors, but their actions will be motivated by profitability or some factors which ultimately lead to that. They would not therefore be included in the system for program management. In practice there is often no unambiguous statement of program objectives or of the true purposes of all the institutions involved, and there is no implication intended to suggest that defining the system is an easy matter. Subtle changes in the way the objectives of the program are defined could alter the boundaries of the system. Nevertheless, the idea that what might be a very large number of and non-system-is essential. bodies can be divided into two group-system It allows the analytical process to proceed by reducing the number of bodies which it has directly to include and, more importantly, provides a logic for our systemic approach. Once this division has been made the non-system part cannot be forgotten. Rather, a statement can be made about the relationship between the two groups. It is the task of the system to evoke behaviours in the relevant institutions outside of the system which are consistent with program objective achievement. In the illustration above the 'system' has to persuade, in one way or another, private industry to locate in Scotland and provide jobs. The term 'mechanisms' will be used for these means of persuasion. In the context of program management it is not usual to think of the

institutions involved as a system. However, there are many other more familiar examples of multi-institutional systems. For example, many different offices of government can be recognized as a system with respect to particular societal or administrative objectives. In large industrial, perhaps multinational, undertakings the activities of each division in some way contributes to an overall objective so that the company as a whole is a system. On the international scale, also, the United Nations or the EEC are systems, with respect to particular objectives, with the member nations as elements. (They are not necessarily effective systems since conditions other than common objectives have to be satisfied.) On a much smaller scale, informal workgroups in factories may form a system with individual workers as elements and with respect to objectives quite different to the formally stated enterprise objectives. All of these examples, and perhaps particularly the last, illustrate that institutions or elements are not necessarily part of just one system. They may subscribe to more than one set of objectives and these may be more or less consistent or contradictory. As individuals this is familiar, belonging to a family, having a job, social groups, and so on. Essentially parallel comments apply to institutions, particularly ones which have had a particular role to play prior to the program and for which the program implies the imposition of new goals. This may lead to unpredictable behaviours and is an area in which industrial sociologists and industrial psychologists have made major contributions (Cyert and March, 1963; Katz and Kahn, 1966). It emphasizes again that, while conceptually delineating a system for program management is straightforward, in practice it requires a very careful understanding of program objectives and institutional objectives. Having identified the system, however, then one has selected the institutions on which analysis will be focused. 2.2 Environment

Whenever a system is defined, things or factors outside the system can always be identified which are relevant to the system. The non-system institutions discussed above are just one example of this. The set of factors outside the system is called the relevant system environment. To understand the structure and behaviour of the system a consideration of environment is fundamental. This is true of the most simple systems and of the most complex. The behaviour of a thermostat switching on and off makes sense only with respect to the temperature external to the system. Although this illustration is trivial it does have a parallel with the much more complex interaction between complex human systems and their environments. The parallel is that the system is always monitoring or receiving signals from its environment. These are compared by the system with some picture of a desirable state of the environment, or reference state. As a result of that comparison the system will produce an output to the environment to move it towards that reference

state. However, whereas for mechanical systems the environment is well defined (for the thermostat it is just temperature), for the type of systems considered here it is not. Nor is the appropriate response always known or defined. In non-trivial examples the factors in the environment may be highly diverse. In place of temperature for the thermostat, a manufacturer may want to monitor and respond to changes in markets, in the cost of various factors of production, in technical possibilities and, perhaps, in longer-term changes in fashion. An industrial development program would want to take account of factories moving into a region, local unemployment, and training facilities. An environmental protection program might want to monitor sulphur dioxide in the air, to change patterns of fuel use, and so on. In all of these cases it is through monitoring these relevant factors and comparing them with some reference that the system becomes aware of how well its objectives are being achieved and the need for actions on its part. Although when we are dealing with complex institutions the factors that are considered may be very diverse, nevertheless the environment is not completely unbounded. It is not a blanket term used for everything outside the system. Just as it was objectives that enabled a line to be drawn around the system, so system objectives enable the environment to be defined. The relevant environment consists of just those factors which are relevanr to objective achievement. Only those things which a system needs to be aware of and respond to are thought of as its relevant environment. What is of central importance in the environment of one system may be quite irrelevant to another. For example, a manufacturer marketing shoes would want to keep up with the public's preferences for colours and styles. Changes in the preferred colour of shoes would play no part in the environment of the ennrionmental protection program (probably). However, at a general level the types of factor may be similar. Often they have to take regard ultimately of what individuals in a society want, with changes in social trends, with the actions of other institutions outside the system, and with technological changes. Almost always the impact of these changes relates to different time-scales. Account has to be taken of the future as well as of the present. In principle it may appear possible to go on from a statement of objectives to draw up a list of environmental factors which are relevant, but in practice this implies a perfect knowledge of the world. It is suggestive of a god above the system who sees the true relationships of all these factors and communicates them. It is more useful, therefore, to think in terms of a perceived relevant environment. This consists of the factors which the system recognizes as relevant, monitors, and responds to. The perceived relevant environment may be continuously changing as the world is better understood by the system. Factors which were previously not recognized may be included in the environment as the system recognizes their importance. Conversely, factors once thought important may no longer be considered so. This process of a continuously changing set of environmental factors as a result of learning on the part

of the system is characteristic of wmplex human systems and is absent from simple mechanical ones. Of course, it is not only the system's view of the world which is changing. In some objective sense the world may also be changing, and this may oblige the system to include new factors. The situation with energy supply provides a good illustration. Whereas ten years ago many activities could proceed on the simple assumption of adequate cheap energy supplies, now consideration may have to be given in some detail to alternative sources of energy, i.e. a whole new set of environmental factors become relevast. The scope of the environment may also change as shifts occur in the objectives of a system. Taking all these things together it is not feasible to construct a static, defined picture of a system's environment, but at any point in time a system will itself recognize an environment. That is it will be aware of a set of factors which relate to its success; it will assess its success in terms of these factors and will respond to changes in those factors. Viewing system environment in this way allows a quite new definition of the task of management to be set up. Effective management on this view is neither more nor less than adequately recognizing and responding to changes in environment. Although this is a rather unfamiliar statement of management, it is a description at a very general level of what is readily observable in real institutions. It is also a good description of what fails to happen when many of these institutions cease to exist. The business press is full of examples of firms which have gone bankrupt because they did not recognize or act upon changes in the market-place, take account of competitors' actions, or recognize the importance of changing technologies. If the statement seems rather simplistic it is because it adopts an overall view. Most discussions on management practice are not at this level, but rather are concerned with how particular aspects of the environment can be responded to. They concentrate on the internal state of the system rather than this external response. Such a wncem is, of course, necessary and is discussed in later sections. However, in order to sensibly comment on these issues it seems worth while to understand what the pieces of system management are directed to in aggregate. At this level, also, one can understand why it is that some system with particular types of objective are more difficult to manage than others; it is because the objectives of those systems delineate a more 'difficult' environment. A 'difficult' environment is one which includes many factors subject to rapid, perhaps unpredictable, change and where change-in one has implications for others (Bums and Stalker, 1961; Emery and Triste, 1965; Lawrence and Lorsch, 1969). These conditions occur in-areas where there are rapid changes in technology and in fashion, where many new competitors are entering a field, and in cases where the number and variety of things that have to be taken into account are unusually diverse. It is possible ultimately to equate the 'difficulty' of an environment with the number of different states it can adopt. By different states is meant different situations which require responding to by the system. For the thermostat the number of states is only two. Either the temperature is above or below a reference level. For program

management it would be difficult to attach a number, other than saying it is very large. The number of states is called the environmental complexity, and when that number is particularly large (with respect to the complexity ordinarily surrounding similar systems) the environment is termed complex. Some particular aspects, briefly referred to already, can be identified as contributing to environmental complexity. First is the number of different environmental dimensions, e.g. size of population, climate, technology. In general this will always be large, but particular types of system, because of the scope of their objectives, will face more dimensions. A system consisting of a series of steel-producingplants will face a less complex environment than one of similar size (in terms of personnel or turnover) that produces steel and, say, clothing. In fact, the inherent improbability of this combination derives partly from the very different environments that are relevant to each, leading to considerable extra demands on management. At its most simple 'this is really pointing to an increase in management demands with diversity of objectives. It is worth noting that programs are often characterized by such diversity. In addition to the number of dimensions, the complexity of each dimension has to be considered. If markets can be taken as being just above or below a particular level, monitoring the state of those markets may not put much demand on management. However, if the system believes it needs to know the state of its markets down to a fine level this may lead to considerable demands. If an industrial development program is just concerned with the number of new jobs seated in a region this is one thing. Concern with the balance of those jobs in matching available skills of the population is more complex. If competitors are entering a market a system may wish to know more than just, say, their number; it may also require some detail of their activities. A further very important contributor to complexity is the degree to which dimensions can be considered indeuendent. When thev are not indeuendent but are in some way interconnected this can lead to a very rapid rise in complexity. Put another way, can the dimensions be considered one at a time or do they have to be considered together? Take again, for example, the manufacturer producing shoes. He may observe his sales are down. On its own this may not be important; it may be a random fluctuation which will pick up again. After all, he may say, people have to wear shoes. However, suppose competitors are entering the business. The coincidence of this with his own drop in sales may give new significance to that drop. His response may then be to reduce his price. However, suppose also that social trends were such that people were walking less and therefore needing fewer shoes; his response may be different again. What is being constructed here is a multiplicative increase in complexity because of the need to recognize an interconnectivity in dimensions of the environment. Programs are often defined in such a way that interconnectivity must be taken into account in order to accomplish the objectives. Programs cut across and relate to a broad spectrum

of activities, and indeed usually derive their purpose from doing so. For example, conventional ways of dealing with crime may be to adjust the level of the police force. However, a comprehensive crime prevention program would want to monitor, and perhaps consider together, the crime rate, unemployment rate, education standards, housing standards, wage rates, and so on. Changes in any one of these may alter the interpretation of and response to the others. Without suggesting that quantification of these dimensions is possible the use of some simple numbers illustrates well the growth in complexity that arises from what is here referred to as interconnectivity. A system has, say, eight recognizable dimensions in its environment, each adopting one of two relevant states. All possible combinations of these dimensions generates 2* (= 256) states of the environment. The number of states that are relevant to the system depends upon system objectives. If objectives are such that all possible interconnections need to be recognized, then the system must respond to all 256 states. If the objectives allow all of the interconnectivity to be ignored, then only 8 x 2 (= 16) different states need to be responded to. Often objectives are such that some number in between is perceived as relevant. This is a crucial factor, and one which is very important in determining system structure. The need to recognize interconnectivities is arising increasingly because of the increase in the scale of activities. As utilization of resources of all kinds (energy, environment, land) pushes towards physical limits of societies or even the world, these interconnectivitiesarise and demand recognition by systems whose objectives are in some way concerned with them. In addition there are several considerations relating to the complexity of an environment as it is perceived by the system. These include the rate of changes of dimensions and the degree to which the environment is understood. When entering new areas a system may have to monitor dimensions which it later learns it can cease to consider (although new dimensions will doubtless be included). The purpose in this discussion has not been to set up a procedure through which environmental complexity can be measured. Rather, the intention was first of all to explain the fundamental role that the concept of environment plays in a systems approach to management and then to begin to characterize the situations in which the complexity of the environment is high and poses special demands on management. It does not seem possible to draw up any very detailed and durable picture of a system's environment. One has instead a perceived, and therefore perhaps partial, environment which is updated as the system's understanding increases. The task of management is the satisfactory recognition and response to that environment, and specialists of many types do play an important role in assisting management. Through the use of computers and the design of models of the environment management is now able to meet much greater degrees of complexity than has hitherto been the case. Large amounts of information on the environment can be monitored and processed so that fewer indicators need to be received and acted upon by the manager. Statisticians can reduce perhaps thousands of

market figures to a few indicators of significant market changes. Market research and, more generally, surveying techniques specialize in noting changes in specified sectors of the environment. Economists and engineers provide models which help to identify particular environmental factors and their relationships. These and other specialist activities can be used to construct whole sectors of a system environment and make it more manageable. They provide essential support to the effective management of large systems. The contribution of organization sciences is rather different. Their role is to enable management to create systems structures in order to manage the complexity of the relevant system environment. This is accomplished by aiding managements in identifying environmental factors and structuring a representation of the complexity of that environment.

2.3 A system in its environment The discussion of system and environment will be taken a step further here by enquiring into the rules that determine when a system is in balance with its environment. The task of management has so far been defined as arising from the need for a system to respond to environmental change. Indeed, this has arisen very naturally from the way a system environment has been defined. It is precisely those dimensions that a system needs to take account of. It is true that many factors outside the system are constantly changing and that this has little or no impact on the system. However, those changing factors would not be considered part of the relevant environment. Similarly, if two apparently different states of the environment always required the same system response, then from the point of view of the system they are not two different states. To a different observer with different purposes, two states may be clearly observed; however, this may be a finer view than is necessary for the system. Once more the shoe manufacturer can serve as an example. Suppose sales are made in two regions and that the only response to falling sales is television advertising. The television area covers both regions and advertising is used when overall sales fall below a certain level. If one assumes that this single response to use television based on overall sales has been shown by experience to be an adequate response, then sales of 100 in region A and 200 in region B is an identical state so far as the system is concerned to 200 in region A and 100 in region B. Of course, in reality this apparently redundant information may serve many other purposes, but the point is illustrated. If any system monitors and devotes energy to changes in a larger environment than is necessary, institutional resources are being inefficiently used. Of course, this may happen over a short term while the set of factors is changing or while the system is actively learning about its environment, but if no response is required to change in a particular dimension it will eventually be dropped. A quite opposite example occurs when what is apparently one state requires more than one response. The shoe manufacturer may have discovered that sometimes television advertising is the answer to falling sales

and sometimes only discount offers are effective. In thii case what is perceived as just one state is in fact more than one state. There is another dimension governing which tactic is going to be effective. Presumably the shoe manufacturer does not spin a coin to decide which to take but in the longer tern will try to understand his environment better so that what was perceived as one state becomes perceived as two. The result of these illustrations is to demonstrate a need for parity between the environmental complexity, or number of states the environment can take, and the number of responses the system can make. When this is not the case objectives will not be achieved as described. This receives its formal statement in the form of a law governing the balance between d l systems and their environments. This states that to be effective and ultimately to survive the complexity of a system must as least equal the complexity of its environment. In later chapters this will be used to develop results of importance in designing system organization. For the present it i;sufficient to explore at an illustrative level the sigmficance of this relationship. It can be stated immediately that it is not a prescription for a simple means of balancing system and environment. One is not led to measure environmental complexity, measure system capacity, and adjust accordingly; the previous discussion should make further disavowal of this intention unnecessary. Rather, the importance of the law is because it focuses attention on the danger of wasting resources when a system has more than the requisite capacity focused on particular parts of the environment and, more seriously, the threat to system survival if it is insufficient. The capacity to monitor and respond is not an abstract entity. It is a physical reality, residing in the people and their management mechanisms that are found in real institutions. In systems with many such institutions, it is these institutions and the linkages between them that give the system its capacity. Where this is insufficient the system may fail. 'Insufficient' here means an incapacity to recognize and respond to environmental change. In the short term a system may proceed with very little attention paid to the environment. It may respond largely to internally generated signalsproducing what its managers enjoy producing, for example, without regard to market changes. Its demise may be sudden and swift. Environmental change occurs in some objective sense whether or not the system perceives it. If relevant changes are not perceived, or not acted upon, then the state of the environment is governed more and more by changes outside the system and less and less by the actions of the system itself. The example of an aircraft in flight is an imperfect illustration but with some parallels. The aircraft is subject to many changes in air currents (its environment). If the pilot has the instruments to recognize these and has the controls to respond to them the plane can get where it wants to. If the changes are not recognized or the controls do not exist to meet changes in air currents then where the plane goes becomes a function purely of the air currents and not of the pilot. The system ceases to exist as a purposeful

system to go from point A to point B. This state may be more or less true as the capacity of the system (the aircraft and pilot) more or less matches the complexity of the environment'(changes in the air currents). From this illustration two distinct ways are apparent in which the system may fail. The most straightforward is a lack of resources with which to respond to the environment. The pilot may meet air currents which the plane is simply not equipped to counter. He can do little more than go where the wind blows him. Parallels are easy to find in program management. Educational programs may fail because there are not enough teachers. Industrial programs may fail because the society does not have enough capital or enough skilled workers to support the program, or the technology required to achieve desired ends may be beyond the current state of the art. When programs fail for reasons of this type it is suggestive of insufficient recognition of real constraints at the formulation stages of the program. Thus it indicates a particular type of failure of program management which needs to be addressed. In the course of analysis it should generally be possible to point out when this is likely to happen and to highlight the need for the system to modify its objectives, perhaps in terms of their time-scale, and to focus on the creation of the n e c e s s q capacity to achieve the original objectives. This type of limitation on a system's potential is often a very tangible course of failure. It is easy to see and easy to understand. But it would be wrong to assume that it is the most common reasons for program failure. A second and equally important cause of failure is illustrated in the case in which the system has available the necessary resources but lacks the management capacity to use them effectively. Increasingly programs are supported by technical preparation of very high standards, and program objectives should be well within the systems's capabilities. Yet even in these cases failure results. The so-called energy crisis affecting all Western societies is an elegant example of this. The relevant set of institutions concerned with a secure supply of energy are many, but they did not form any system. The sudden shortage of oil and the greatly increased price of that commodity hit these societies very suddenly, leading to increased transport costs, often cut-backs in industrial activity, and many undesirable concomitant effects transmitted throughout the economy. Crisis programs were set up to develop alternative sources of energy, often at unrealistic time-scales. Governments excused themselves for this lack of preparedness by emphasizing the essentially unpredictable nature of the crisis, being stimulated as it was by a Middle East war. However, the reality was that the impending nature of the crisis was apparent to many observers of the energy scene long before it occurred. Some had gone so far as to correctly identify the circumstances under which it would occur. What was missing was the linkage of these forecasters to agencies with the responsibility for taking appropriate actions. After it occurred the program to develop alternative energy supplies were hindered by the lack of a satisfactory system to coordinate necessary research and development. There have been recent

major organizational changes within the United States, among other countries, to develop the organizational capacity to manage these programs. Usually organizational failure occurs on a less dramatic scale than this. However, it is characterized by gaps in the monitoring of an environment, or by missing linkages to connect this to contres which can formulate action, or by gaps in linking these to bodies directly responsible for that action. Unlike the pilot of an aircraft, the management system for a program can be distributed among many agencies in many different places for whom program activities are just one of many interests. It is not sufficient that these agencies exist; they have to be organized in particular ways if the management system is to have the requisite capacity. It is towards avoiding system failure arising from a lack of this sort of organization, as well as cases where the potential resources are not sufficient, that organizational analysis is directed. The rule of balance between environmental complexity and system capacity is the basic guideline in this endeavour. 2.4 System st~cture

It is impossible to quantify the complexity of the environment of any system. What is clear, even without this quantification, is that for non-trivial objectives this number is high. For development programs, as for industrial enterprises, the number of states perceived increases and increases as more of the detailed implications of system objectives are worked out. If the systemlenvironment balance were taken to imply that all of this complexity was considered at one point then one might be surprised that any significant enterprise could survive. It is by adopting a structure-by differentation within a system-that complex environments can be dealt with. Structure derives its meaning and its significance from a system's needs to control complex environments. Adopting a structure is the most important way a system can cope with such environments. Reference to the real world of enterprises with their specialist departments and associated divisions confirms this. However, to understand the rules governing effective structure one cannot look directly to this real world where the forms of organization differ according to traditions, the nature of objectives, politics, and so on. It is necessary to use system concepts which are neutral to these specific features to gain this understanding. System objectives have provided the basis for defining the system and for identifying its environment. They also provide the basis for understanding structure. At the most aggregate level any system's objectives can usually be stated in very general terms-profitability or growth for private bodies, welfare or security of populations for national government, provision of food, or health care for a development system. It is as these objectives are elaborated into their more detailed implications that the wealth of environmental dimensions becomes apparent. These objectives are elaborated in stages, and at each new stage new dimensions in the environment become apparent.

The stagewise elaboration of objectives provides the logic for system structure. If one takes a whole governmental system this process can be observed and described. At the most general level the objective may be some illformulated concept of welfare. Top levels of government will be concerned with identifying general implications of 'welfare'. Perhaps it will include material wealth adequate social security, and national defence. Major programs such as the development of a region may in outline terms also be considered at this level. Because resources are inevitably limited and each of these implications of general objectives demand resources, choices have to be made between them. Without considering the details of how industry can be developed, social security achieved or national security maintained, a choice will be made to the priorities to be accorded to each. Both long- and shortterm considerations will be taken account of in this process, but neither will include the level of detail that will eventually have to be taken into account. Once this choice has been made, it sets the parameters or context in which the separate areas can be considered individually in more detail. For example, the national defence issue can be considered in a detail which allows the relative claims of air, land, and naval powers to be taken into account. This extra detail brings in many new environmental dimensions not considered at the more general level. However, the response to just this set of dimensions is all that is required, and the issue of the impacts of choices here on the industrial development of the nation is not a necessary consideration. This process can be described more generally. At the higher system levels objectives are elaborated-broken down into particular issues or policy areas-and choices are made between them which set the parameters within which each area can be further developed. The only environmental dimensions that need to be taken into account at this level are those required to support the decisions or choices made. Where these choices are made in rather general terms, only environmental dimensions appropriate to this level of generality form part of the relevant environment. Once the choices have been made, they are then 'handed down' to the next lower system level. Here each policy area can be expanded on its own. Dimensions are examined in more detail, but within the framework of decisions already made at the higher level. The higher level decisions provide the objectives for the next level down. The process of elaboration of objectives can be repeated indefinitely, each stage defining a new system level. From the point of view of any system level, the level below it are sub-systems or sub-sub-systems, and so on. In the language used here, these sub-systems are said to be embedded within the system above. The concept of embedding is best captured in Rgure 2.l(a), but, for convenience, the representation used will be as in Figure 2.l(b). One of the ways structure enables a system to meet its environment is by splitting up the environment into pieces that can be separately considered. However, the process does more than just this. It is not simply redistributing the total environmental complexity among levels. Instead, the exercise of choice through successive levels is actually removing potential areas of the

a0 Environment

Syslem

0n System

f

Z

Sub-system

Figure 2.1. System structure

environment from more detailed consideration. Thus it reduces environmental complexity as well as redistributing it. The use of an illustration will be valuable here. Consider an energy program. First of all, the objectives of that program have to be decided. This takes place as a result of trade-off between energy and other societal needs in the manner already discussed. Those objectives may be stated in terms of an overall demand for energy and perhaps available resources. The details of the problems associated with different energy strategies need not have been considered at this stage; they are the concern of the energy program. Once received, these objectives will be elaborated and different potential strategies, perhaps emphasis on wal, nuclear, or non-conventional resources, are considered. At this level some detail of each strategy will be considered and a choice made between tnem. 11 ~t1s decided, say for general reasons of reactor safety, not to develop nuclear energy, then the detailed issues connected with nuclear power will never be

considered within the system (unless at some future time this strategy is reversed). Thus a whole sector of the potential environment is removed. NO detailed consideration need be made of possible supplies of uranium or of needs for particular technical skills or types of specialized manufacturing capacity. By exercising a choice at the higher level, considering environmental dimensions relevant at the general level, the need for some of those factors to be considered in more detail is removed. Exercising choice at one level provides the directions along which the management capacity at sub-system levels will be developed, and therefore restricts the need for capacity. Understanding this dual function of structure in both distributing and limiting the need for the management capacity to respond to the system environment is crucial to the system. The process of objective elaboration provides the logic for drawing up a system hierarchy, and this is one of the important dimensions of structure that is considered in the approach. It is natural to enquire about the relationship of this definition of hierarchy of a system to the concept of hierarchy as it is ordinarily used in describing real institutions. Obvious parallels do occur. Large companies do have head offices, divisions, and branches and government has its equivalents which map fairly well to the logic described above. However, almost always the mapping will be imperfect. The truth is that, while parallels between the two kinds of hierarchy do occur, the logical process described above is not intended to be a description of how conventional hierarchies operate. Instead, it is a way of creating a new definition of hierarchy and one that is more useful to systemic analysis. It should always be possible to describe real institutions in terms of this new hierarchy, but in doing so one cannot expect one-to-one translations. Quite possibly, what is recognized as a single unit may appear at more than one system level. The logic of the approach requires only some understanding of the management capacity available at each system level available to respond to the environmental complexity facing that level. There is nothing implausible or unnatural in the management capacity represented by a single unit being distributed among several levels. The necessity for some specified way of defining system levels is more immediately apparent in programs requiring the efforts of multi-organizations than in single large corporate bodies. Here the (perhaps) many separate institutions contributing to management of a single task many have no defined hierarchical relationships between them. The logic used here can, however, define system levels for multi-institutional systems in a similar way to those of single large institutions. There is one further important characteristic of this way of formulating system levels which is not apparent in conventional hierarchies. That is the constancy of the logic used at each system level. At each level received objectives are elaborated which necessitate consideration of a particular environment at that level, choices or trade-offs being made which provide the objectives to the next level down. This logic holds for upper system levels as well as low system levels. Of course, the nature of the objectives received and

therefore the kind of environmental factors considered change as one goes down the system hierarchy, but the process remains the same. This feature implies structural recursion, and it adds greatly to the general applicability of the approach. It implies that analysis does not need to start at the highest possible level of a system and proceed to the lowest level. It is the problem being considered that determines where in the hierarchy one starts analysis and where one finishes. Practically, a 'top of the class' does exist. It is the level at which objectives are internally generated rather than received. However, at this level the process of elaboration of objectives, and the definition of the relevant environment are no different to those of lower levels. Similarly, a 'bottom of the chain' does exist when, instead of objectives to the next lower system being the output, action is taken directly to effect some change in the environment. The point to be emphasized is that there is no necessity to include these extremes in the analysis. It depends upon the purposes of the analyst. The focus on management issues arising out of programs limits the number of levels through which the analysis has to be taken. This is discussed in Chapter 3. Before leaving the discussion of system structure it is worth commenting on an impression a reader may legitimately have received from the nature of the discussion. In following closely the logic of system hierarchy it has not proved convenient to cover the behaviour of that hierarchy at the same time. As a result, the system appears to be presented as operating in what can be called a heavily topdown mode and in a rather mechanistic way. That is, the exercise of information flow and influence appears to emanate from the highest level and go downwards, and relates to trade-offs made at, perhaps, some discrete and defined points in time. Such a proposition would provide a very poor description of how real institutions behave and an equally poor interpretation of the systematic approach adopted. It would, in fact, have been possible, although less convenient for communication, to have derived the same systemic structure by starting at the bottom of the hierarchy and working upwards. Then quite different impressions of shortcomings would have been received. What is clear is that information and influence flow in both directions; neither extreme is tenable although real systems can and do approach the extremes. The consequences of this are able to be analysed using the approach and are discussed more fully in later chapters. Regarding the mechanistic or discontinuous nature of the system, this, too, is an unfortunate and inaccurate impression. The influence of one system level on another is seen as continuous and dynamic. The 'trade-offs' used in the description are not equated with major published documents or plans, but rather with the continuous process by which any manager influences and guides those below him. In this respect the issuance of plans or decisions must be regarded as atypical of what is meant here by choice or trade-off. Nevertheless, having recognized that the process is more diffuse and less defined than it has hitherto been made to appear, in both logic and reality there are levels at which information and alternatives regarding various stages of objective

elaboration are considered and decided upon. The identification of these is not simple and is itself the result of a complex process described in a later chapter. 2.5 Functions

System hierarchy is just one of two dimensions of system structure used in the approach. The second dimension refers to the capability of any level to elaborate its own objectives and provide objectives to its sub-systems. In this second dimension five system functions are defined through which the system hierarchy is able to maintain itself. These functions will be called policy, intelligence, control, coordination, and implementation. If any of these funo tions are missing at any level the system hierarchy cannot be maintained. They are therefore necessary functions. They appear also to be sufficient functions. That is, no more than these five will be necessary to understand the ways in which a system achieves a balance with its environment. Just as the real institutions involved in the program management provide the substance of the system levels, so these same institutions with the linkages between them provide the levels with the capacity to cany out these functions. Moving from these abstract statements to the descriptive mode in which the system hierarchy was first inroduced, three of the five functions are quickly apparent. First of all, a choice or trade-off was mentioned at each level which selected from potential alternative strategies. Making this choice is one of the system functions, called here thepolicy function. Second, so that this choice is possible alternative strategies have to be generated. This is quite distinguishable from the function of choosing and is the role of the intelligence function. Third, once choices are made they have to be transmitted to the sub-systems, and attempts must be made to ensure that they have the right resources to achieve their tasks and that they are, in fact, achieving them. The control function does this. The other two functions are called the coordination function and the implementation function. Their roles will be easier to understand once the first three have been more adequately introduced. The policy function chooses between what might be called alternative strategic directions. The word 'strategic' in its more usual sense could be misleading, since it often refers to decisions made only at the highest system levels. However, here it is recognized that from the point of view of any system level decisions have to be made that can justifiably be called strategic. For the top level of government the split in resources, say between education and other national needs, is strategic. Within an educational sub-system the strategic decision may be the split between preschool, school, and university education. Within the school sub-system of the educational sub-system the ages at which children are moved between different types of school may be strategic. What is characteristic of all these 'strategic' or policy decisions is that they involve an element of choice which takes account both of the shorter

tern and the longer term, of what is happening in the environment of the system, and of what are the potentials of the system. The decisions are made with reference to the system's own objectives, the state of the environment outside the system (provided by the intelligence function), and the state of the sub-systems or what might be termed the internal system environment (provided by the control function). The decisions may be continually updated as either the received objectives or the external or internal environments change. Through these decisions the way in which the system will evolve and the sub-system capacities be developed is, to an extent, being determined. Where a system level sets its sub-system objectives to an increasing degree of specificity, and thereby itself must respond to the more complex environment relevant to that specificity, then the degree of determination of system evolution by that level is increased. This tendency is towards what is often referred to as centralization. The intelligence ftrnction is specifically concerned with the environment external to the system, with monitoring changes in that environment, and with considering alternative ways in which the system can adapt to and achieve a balance with the environment. The possible strategies must, of course, take account of the potential of the sub-systems as well as the environment, and this information on the internal state is provided by the control ftrnction. The scope of the environmental monitoring and the type of alternative strategies considered are directly associated with the nature of the objectives which the policy function chooses to set to its sub-systems. Hence, there is a very dynamic loop; the type of alternatives considered by intelligence function both influence and are influenced by the requirements of the policy function. Although the intelligence function is not conceived as a decision function as such, this inevitable influence cannot be ignored. In terms of real institutions, the intelligence functional capacity is most often found in planning departments, survey departments, and various types of research institute. In all these cases it is a familiar experience that, although the formal remit is one of supporting management decisions because of the types of method and filters employed, these units sometimes effectively determine that decision. The demands made on the intelligence function follow directly from the complexity of the environment facing the system level. This in turn follows from the type of objective the level is setting to its sub-systems. When they are detailed, or involve a high degree of elaboration upon the received objectives at that level, then more environmental factors have to be taken into account. If the intelligence capacity is not sufficient to monitor such a complex environment then opportunities may be missed by the system or policy decisions may have to be taken with an inadequate account of their consequences. Ultimately through insufficient response to environmental change the system may cease to survive. In recent years many new supports have grown for intelligence capacity. Most important among these are the use of computers together with mathematical modelling techniques. These make the environment easier to monitor and, by recognizing regularities in the environment, easier to understand. While this growth has been significant, so has the

growth of environmenta1 complexity, which has been brought about by the scale of problems and the increased level of expectations of a large part of the world's population. It is a fascinating question as to which (computers or environmental complexity) is growing at the faster rate. The control function is concerned with the sub-system at any level. It receives the decisions of the policy function and transmits these to the subsystem in a form so that they provide meaningful objectives to the subsystems. That is, strategic policy decisions are translated into more operational terms which take into account the particular circumstances of each of the sub-systems. The performance of the sub-systems will be reviewed by the control function and common resources allocated between sub-systems according to information received from them. The control function does, therefore, have a decision capacity, and the references for the exercise of decision are the strategic decisions made by the policy function and the circumstances of the sub-systems. The type of activity involved is characteristically what is thought of as operational management: progress checking, scheduling, resource allocation. However, the control function does have an important role to play in the overall evolution of the system and its response to the environmental change. This dimension is often not included in conventional characterizations of operational management. It arises because of the need for the policy function to take account of the state of the sub-systems, as well as new opportunities perceived in the environment when making strategic choices. Just as the intelligence function provides the view of the environment so the control function provides this view of the sub-system. As with the intelligence function, computers and mathematical modelling have added to the capacity of the control function. Whereas for the intelligence function the computer data bases relate to the environment, for the control function they relate to the performance of sub-systems. The mathematical models for intelligence support illuminate relationships between environmental factors. For control support they are models of relationships within the system, typically to support decisions like the allocation of money or materials between sub-systems. The fourth function to be introduced is the coordination function. The way the policy, intelligence, and control functions have been defined follows from the process supporting systems structur-the elaboration of received objectives at one system level and the breaking down of them into pieces to be handled by separate sub-systems. These pieces which form the objectives to sub-systems will not in general be independent. Much more likely, the particular ways in which one sub-system chooses to achieve its objectives will have effects on the ways open to another. One sub-system's actions may make life easier for another, or it may make it more difficult. Of course, sub-systems in one sense could never be independent. They are part of the same system and their objective are set to contribute to a larger system goal. To this extent, sub-system interdependences are recognized when their objectives are being set and are included in those objectives. When it is recognised that interactions occur, then the terms of the objec-

tives will take account of this and will define parameters within which each system must keep so that undue interactions do not occur. Very simple examples of this in real life might be geographic boundaries around the activities of different divisions of a company, or perhaps product boundaries. In government the type of issues which can be dealt with by one department are often very carefully defined when they are recognized as being near an interface with another department. It is then the control function which ensures that these interfaces are maintained. However, this prior definition of a logic for handling interactions in sub-system objectives is limited by the degree to which those objectives are specific. If interactions become apparent only from a more detailed understanding of sub-system activities than that available to the system level above, those interactions cannot be provided for in sub-system objectives. Take, for example, a governmental system at the highest level which recognizes a need to meet a certain level of demand for energy but recognizes also the population's demand for a pleasant healthy environment. These separate needs may be passed on to an energy sub-system and an environmental protection system. Clearly these two sub-systems will interact in many different ways. The activities of one can easily lead to undesirable states of the system environment of the other. Some of these may be recognized at the higher govemment level. Quite possibly allowable levels of sulphur emissions may be defined. This puts restrictions on both sub-systems. The objectives of the energy sub-system would not be allowed to adopt energy strategies that led to more than this amount of sulphur being emitted and the environmental protection system would not be allowed to adopt strategies that required less than this. The more detail with which the higher level is able to consider its total environment the more it will be able to make such provisions. However, because the sub-systems will always perceive their own environments in greater detail new interactions will become apparent. In the illustration used the higher level might be concerned with nitrogen oxide emissions, thermal pollution of particular rivers, or the availability of coal in areas of great beauty. Because these interactions cannot be considered in advance by the higher level there is a need for direct communication between sub-systems to try to resolve them. This is provided for by the fourth function, the coordiiation function. Where conflicts cannot be resolved then, as a result of this coordination, there may be a need for selective application by the level above of its own perception of the relevant environment, so that these conflicts can be resolved by the control function. This would be on what could be termed a 'management by exception' principle. However, there are clearly limits to the extent to which 'this is possible. If such situations are constantly occurring it would suggest a poor allocation of objectives between sub-systems. One of the characteristics of programs is that their objectives tend to have the effect of increasing such interdependences, and this is one of the reasons why they can present new management challenges.

The final function considered is the implementation function. The other functions have been concerned with monitoring the environment and with information flows and decisions internal to the system. The implementation function is the 'doing'. It is responsible for the actions which create changes in the environment. In simple cases it is possible to visualize simple, direct implementation actions. A very small, or one-man, firm knows what it wants to achieve, sees the opportunities available, decides on actions, and does it. In a family shoe business, the chief policy maker may go directly to the machine and make so many pairs of shoes in the chosen colours. In large endeavours with many system levels the equivalent action of going to the machine is to provide objectives to the sub-systems. The sub-systems are in some way equivalent to the machines; it is they who will turn out the goods, will put out something, and in doing so will effect some change in the environmental state. From the point of view of any system level it is the sub-systems who provide the implementation function. It does not matter that the sub-systems go through a process of elaborating their objectives and transmitting new objectives to the sub-system below. Nor does it matter that this may go on through many more system levels before any direct outputs to the environment are made. Looking at the energy example, the high level of government requires a certain energy demand to be met and passes this objective to the energy sub-system. It will perceive in its own environment information about whether that demand is met. It passes objectives to a sub-system and in this way expects those objectives to be achieved. There is no reason why it should be interested in more than this. The energy system in turn will see, perhaps, different contributions from nuclear fuel, coal, and oil (if this is how objectives were set to its own sub-systems), but, no more details of the energy provision. And so it goes on. if one were interested, to a level at which direct outputs were made. This reasoning gives a new emphasis to the concepts of recursion and embedding It is not only that a parallel logic is used throughout the system in defining new levels; the sub-systems also provide the implementation function to the level above, and this function may itself be unfolded to show all the five functions at a lower system level. Figure 2.2 attempts to capture this idea; the functions to the right are at the system level below those shown in capital letters to the left. The five system functions have now been defined. They occur at every system level and provide the second dimension of system structure. The two dimensions, level and functions, are very closely related to each other through the concept of recursion. It may have been possible to define each of the functions slightly differently and come out with a different set. Viewed one by one there seems to be no necessity to define, say, the control function exactly as it is here. However, it is important to define a consistent set which covers without overlap the different types of activity necessary to support the system structure. The five defined here do that, and the authors have not needed, or attempted to define, a different set. The functions defined have the advantage

POLICY CONTROL

COORDINATION

Policy Intelligence Control Implementation

/

Coordination

\

Figure 2.2. System functions and system levels

of covering what are often broadly recognized as separate, distinguishable activities in real institutions and therefore have an immediate familiarity. However, this fact can be double edged. What might be normally referred to a policy, intelligence, control, or coordination activity may embody more than just one of the above functions. Often, for example, a policy body may operate in what is defined here as a control or coordination function role as well as a policy function. There is some degree of congruence which is different in different cases but unlikely ever to be perfect. This is similar to earlier comments on the extent to which institutional hierarchy mapped system levels. There is a need for analysis to describe real institutions in terms of this framework, i.e. in terms of system levels and system functions. In both cases, functions and structure, conventional descriptions may be useful guides to start off analysis, but will not be sufficient. 2.6 Transformation With the introduction of the concepts of system, environment, balance, levels, and functions much of the conceptual language of the approach has been covered. In very broad terms the application of the approach involves describing the real institutions concerned with the program in these system

terms and examining the extent to which system environment balance is or can be achieved. Elaborating on how this is done is the purpose of later chapters, but before going on to do this there are some points of a rather general nature which should be addressed. With the description of groups of real institutions in terms of the systems framework an order is revealed which is not apparent in the real world. Simple observation without the framework would reveal a high degree of disorder. Institutions of many different types, with different types of expertise and resources, may use a bewildering number of mechanisms and become involved in the program in many different ways. In the extreme, the real situation may resemble a jungle. By contrast, the systemic approach with its limited types of function and rules for defining levels may be described as an ordered garden. Using this metaphor one is led very naturally to ask, 'What is the relationship of the garden to the jungle?' The direct answer to this is that the garden represents a particular type of model of the jungle. It does not seek to capture the full complexity of the picture; rather it is a partial description for the particular purposes of designing effective structures. Models always have this characteristic. As an example one could take the problem of forecasting electricity demand. Here the real situation is of thousands, perhaps millions, of consumers, both industrial or domestic, buying electrical equipment or appliances and using them as and when it suits each individual consumer's needs. This jungle can often be very satisfactorily described, for the purpose of forecasting demand, in terms of a few mathematical trend statements. Similarly, for designing efficient flows of oil and its products across the world one can usefully describe the problem in a mathematical programming formulation. Models are always useful because they reveal an order in the complex world. The systemic model used here is of a somewhat different nature from these two illustrations but is, nevertheless, just a model. It is useful for examining multi-organizational structure, but there remain many questions of management which it does not consider. Recognizing this, one can ask important questions about the approach--questions which are valid for any model application. The first is whether it is always possible to describe the real situation in terms of the model. This has been referred to in the first chapter as transformation. The answer is 'yes', but this is in no way a trivial problem. Describing the real situation in terms of a model requires a good understanding of those objectives with which the program is concerned and of the true roles of participating institutions. This understanding must go beyond the roles of those institutions as they might usually be described, and will normally be achieved only as the result of a complex process of interaction between the analyst and the setting. This process is described in the following chapters. A second question is whether, once a model description exists, manipulations can be made with the description which allows new insights or results to be derived. Again the answer is 'yes'. In Chapters 4 and 5 the concepts introduced here will be developed more rigorously and the means of

this manipulation will be explained. Because of the complexity of the issues this manipulation will not have the precision or simplicity which is found familiarly in the mathematical models of, say, operational research. Nonetheless, manipulation will yield accurate and operational insights. A third question concerns the possibility of translating back solutions generated by the manipulation into effective solutions in the real world. In some respects this is the most difficult problem of all. Transformation involved simply the understanding of existing functions and patterns of organizational relationships. To understand the feasibility of solutions generated by the use of the model one has to understand the potentials of changing and reorganizing the institutional resources, bearing in mind all the specific traditional, sociopolitical, and technological constraints of the program setting. The issues are too complex for be formalized in the manner of a transformation process. Ultimately the generation of solutions depends upon very full interaction between the analyst and policymakers in the setting.

CHAPTER 3

From Institutions to the Model System 3.1 The transformation process The purpose of this discussion is to outline the process through which the model of the program system and its environment is constructed. Program objectives, the activities associated with them, and the institutions relevant to the management of these activities are the data base for the analysis. In order to use them, they must be structured according to the formal model presented in Chapter 2. This process is a multi-step undertaking through which the description of the organizational system and its environment is iteratively evolved. Figure 3.1 indicates the position of this transfornation with respect to the stages of the analytic process. Through this process the elements observed in the program setting are reformulated in terms of the model of the system and environment (see Figure 3.2). The transformation process is in itself both a data collection and the first stages of analysis. It is a multi-step process during which the analyst develops not only a description of the various organizational issues inherent in the program but a sense also of their importance and of the nature of the traditions and values governing organizational behaviour in the program setting. For presentational purposes the process will be described in a linear fashion in this chapter. In practice, this comprehension of key organizational issues and the idiosyncracies of the program and setting never occur in simple linear order. The process tends to be of a more synthetic nature. The reasons for this are straightforward: at the same time their consequence in the context of an exposition may be to create an impression which is more simplistic than intended. The data, the objectives, activities, and institutions, exist as a coherent whole in the program setting. Therefore, the first step of the transformation process consists of distinguishing among elements of a holistic understanding, and is less 'neat' than one might desire for presentational purposes. In its most simplified form, the process of transformation is presented in Figure 3.3. The figure indicates an iterative process of comparing successively more detailed descriptions of the environment and the system so that no elements are overlooked. It also indicates simultaneous,independent investigations of both the organizational system and the environment. The data surfaced as a result of the independent investigations provide input to the iterative process at each step. 37

Chapter 3

r Transformation

I

Chopter 4 Chapter 5

I

Retronsformotion

T 1 Figure 3.1. Discussions of analytic process by chaptex

+

Observable situation

Model of system andenvironment

i.e. Program object~ves Associated oclivities Relevant inslitutions

Figure 3.2. The transformation goal

zr

lnslilutions

Activities

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Organizatianol system

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Rgure 3.3. The transformation process simplified

Program obtectlves

~unciional copocity

Figure 3.4. Discussion in chapter 3 The process is, in fact, morecomplex than indicated by the figure. However, the complexity will become more clear as the discussion progresses, and the simplification will suffice to provide a road-map for the discussion which follows (see Figure 3.4). Clarification of the organizational system and its environment is a chickerregg exercise in many respects. This discussion will

begin with a brief description of the derivation of activities-the most rudimentary definition of the system environment. This is followed by a discussion of the construction of the model of the organizational system through the first few iterations. At this point, we shift to consider the nature of environmental complexity associated with the program. An understanding of this complexity is essential to a full understanding of the implications of the concept of functional capacity, which completes the refinements in the description of the organizational system. Because the object of the analysis ultimately is an assessment of organizational effectiveness, the discussion emphasizes the construction of the model of the organizational system (see Figure 3.4).

3.2 Constructing the model The purpose of the conceptual framework is to provide a method for investigating the capacity of the institutions involved in a program to manage program activities. Formulated according to the concepts presented in Chapter 2 the issue is the effectiveness of the organization of the management system to deal with its environment. To address this issue we introduce the notion of the organizational capacity of a system. This capacity refers to the ability of the system to prepare, evaluate, take, and implement decisions with respect to all aspects of program management. It is a direct consequence of the organization of the management system within any given level of resources. The key elements of the investigation into the organizational capacity of the management system are the system and its environment. The basic principle is that the organizational capacity of the management system must balance the complexity of its relevant environment. This pertains both to the system as a whole and to its sub-systems. Accurate descriptions of the system, sub-systems, and their relevant environments have to be formulated as a basis for analysis. Conclusions with respect to the quality of the balance will be the output of an analysis of the effectiveness of the organization. The conceptual framework provides the basis for structuring the investigation in a way which highlights these organizational dimensions. The first step of the investigation, then, is to create a description of the institutions and program activities according to the model of the system and its environment.

3.3 The organizational system The description which we will construct is of an abstract system. It cannot be observed directly in the program setting; it can only be derived and is derived solely for purposes of organizational analysis. The two main features of the system are the structure and the functional capacity. The system is assumed to have a multi-level structure consistent with a logical hierarchy of program

objectives. The functional capacity is described in terms of the five functions defined in Chapter 2, for each system level. Derivation of the model for a particular program and setting involves several stages of sorting, ordering, and transforming data into the formal structure of the model. Development of the system structure requires the definition of system levels and the identification of the sets of institutional units which comprise each system level. The result will be a comprehensive description of the program management system, including sub-system levels, the functions at each level and the institutions or institutional units performing them, and the linkages among them.

The structure of the organizational system Program objectives will serve as the basis for both the initial structuring of the levels of the abstract system and the identification of the boundary of the relevant environment of the system. Both the levels of the system and sub-systems and the clustering of the environment correspond to a disaggregation of program objectives. The elaboration of program objectives involves the specification of more detailed sub-objectives. Taking regional development as an example, more specific objectives include the creation of industrial infra-structure or the . turn, these can be further specified as the provision of social s e ~ c e s In development of particular transport systems, such as rail and motor, or the creation of medical and recreation service networks. For each set of objectives there are a set of corollary activities. For the most general objectives these will be defined in general categories and for more specific objectives they will define narrower areas of activity and tasks. It should be noted that the term 'activity' is being used in a broad sense to include physical projects, associated legal and financial processes, and institutional actions (see Figure 3.5). In some cases similar activities will be needed to support the realization of different sub-objectives. In Section 3.5 activity networks will be discussed as part of the process of mapping the relevant environment of the system. Identification of this initial set of activities represents the first step in defining the relevant environment and is also used to specify the set of institutions which represent the management capacity for the program in the first iteration in the evolution of the model of the organizational system. In the case of each element of the model, i.e. system, structure, and environment, the term 'disaggregation' indicates the specification of sub-sets of the element under discussion. Thus, the disaggregation of program objectives breaks the overall objective into its component objectives; the disaggregation of system levels identifies sub-systems, each of which are embedded directly in the previous system level; and the clustering of the environment identifies sub-sets of environmental activities. Schematic presentations of the environment visually present the clusters as sub-sets; however, the schematic of the organizational system whose vertical rendering

Program objectives

Corollary sets of oct~v~l:os

P i

Regional development

General cotegor~es

objectivs

services

kn= Tasks

Figure 3.5. Identification of system levels and activities

Tasks

Tosks

Tasks

facilitates presentation of many system dimensions is less successful in conveying this embedding characteristic.

System levels In general, there will be at least two system levels: general and program. The general system level is concerned with broad social goals and considers the program as one of many possible strategies for achieving these social goals. The program level focuses solely on the management of the program as defined in the objectives. The number of system levels appropriate for analysis will depend upon the sophistication of the setting with respect to program objectives, the current organization of management resources, and the desired level of detail of the resulting recommendations. In the first iterations the activities and sub-objectives will generally be elaborated to the point where the last disaggregation identifies a natural management group. Definitions of natural management groups will differ from setting to setting, but will usually be readily observable in the program setting. For example, if there is a well-developed rail industry in the setting, once objectives are disaggregated to the constructionor design of rail transport system for the region there is no need for further disaggregation. Rail transport represents an activity group for which organizational solutions for the management of the various sub-activities already exist in the setting. From the point of view of program organization there is no need to enquire further about the effectiveness of organization within that management group; rather, attention should be focused on the relationship of that management group to other activities in the context of program objectives. Bounding the analysis in this manner focuses attention on the set of organizational issues resulting from the non-conventional and multi-institutional aspects of the program. These natural management groups will themselves be disaggregated in the event that later iterations indicate the usefulness of such a disaggregation. Natural management groups are thus used to limit the level of disaggregation for analysis and system levels. The number of system levels disaggregated for sub-systemsneed not be symmetrical. For example, it might be desirable to disaggregate objectives and sub-systems in the social services through several levels, whereas another sub-system, such as transportation, might only be disaggregated to one sub-system level. The levels are retained for analysis, however, only when the system level has some degree of autonomy with respect to meeting objectives. The degree of autonomy may vary, but if the institutions implementing those objectives have no autonomy, i.e. no policy discretion at all, then it is inaccurate to create a separate system level. The creation of a separate system level attributes policy discretion, however small or large, to that system level. A clear example of this distinction is presented in Chapter 10, in the discussion of the proper structure of the model of the regional system for Bratsk.

The structuring of the model is more than a data-collection exercise. As soon as judgements such as the number of system levels and the location of institutions are made the analysis has begun. It is important to reemphasize here the iterative nature of the process of building the model. No judgement is final at these early stages. Examining the basis for judgements for this kind will yield insights into big issues. The information thus gained will be of use in later analysis. Existing institutional structures do not correspond to the structure of the system model. However, there may appear to be parallels between the hierarchy of existing institutional relationships and system levels. These apparent parallels result from the use of program objectives as the major device for structuring the system levels. Program objectives will tend to disaggregate into activity groups which reflect usual management practice for the program setting. If the model were to be constructed solely on the basis of the institutional data, it would parallel current practice in the setting (and provide little new insight). However, as the system model is constructed in iteration with detailed speci£ication of the system environment, it thereby takes on a logic more independent of usual management practices. Program objectives and their disaggregation, thus, are the basis for beginning the process of structuring the model of the system, but represent only a partial input. The interdependencies and relationships among the activities and institutions which form the relevant environment are also considered in the development of the model, as are the appropriateness of existing formulations of program objectives. Presumably, the raison d'2tre of a program is to permit the management of projects which represent new combinations of activities for a setting. It would be of little use, then, to structure a model using concepts which simply paralleled present management practice. It is the intereaction between examinations of program objectives, of the activities, and of the institutions which finally results in a description that provides a new look at the organization of program management. Figure 3.6 presents a schematic of the actual process of constructing the model of the system and its environment. The figure indicates that the construction of the model of the system results both from the continuous refinement of the institutional data (vertical) and the inputs made as a greater and more specific understanding of the nature of the environment is achieved (helix). The description of the system is refined through the process of continuously posing two types of question. First, as the environment is examined and activities identified (helix), one asks, 'Who manages it?' or 'Who should manage it?'. By this means, the set of institutions is expanded and the additional institutions can be sorted into the model. Second, as institutions are sorted into the system model the institutional resources are reexamined by asking, 'Whoelse relates to these institutions?' or 'Who else should be related on these issues?'. With respect to activities of the system environment, similar questions are posed: 'What other activities are related?' or 'What else is

Sub~"bobjectives objectives

resources

L

Orgonizationol system

&bobpctives

J J

Environment Environment

System

Environment

J J

Figure 3.6. Iterations in defining program system and environment

necessary to make this possible?'. The vertical progression results from this type of questioning. While both processes may appear somewhat obvious as standard research practice, the iterations are so vital to the construction of an accurate description that we stress them here. In the context of investigating the organization of a program which is non-conventional for the program setting the possibility of inadvertently excluding relevant institutions or activities is quite high, and this phase of data collection can usefully be taken a step beyond standard research practice. The number of iterations will depend upon the access to data and the degree to which researchers are familiar with the program setting. It is essential that this process be undertaken in close collaboration with persons intimately familiar with the program setting and common management practices. Often informal processes will be as important in structuring the description of the behaviour of the system as formal roles or linkages. This knowledge of the setting will be particularly crucial in the definition of functional capacity.

3.4 Identifying institutional resources for the program system Following the logic outlined in Figure 3.6, the first step in actually describing the organization of the system is the identification of the institutional

Elaboration of program objectives

&

Activities

Relevant institut~ons

required -

General

tasks Set

Figure 3.7. Derivation of institutional population

resources for the program. These are the institutions or units within institutions which represent the management capacity for the program and which will be organized according to the logic of the systemic structure. The identification of these resources requires several stages of refinement. Figure 3.7 illustrates the derivation of institutions relevant to the program from the disaggregation of program objectives and the corollary activities. Institutions, existing or planned, directly involved with the management of these activities and those managing activities which affect the program indirectly represent the entire set of institutions with which we will be concerned. This undifferentiated set of institutions is referred to as thepopulation of relevant institutions. Such institutions will likely be readily identifiable by those familiar with the program and the program setting. In general, however, it is assumed that the first round definition of the population will overlook some that can only be discovered as a result of later iterations in defining the system environment. This first identification is illustrated by the first iteration in Figure 3.6. The population is grouped during this process according only to the activities with which each is concerned. Often institutions will appear in connection with several activities. These duplications are important and are retained throughout the process of structuring the description of the system. However, the population must eventually be differentiated according to the structure of the abstract model in order to begin completing the system description. The population is, therefore, sorted into three categories: (1) those which are part of the program system, (2) those which are part of the general system, and (3) those which are part of the relevant environment of the system. It should be noted at this point that the actual units considered include both whole institutions and sub-units of institutions. Departments or persons within institutions may be sorted into different categories. For example, it is possible for the central office of the rail transport industry to be part of one system level, while the department which is concerned specifically with the development of the region may be part of another. This will become clearer as criteria are discussed. The term 'institution' will be used to refer to either institution or department. 1. Institutions are considered part of the program system (a) when their activities are necessary for accomplishingprogram objectives, (b) when program objectives or sub-objectives represent an identifiable concern of the institution involved, and (c) when this identifiable concern of the institution coincides with program objectives. Institutions which are part of sub-systems are differentiated in a similar manner. That is, these institutions are necessary for the accomplishment of program objectives, their identifiable concern is with activities which represent a program sub-objective, and these subobjectives coincide completely with the institutional concern. Each system level is a sub-set of the organizational system as a whole and of the system level above it. In other words, each system level embeds its sub-systems.

Program activities contribute to the accomplishment of program objectives as a matter of definition: in cases where institutions are identifiablv concerned with the management of activities that fulfill a particular sub-objective, they are distinguished as a separate system level for purposes of organizational analysis. 2. Institutions whose involvement is necessary for the accomplishment of program activities and objectives, but which are concerned with more general social goals, will be considered part of the general system. These institutions tend to view program activities as one of many strategies which might be implemented to achieve these social goals. They will have been involved in the setting of program objectives and in the choice of the program strategy. Their more general goals and policies set the parameters within which the program willbe carried out. These members ofthe general system primarily consider program objectives in the context of trade-offs between the program - and other activities. By contrast, the focus of the program system is bounded by program objectives and it considers only trade-offs between activities within the program, i.e. between sub-systems (see Figure 3.8). Because the general system is comprised of many other institutions in addition to those institutions which are concerned with the program, these program-relevant institutional members of this system will be called members of the general system level of the program management system. In the course of the case studies, there will be many illustrations of institutions whose various units will have been considered as parts of the general and program levels respectively. In the Soviet case study, for example, the head offices of national ministries are usuallv considered Dart of the general system for managing those activities. These central offices consider projects in different regions - in the context of national strategies - (for . electrification, for example), while a department concerned with one or another specific region would focus upon the management of the regional activities and would be considered part of a regional system. 3. Those institutions whose involvement is relevant to the accomplishment

-

Trade-offs ( I )General system ( 2 ) Progrnm system

Figure 3.8. Focus of decision making

of program activities and objectives but whose own objectives differ from program objectives are considered part of the relevant environment of the system. These include both institutions whose own actions influence other program activities and those whose direct involvement is essential to the accomplishment of program objectives. In market or mixed economies these institutions will often represent a major portion of the implementation capability for a program. Independent businesses (industry or banks, for example) will provide the capacity for construction, design, and financing of industrial and social investments. While these agencies are key actors in the context of meeting program objectives, because they do not share the objectives of the program as the basis for their management decisions they are not considered part of the system. To take a svecific examvle. in Scotland the accomvlishment of the shortterm objective of facilitating rapid oil exploitation while protecting the amenities of local communities can onlv be achieved through the cooperation of many independent developers. These developers, e.g. construction companies and shipping firms, may applaud the program objective and yet take their own management decisions on the basis of quite different objectives which may be inconsistent with the achievement of the program goal. These institutions are considered part of the program environment. A program system has a variety of mechanisms with which to influence the actions of such important non-system institutions. These mechanisms, such as legal regulation or financial incentives, vary from setting to setting. The distinction which differentiates between institutions which are part of the system and those which form part of the environment hinges upon the objectives which constitute the basis for the management of the institution. An institution may approve of program objectives and yet manage its own activities on the basis of different priorities. Those institutions which manage on the basis of objectives that coincide with program objectives are considered part of the system and those that manage on the basis of different objectives but whose involvement is important to the implementation of the program are considered part of the relevant environment of the system. With this categorization it is now possible to identify the set of institutions and departments which comprise the institutional resources for managing the program. Those agencies which have been categorized as part of the general, program, and sub-system levels of the system represent the institutional resources for managing the program. It is the organization of these resources that is precisely the subject of our attention. Ultimately the analysis will examine the degree to which the organization of the system (the institutional resources) is consistent with the nature of the relevant environment (activities and institutions) that must be managed in order to accomplish program objectives. The institutional resources will not appear in the program setting as organized in the exact structure represented by the model. However, it is possible to describe the actual organization of these resources by translating them L

,

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into the abstract model which can be analyzed to determine the balance between the complexity of the environment (comprised of the many activities necessary for the accomplishment of program objectives) and the capacity of the system (the institutions, their functions, and interrelationships). Having identified the institutional resources for the organizational system we now have a rudimentary model of the organizational system. It is structured according to system levels, and the set of institutions involved in the management of processes and activities necessary for the accomplishment of program objectives and sub-objectives have been categorized within the system levels. The next step in refining this description of the organizational system is to specify the nature of the functional capacity at each system level supporting the corollary program objectives. However, consistent with the usual process of constructing the model, we will next turn to a consideration of the nature of the environment associated with the program (see Figure 3.4).

3.5 The relevant environment Environmental complexity is the counterpart to organizational capacity in the effectiveness equation, where effectiveness has been defined as the balance between the organizational capacity of the system and the complexity of the relevant environment. The complexity of the relevant environment is comprised of many dimensions, including aspects such as physical, financial, and legal activities and institutions which must be managed in order to accomplish program objectives. These activities are first identified from the program objectives, as described in Section 3.3. They include industrial activities such as construo tion or manufacturing, financial activities such as the supply of capital and banking services, and legal activities which include the range of regulatory actions associated with program activities. The institutional components of the environment include those institutions whose actions affect the accomplishment of program objectives, either directly or indirectly, and who share neither the priority of program objectives as the basis for the management of their own activities nor direct concern for the accomplishment of program objectives. These institutions may actually manage activities vital to the implementation of the program or they may influence program activities more indirectly. The complexity of the environment includes the relationships among these various activities and institutions and the nature of the flows between them. The construction of a network of activities, such as those accomplished using PERT or CPM planning techniques, would, yield one picture of the relationships within the environment. An input-output table would add further detail by clarifying the nature of physical flows. The rate of flows between activities and/or institutions are crucial in constructing a comprehensive picture of the complexity. For example, the number and rate of applications for land permits in Scotland to build facilities supporting oil development were a critical aspect of the environmental complexity of that program.

It is possible to describe the complexity of the environment in great detail. However, in consideration of the ultimate use of this description, the question of quantification often arises. The purpose of describing the environment (and, to be sure, organizational capacity) is to permit an examination of the degree of match between these two. Thus, it would appear desirable to quantify both environmental complexity and organizational capacity. To digress for a moment, there could be (and the authors have entertained) a good deal of discussion around this point. The discussion revolves around the results desired from the analysis and the difference between 'quantification' and 'measurement'. It is possible to measure, i.e. to count, various dimensions of both environmental complexity and organizational capacity. Interactions between activities, their importance, and the level and rate of communication can be enumerated to point where major changes in those dimensions incurred by the program can be easily detected. Similarly, for organizational capacity, sizes of staffs, computer capability, and other communication capabilities can be defined in terms which allow comparison between the capability and the task at hand. For the purpose of analysing environmental complexity to determine whether the increase in complexity might be creating stress for the organizational system, or to examine the nature of organizational resources for the management of program activities, these types of measurement suffice. They suffice particularly when coupled with behavioural evidence which should accompany any such description. Members of the organizational system will demonstrate if it is occurring, either verbally or by their actions. AS an example we might cite the type of organizational diagnosis undertaken to determine the adequacy of management information systems. The capability of information systems to support management decision making or control can be assessed bv a combination of measurement and behavioural evidence to a point where policy decisionswith regard to enlarging, replacing, or improvingcurrent capability can be made quite adequately. This is the nature of the criteria for the adequacy of 'quantification' in policy research. The nature of quantification, i.e. the description of environmental complexity and organizational capacity, should be (and is) adequate to SUPport policy decisions with respect to enlarging, replacing, or improving the current capacity of the organizational system. However, if the purpose of the research is to shed more light on the dynamics of organization, one might argue that attention could usefully be paid to the development of finer methods of quantification.None of the authors would argue this point. There is much to be learned from more formalized models and the development of these models is dependent upon a degree and quality of quantification not yet achieved in studies of organizational behaviour. Research, including policy research, could be improved by the development of such techniques. The lack of finer instruments for quantification, however, need not, and should not, inhibit efforts to improve the quality of organizations by utilizing the full potential of existing methods. A

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Clustering the relevant environment In order to permit this eventual comparision between the organizational capacity of the system and the complexity of the environment it is necessary to differentiate the relevant environment along several dimensions. The first distinction seeks to cluster the environment into sub-sets which correlate with the hierarchy of program objectives disaggregated as the first step of the model building. This clustering will identlfy the sub-sets of the environment for which each level of the organizational system and sub-system will ultimately be assumed responsible, in the context of the model. Figure 3.9 illustrates the clustering and correlation of the environment with system levels. These clusters are the result of the identification of activities (physical, financial, legal, and institutional) necessary for or related to the accomplishment of program objectives. The macro set of activities bounds those for which the general system should be responsible and which it is expected to 'manage'. In this context, 'management' is used in the broad sense of the term and includes the delegation of responsiblity for part of the environment to sub-systems. In turn, any system level may opt for a delegation strategy to manage all or part of its relevant environment. The act of setting program objectives is one example of delegation. By creating a program, the general system has clustered one segment of its environment and delegates responsibilty. In the context of the program, the general system is left with the responsibility for those activities which affect the accomplishment of program objec= tives but which are beyond the scope of the program. In a similar manner, the environment relevant to each sub-system level is identified. At this point, an important but subtle distinction arises in the environmental sub-set achieved through clustering. There are a set of activities necessary for the accomplishment of program objectives, and these activities should be managed by one or another system level. It is in this sense that 'responsibility' for certain segments of the environment is attributed to system levels. However, this responsibility differs from the actual responsibility assigned to sysOblectlves-Activities- Relevant envlronments+Syste~struclure

Program

Sub-

Sub-

relevant to the accompl~shmenl of program object~ves physical, flnonclal, ~nstltu-

Figure 3.9. Clustering the environment

tem levels as a consequence of institutional assignments in the program setting. The segment of the environment for which any given system level is actually responsible corresponds to that segment of the environment necessary for the accomplishment of the objectives of that system level as set by its superior system level. These objectives may differ importantly from the logical disaggregation of program objectives. These operational objectives, those actually specified as orders or assignments, restrict the purview of any given system level to the corresponding segments of the environment. This is the relevant environment as perceived by the system itself. In the best of situations, for effective program management, an aggregation of operational objectives should result in the assignment of all important aspects of the relevant environment to an appropriate system level. The purpose of this descriptive stage of the analysis is to develop a comprehensive picture of the environment that can be compared later with the comprehensiveness of operational objectives, as part of the consideration of the capacity of the system. Thus, two clusterings of the environment are ultimately sought. The first clustering can be accomplished in these early iterations. In this iteration the analyst deduces and differentiates the environment relevant to the system according to a logical disaggregation of program objectives into associated activities. This clustering is mainly accomplished as a result of the independent investigation of the environment indicated in Figure 3.3. The second clustering, that which corresponds to the operational objectives for each system level, will become more clear from later iterations in the model-building process. In order to carry out this clustering it is necessary to know the nature of the objectives set for each system level, the policy discretion exercised, and the functional support for the policy. This clustering, the identification of the relevant environment as perceived by the system, will result from iterations with h e r descriptions of the organizational system. Management challenges For any program the full range of activities and support processes is almost infinite, and a sub-set of these must be selected for useful analysis. Our concern is with those aspects of the complexity of the environment which are a direct consequence of the creation of a program. The concept of management challenges facilitates the distinction of this program-related complexity. The role of the concept is to highlight those organizational issues which are a consequence of the ('program' strategy and thus to distinguish those issues from organizational issues which result if the same set of activities were undertaken using a different management strategy. The process of deriving challenges is straightforward, but also requires judgement by those familiar with the setting. The first step on identifying the environment is the simple identification of clusters of activities which are

necessary for the accomplishment of program objectives. These activities are then considered in the light of the institutions which would normally be involved in managing them. A close examination of the activities and their interactions should reveal combinations and interdependencies among activities which are new or unusual for the program setting. These new types of combination and interdependency set up a demand for management which cannot be met by normal processes and which, thus, challenge existing institutional capability. As an analytic device, definition of the management challenges serves to crystallize the major organizational policy issues- Challenges identify organizational issues which are crucial to effective management. They are an important sub-set of the full set of organizational issues which must be addressed in the course of managing the program. The challenges may be directly identifiable in the first consideration of the program objectives and institutional resources, or they may be more subtle and revealed only with more detailed analysis. Always, first formulations of challenges represent general statements of management needs, and their full implications will only become obvious as a more detailed understanding of the organizational system is achieved. The Bratsk case provides a good example of the role of this concept. The full range of activities which would have to be managed to create a territorial production complex in Siberia are infinite. They include all activities associated with the constuction of the dam at Bratsk, all activities associated with the completion of the wood-processing and aluminium plants, the provision of transportation lines, and the planning and construction of social service facilities, etc. Viewing this set of activities in the context of the program strategy known as the TPC generates some new features. These particular features have been identified as three management challenges which represent the focus of the organizational analysis. The first was the development of a capability for assessing the feasibility of industrial projects in the context of an interdependent matrix of industries. The industries are often planned for and managed by separate national ministries. The interdependence of the projects requires that planning be undertaken for the projects together, and thus requires interministerial cooperation of some sort during the planning process. Were the development managed as a series of individual projects, the usual independent investment analysis handled by each of the ministries would suffice. The second challenge was the synchronized construction and implementation of industrial projects and infrastructure. Like the first, both the separate industrial projects and infrastructure are usually managed and funded by separate national and republican authorities. In the context of the program, whose objectives stipulated that the industry should become a core for a settlement, coordinated management and funding of these projects becomes quite crucial. Finally, the third challenge was, the creation of self-contained settlement

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communities. Again, responsibility for the components of a self-contained community is distributed, by tradition, among many agencies. The interdependence among the components and the relationship between the settlement and the industrial matrix for which it provided support was a direct consequence of the logic of the TPC strategy. It resulted in a unique set of organizational issues which would not have been encountered in the context of a different strategy. The identification of challenges will be a setting-contingent process. The nature, frequency, and importance of the management challenges inherent in a particular program will depend upon the sophistication of the program setting with respect to program activities. As was noted in chapter 1, programs which represent new and unusual undertakings in one setting might represent usual management practice in another. Challenges like the relevant environment are derived from program objectives and an examination of standard management practice. It is quite possible that a program might imply so many management challenges for a particular setting that upon close examination the accomplishment of program objectives is determined to be unrealistic. In such a case there would be a need to reformulate program objectives or reschedule component activities such that the frequency and dimensions of the challenges were not overwhelming. Challenges will, in general, be met through organizational changes. The changes may take the form of minor modifications of existing processes or they may require major innovation. It is the degree of modification required to meet the challenges which result in reexamination of program objectives. The stress of organizational change is a factor whose importance cannot be underestimated in an assessment of the capability of institutional resources to meet the challenges implicit in a set of program objectives.

A final comment with respect to the challenges should note that the organizational issues raised by management challenges will tend to be of a macro nature. That is, in general, challenges will identify organizational issues that pertain to the relationships and interdependencies among the natural management groups identified as the lowest disaggregation of the program system. In general, these natural management groups will only be disaggregated in the event that a close examination of the invironment indicates that the grouping may be inappropriate to effective management of the activities in the context of program objectives. This is not to imply that there will never be problems in the organization of natural management groups, but rather to clarify the level of resolution of this analysis. In fact, much current organization research addresses issues pertinent to the management of activities within these clusters which we have named natural management groups. Nothing precludes an analysis of both sets of organizational issues; it is solely for purposes of focusing attention on the organizational issues characteristic of programs that this discussion has been restricted in this manner.

The relevant system,environment, comprised of many activities, may be said to represent the demands for management which must be met in order to accomplish program objectives. The demands consist of activities, institutions, and relationships related to program objectives, according to logical disaggregation of both objectives and environmental factors. Certain features of this demand represent new combinations of activities for the setting and may be identified as management challenges. Special attention should be paid to these challenges which identify major organizational policy issues. 3.6 Functional capacity To meet the challenges posed by program objectives there is a set of institutional resources. Thus far, in the discussion of the organizational system, these institutional resources have only been identified and structured crudely according to the particular objectives with which they are involved. Our concern now is to describe the organization of these resources in a manner which permits examination of their capacity to manage the environment relevant to those objectives. This involves the allocation of each institution, or part of an institution, to its appropriate system level. It is these institutions that endow system level with functional capacity, defined in terms of the five functions introduced in Chapter 2. The same unit may be a part of more than one sub-system and/or may perform more than one function for a given system level. Consider, for example, a regional development program including social service and transportation objectives, which are considered as sub-sub-systems of the program. Some particular unit may perform an intelligence role for both the social service and transport sub-systems, or it may serve both the intelligence and control functions for the social service sub-system level. For example, one planning unit may prepare separate plans for both the rail and motor transport sub-sub-systems. In this case, it would be considered as part of the intelligence function of each sub-system. Institutions and/or units are identified with as many roles as they play. Because the system was structured into system levels according to program objectives, the end result will be a descrip tion of the nature of the institutional support and functional capacity for each program objective and sub-objective. The purpose of this last iteration in structuring the system is to identify the functional capacity of the system. This is accomplished by (1) sorting all institutional resources according to the functional roles which they perform with respect to any and all program objectives which they support and (2) identifying the nature of linkages between units playing the various roles. Eventually, it will be as important to understand these linkages as it is to have a description of the functional roles. This process can most easily be illustrated by the use of the matrix presented in Figure 3.10, The matrix corresponds to a regional development

Sub-sub-system: Sub-sub- system-

Figure 3.10. Identification of functional capacity

system, and specifically addresses only the organization of the program level, and two sub-system disaggregations. The matrix does not include the general system level which defines program objectives. The matrix is completed with the names of institutions or units which perform the various functions, for each systeni level. Each of these is represented by a box in the figure. The figure shows that a function at a particular level may be carried out by more than one institution (box). It also shows examples of a single institution performing more than one function (the units marked b and f i n the figure). The matrix must be supported by information on the three types of linkage, which is essential for later analysis. 1. The set of linkages among the various units which cany out each function should be described. Thus, if three or four departments of different institutions perform the intelligence function for the transportation subsystem, we are also interested in the manner in which these units communicate with one another. Communication in all threee cases may take the form of computer networks, of personal communication between individuals, of formal meetings, or simply of the transmission of data. Informal communication networks play as important a role in this context as more formal linkages. 2. Of equal interest are the linkages among the units carrying out the functions for a articular svstem level. Thus, for each sub-svstem there should be an accurate description of the communication links among units carrying out all five functions: policy, intelligence, control, coordination, and implementation functions. 3. Finally, linkages among certain functions at different system levels are of interest, particularly for the policy, intelligence, and control functions. A fuller discussion of these three sets of linkages is presented in Chapters 4 and

5. At this stage, our primary concern is with the construction of an accurate and comprehensive description of the organization of the institutional resources for the program. One might well note that this sort of data collection could provide a great deal more information than the analysis was intended to support. Clearly, an unbounded data-collection process would result in just such an information overload. Often, however, useful analysis can be carried out by focusing upon a sub-set of the functions and system levels. In the case of Scotland, for example, a restricted focus provided a guide only to general policy issues which could be explored further by more detailed analysis. On occasions, one might wish to focus entirely upon a single sub-system level and the nature of the interactions of that level with the rest of the system. The mode of data collection, however, and initial structuring of the system model will be independent of the level of detail necessary for policy support. The principles of identlfylng the institutional population, categorizing institutional resources, and finally refining this raw data into a comprehensive description of the functional capacity of the system are constant and independent of the purpose of the research. Research goals will determine the scope and the level of detail to which analysis is carried. It might well be noted here that policy-relevant research into the organizational dimensions of program management may be performed usefully for policy makers at various system levels. Were analysis to be requested by the transportation group of the regional development program, the focus of analysis would shift accordingly to a consideration of transportation objectives as the 'program level' of the system, but the process would remain the same. In such a case, the regional development program level would be considered the general system for the transportation program level, and subBystems would consist of transportation sub-systems as presently defined. No doubt, the actual membership in the general system of the transportation program would differ somewhat from that of the program system, but the point is rather different. Using program objectives as the primary structuring device for the system and for the initial definition of the environment, analysis may be carried out for any program. The process of analysis is independent of the scope or substance of program objectives. One could carry out organizational analysis for an educational program in the United States equally well for the Office of Education at the national level as for a state or local board of education.

3.7 Comment

The interdependence between the definition and description of the system and its environment has been noted several times in the course of the discussion. Although the process of defining the functional capacity of the system has been presented in a linear manner, Figure 3.6 illustrates the nature of

iterations actually involved. The output of this elaborate procedure is a description of the actual organization of program management. Throughout the discussion, the term 'institution' refers to firms or agencies in the form in which they occur in the program setting. The term 'organization' is reserved for use only in conjunction with the systemic configuration of institutional resources. Thus the organization of institutional resources refers only to the abstract relationship among institutional units, as they appear in the model of the system. As the discussion progresses, this terminology will be sustained. Organizational strategies will refer to alternative modes of structuring the model system, either by manipulating linkages or functional capacity. The nature of strategies will become clearer in later chapters. The form of an organizational strategy refers to the actual institutional or management strategy observed directly in the program setting. Every institutional strategy, including the management processes currently in use in a program setting, has an implicit organizational strategy which can be described in explicit terms using the conceptual framework. The terminology of the conceptual framework is, thus, independent of institutional form or institutional bias. Its terminology can be used to describe institutional strategies in diverse national settings because the terminology transforms all institutional strategies into their underlying organizational strategies. In this way, the conceptual framework can be used to examine the effectiveness of institutional strategies consistent with the social philosophy and management traditions of Scotland as well as the Soviet Union. The abstract formulation of the program management system permits an accurate description of a management strategy in organizational terms which are universally applicable. Effectiveness criteria are based upon the principle of balance which is applied to the system and its environment, and within and between system levels. Balance may be achieved through a wide variety of institutional strategies, centralized or decentralized, planned or unplanned, socialist or capitalist. In Chapter 1 several distinctions were proposed between effective, feasible, and appropriate organizational strategies. It is now possible to clarify the distinctions. Effective organizational strategies satisfy conditions of system/environment balance and may be numerous. Appropriate strategies must be consistent with the social values and management traditions of the setting, and are thus a sub-set of effective strategies. Feasible strategies must be both effective and appropriate, and consistent with the preferences of policy makers. Designing appropriate institutional strategies, i.e. institutional strategies consistent with the values, traditions, and preferences of the policy maker and the program setting, is a complex business. The judgement of organization analysts alone is inadequate to the task, unless those analysts are intimately familiar with the program setting. It is more likely that organization analysts should work in close collaboration with researchers familiar with the institu-

tional traditions and norms of the setting, and analysts and managers knowledgeable about related activities. The principle of balance provides the criteria for examining the effectiveness of the organization of the research team, as weU as of the program. Thus, to be effective, the research team should include among its members, or have access to, those with expertise that is appropriate to the complexity of the management issues addressed.

CHAPTER 4

The Model System in Action 4.1 ModeIs for policy support

In the previous chapter the process followed was to describe the set of real institutions according to a particular system model. The reason for making this transformation from conventional institutional description to the language of the model is to support policy makers in the design of better solutions for program management. Quite clearly a model description of the institutions is itself only one step in the process of supporting policy. In the final section of Chapter 2, some indication is given of the minimum requirements necessary to be able to describe the real world in terms of the model (transformation), to generate new strategies within the language of the model (manipulation), and to translate these strategies into a language in which they can be understood and acted upon by policy makers. To be useful, the model has always to provide or contain within its rules which cover manipulation or the generation of new strategies. If a linear programming formulation is used to describe flows of oil around the world, then the rules for manipulation would be a mathematical optimization procedure. The output might be a minimum cost transport schedule. The equivalent rules for our system model are rather different in nature. They are a set of criteria for effective systems which follow from the need for balance between a system and its environment. In the next section of this chapter the way in which these criteria of effectiveness can be derived from the systems concept is demonstrated. The mode of the exposition here will be illustrative, following on from Chapter 2 where the concepts were introduced. In a later chapter (Chapter S), when the concepts are presented again in a more rigorous fashion, the conditions of effectiveness will be further substantiated. The purpose of this chapter goes beyond the establishment of these criteria to enquire into the mode in which they can be used for policy support. Because of the complexity of the questions addressed and the multiplicity of considerations influencing the design of program management in any particular setting, some applied by the model and others not, a simple process of transformation and model manipulation is not adequate. Instead, there is a more complex iterative process between model manipulation and outputs, and the policy maker. A t each cycle in the iteration potential solutions to program management are assessed; on the one hand, they are tested against

61

Potential solutions

Cr~teriaof effect~veness

Sutlability lor

Potential solutions

Figure 4.1. Policy maker-model iterations the criteria of effectiveness expressed by the model and, on the other hand, against their appropriateness for the setting as understood by the policy maker. Potential solutions may be suggested initially by either policy maker or analyst, but always they will need to satisfy both sets of conditions. Schematically the situation is shown in Figure 4.1. Through this iterative process potential solutions may be refined to the point where they represent acceptable solutions for program management. In real applications the process is even more complex than this, and the consideration of the shortfalls of existing institutional networks in the program context, and the ways of eliminating them, may start to be appliedat the time of the transformation. Like much research in an action mode the process does not lend itself to simpie description. For the present chapter, an initial presentation is made on how the different kinds of criterion are applied. U s i ~ gthe increased understanding of the approach, which the case studies should provide, some of these issues will be looked at again in the concluding chapter of the book. 4.2 Balance as the criterion of effectiveness

The basic criterion of effectiveness is the need for a balance between a system and its environment, already introduced in Section 2.3. That is, the system needs to generate responses to changes which occur in its relevant environment. The capacity of the system to respond should be balanced with the amount of relevant change that can occur in that environment. The example of a temperature-control system provides a useful (if trivial) illustration of this. Suppose the temperature external to the system is monitored at 5" intervals, say between 0" and 10O0, but that the only states of the system are to have a heater on or off and that these two states are exercised with respect to a reference temperature of 50". It is clear that this system can perform no better than if the perceived environment comprised only two inputs: a temperature below 50" or a temperature above 50". In this case the perception of two different states, say 55" and 60°, cannot add to the performance of the system. They may as well not be recognized as such. Conversely, if the system can adopt many states-levels of heat output from 1 to 10 kilowatts-but only recognizes two states of the environment-above or below 50"-it has no means to use these many levels of heat output to increase its performance. In either case its performance can be no better than

if perceived states and possible responses were equal at the level of the lower of the two. Referring to the example of a shoe manufacturer, a parallel can be found, although in the case of human, adaptive systems the issue is not so simple. Suppose that the shoemaker has the capacity to produce only black shoes. Following the logic of the above illustration it could be said that there is no value in his monitoring a potential demand for shoes in ten different colours. He has no capacity to utilize this more detailed view of the environment. Conversely, if he has the capacity to produce shoes in ten different colours but receives only an aggregate picture of the market, he will not be able to take full advantage of this capacity. These statements, while true for the thermostat, must, however, be qualified for the shoemaker. He operates in a complex environment, and his perception of that environment may be constantly changing. Thus apparently redundant information on the environment may make him see the need to expand his capacity. Imbalances between the response capacity and perceived environment will always be present in adaptive systems. These imbalances are both necessary to support adaptation and are a consequence of adaptation. Although these 'dynamic' imbalances will always occur in complex systems it is convenient for the purpose of exposition to distinguish them from 'persistent' imbalances. In effective systems persistent imbalances may never occur, since the system will strive to respond to imbalance. Indeed, the absence of persistent imbalances is the first criterion of effectiveness. When an imbalance occurs between the perceived changes in the environment of a system and its capacity to respond, the system will, as a matter of fact, perform no better than it would if both environmental monitoring and the level of response were equal at the level of the lower of the two. Thus, as a minimum, imbalance implies a waste of resources. The criterion of balance as stated cannot on its own be a sufficient condition for effectiveness. It needs a reference level. In principle balance might be achieved at many levels. The shoe manufacturer can achieve balance if he produces only black shoes and monitors an aggregate demand or if he produces shoes in ten colours and receives market information in similar categories. While both cases achieve balance it cannot be assumed that they are similarly effective. The reference for balance comes from the system's objectives. It is the objectives which define what in the environment is relevant and needs to be monitored. Suppose the shoemaker's objectives are to gain the majority of the shoe market. If shoe buyers actually care very little about colour, then the objective is most likely to be achieved if the manufacturer produces only black shoes. Since this is less demanding in terms of management and plant, he can presumably produce shoes with less resources (or more cheaply) in this case. He is more efficient in that he uses less resources to respond to the demands of the environment. However, if colour is an important issue to customers, a manufacturer producing only black shoes will rapidly lose his market. Balance between the system and environment will not have been achieved at the appropriate level.

The contrast between the actual environmental complexity and the perceived relevant complexity becomes very important at this point. In nontrivial cases system objectives define an environment of very great complexity. That is, many factors relate to the objectives achievement of the system. Perhaps only a sub-set of this is perceived as being relevant by the system-perceived relevant environment. Of course, the system cannot respond to change if that change is not in its perceived environment. An appropriate level of environmental monitoring is when the perceived relevant environment includes the important dimensions of the actual relevant environment. As already mentioned, when this occurs it is the result of a learning process; the system learns what is relevant. It forms an understanding of the environment which allows it to respond to what is relevant and ignore what is not. That is, filters are used, or models of the environment are built up. These may be models in the most formal sense. For programs, mathematical models may be constructed of how relevant dimensions interrelate. Or the models may be implicitly and unconsciously formulated in the head of an entrepreneur. The procedures described in Chapter 3 contain a built-in potential for the analyst to understand the degree to which the perceived relevant environment captures the actual relevant environment. This results from the two parallel processes in which the system environment was constructed-ne centring on the institutions involved and the other on the activities and their logical interconnections. Out of this are derived management challenges, i.e. areas of new environmental complexity arising from the program objectives which did not need to form part of the perceived relevant environment of the participating institutions prior to the program. Summarizing the discussion it can be said that the criterion for effectiveness requires that, first, the system should have evolved a satisfactory picture or model of its relevant environment and, second, it should have the capacity matched to respond to relevant changes in environmental state. The conditions so far derived are insufficient in that they do not allow operational statements about effectiveness to be made on the basis of the model description resulting from the transformation process. It is insufficient just to view the system at the aggregated level. The system will have a structure-a hierarchy supported by the five functions-and it is natural and necessary to look at this structure in assessing effectiveness. The environment is monitored and responded to at each level in the hierarchy, and the concept of balance needs to be applied to each level. The capacity to respond to environmental change is provided by the five system functions at each level. In some sense they can be thought of as providing the links in a chain linking observation of environmental change and response to it. Following the metaphor, the response at any level will be no better than the weakest link in the chain. In other words, there is a need for each of the functions at a level to be in balance. This condition of effectiveness can be thought of as a need for internal balance. The ideas underlying internal balance are more complex than for overall balance and require drawing out consequences from the way each of the functions has been defined.

To discuss the criteria of internal balance it is convenient to start by considering the distribution of discretion within a system. By discretion available to any system level is meant the authority to make strategic decisions or tradeoffs in response to environmental change. When a system's objectives define a complex environment the demand for such decisions is particularly great. There is more need to make choices on directions to follow--opportunities to seek and dangers to avoid-ompared to a system facing a simpler environment. Although it is environmental complexity resulting from overall objectives that creates the overall need for a level of response, that response may be distributed in many different ways through the system. Thus the response will be made at many system levels, and it is this that gives a significance to system structure. The distribution of response fallows in theory from the way objectives are elaborated. When a system level receives general objectives it has greater possibilities to respond to the environment compared with the case if it received more detailed objectives. I t can be said to have greater discretion available to it. In tufn the level can be thought of as passing on some of that discretion to its sub-systems, i.e. it does not seek totally to define its sub-system responses (in fact, if it did seek to define sub-system responses totally a distinct sub-system level would not exist; instead, these same units would be considered as performing functions for the system level), but leaves them their own measure of possibility to respond to environmental change. From these two ideas (discretion available and passed on) the concept of discretion exercised at each level can be derived. The greater the extent a level elaborates its own objectives to provide more detailed sub-system objectives, the greater degree of discretion it is exercising. This implies that the level has to consider an increased complexity of the environment. Because through setting more detailed objectives the level is reducing the dimensions of the environment to which its sub-systems may respond, it must itself take account of the way these dimensions will affect the process of objectives implementation. If it does not there will be a gap in the system's monitoring of its environment and in particular the sub-systems could be receiving objectives which are inappropriate or unachievable. This type of imbalance will be referred to as an inconsistency between system levels. However, it is just one example of the imbalances which occur. The fuller understanding of internal balance is supported by examining the discretion exercised at each level and the functional capacity available to support it. The exercise of discretion is carried out by the policy function, and naturally the demands on it increase as more discretion is exercised. That is, the frequency and scope of strategic decisions will increase. It is possible for discretion to be exercised with insufficient policy capacity, and this will have a damaging consequence for effectiveness. For example, decisions may not be taken to support system adaptation when the need for such decisions is perceived. In these cases the sub-systems would be trying to achieve objectives which are either no longer attainable or no longer in the interests of the overall system. Circumstances where this might occur in practice could be when certain decisions have to be made by a board which meets infrequently,

so old policies remain in force until the board changes them and long after their usefulness is past. Also, where policy decisions become embedded in complicated planning cycles so that the possibility to update them is not available when major changes in the environment occur, the response of the policy function can be said to be insufficient. In the absence of new choices the old ones remain in force and the discretion of the sub-systems is limited by them. System ineffectiveness can result. If the discretion exercised were greater, the demands on the intelligence capacity would also be greater. That is, the policy and intelligence functions have to be in balance. The idea of balance, or at least of linkages between functions, is implicit in the definition of the functions. An intelligence capacity only adds to system performance if it feeds into the policy function. The existence of, say, a research capability does not become intelligence capacity without this linkage. Quite obviously the linkage has to be of sufficient capacity to support the necessary information flow. Balance implies capacities linked to an appropriate level, and it is the type of policy decisions made in exercising discretion that determine that level. Examples do occur when the level of intelligence support goes beyond that necessary to support policy. Managers may often complain of the amount of research reports or market surveys they receive which go beyond what they perceive as information on the relevant environment. Clearly resources can be wasted in this way. On the other hand, intelligence capacity might be insufficient to support policy, either through a lack of resources or insufficient linkages. In this case discretion will be exercised with a lack of information on environmental change. The system will become less responsive to its environment and may try to follow strategies which are inappropriate. Thus decisions may be taken by an enterprise with insufficient account of markets or central governments may take decisions affecting localities with insufficient knowledge of those localities. In some cases this is a result of a growth in environmental complexity over time which is just not recognized by the system. Thus enterprise boards or governments may think they are making the same kind of decisions as they were ten years ago but because the environment is more complex4ue to an increase of scale, competition, rising individual expectations-these 'same' decisions need more intelligence support. When this is compounded with new types of objectives, such as the programs represented, the demands on intelligence capacity to support some policy decisions can be very great indeed. For such cases the intelligence support may be drawn from a variety of institutions. In the Soviet Union this is very well recognized, and in the case study we observed, a very impressive array of research institutions contributing to intelligence capacity was necessary to support decisions by the general system level concerning the program. The intelligence capacity in this case, as elsewhere in the USSR, consisted of agencies concerned with directly monitoring the environment, while others provided methodological support so that the environmental information could be interpreted and identified

what new types of environmental information were necessary. That is, they were developing models so that the perceived relevant environment better correspond with the actual relevant environment. Linkage among these kinds of unit will be important. It is, therefore, necessary to distinguish two types of linkage. The first occurs among functions, e.g. the need for a link between policy and intelligence functions was mentioned. A second type of linkage arises because of the multi-institutional nature of the questions examined. These linkages bring institutions (or their parts) together in the context of a single function. A good example is the interlinked network of research institutes which are discussed in the Soviet case study (Chapter 8). Of course, both types of link appear exactly the same in reality; they are achieved through flows of papers, people, and so on. In systemic descriptions of real situations both are included, i.e. no linkages between institutions are lost in the transformation process. The reason for distinguishing between the two types is because the omission of one type can have different consequences for effectiveness than omission of the other. As sub-system objectives are set to increased degrees of specificity the need for coordination between sub-systems decreases. The groundwork for this statement was thoroughly covered in Chapter 2 when the coordination function was introduced. Detailed objectives allow the possibility for more of the sub-system interactions to be taken into account at the time of their working out. The objectives themselves provide the guidelines along which conflicts will be resolved. General objectives to sub-systems take account of fewer interactions and coordination has an increased role. Thus, where the discretion exercised at a level increases, this leads to a reduction in the need for coordination at the lower level. When coordination is insufficient, the result can be very much greater demands on the control function (see below) and the system can prove impossible to control. Coordination can also be at a higher-than-necessary level and this leads to a waste of resources. The relationship between the requisite level for control capacity and the discretion exercised is somewhat more complex. The concern of the control function is to ensure that sub-systemsachieve their objectives in the interest of the whole system. However, unless objectives are interpreted very broadly (and more broadly than has been the usage hitherto) this does not capture entirely the job of the control function. If the control function is concerned with sub-system objective achievement, it has also to consider actions required when those objectives are not being achieved. This implies a concern with more than just a set of control figures which could be taken in simple cases to represent objectives, Three rather different components of the control function can, in fact, be recognized: executive or command; coordination; and monitoring. The first component might be called the executive or command component whose direct concern is with translating strategic decisions into operational objectives for sub-systems, passing these to sub-systems, allocating resources

on the basis of them, and reviewing performance. As sub-system objectives become more specific each of these activities becomes more demandingquite straightforwardly, there are more parameters (or objectives) to deal with. Thus with increasing discretion exercised at any level, the demands of control increase. The second component, coordination, has already been mentioned as a function in its own right. Here, however, we emphasize those aspects that pertain to the control function. Coordination may resolve directly many of the interactions that occur between sub-systems. However, this may not always be the case. Sometimes agreements may not be reached between sub-systems, or the nature of the agreement or compromise could have important consequences for the whole system. In such cases there is a need for the control function to be involved. To the extent that sub-system objectives are general and the need for coordination arises, there is increased potential for exception situations to arise from the process of coordination making demands on the control function. For this to occur a link is, of course, necessary between the control and coordination functions. The final component of the control function, monitoring, arises from the need for the control function to be able to respond to failure of the sub-systems to achieve objectives, and perhaps anticipate that failure. If the sub-systems were viewed as black boxes, characterized only by their inputs and outputs (as seen by the executive component of control), then evaluating or revising objectives is impossible. Appropriate objectives can be set only on the basis of an understanding of the sub-systems which goes beyond the detail of the objectives. When objectives are very specific the sub-systems have less discretion and much of the complexity of implementation is already considered through the executive links. When the generality of sub-system objectives increases and the sub-systems themselves become more complex, maintaining this understanding is more difficult. To support this understanding and to gain a broader picture of the appropriateness of objectives the control function will monitor various aspects of sub-system activity. Of course, not everything is monitored, just those aspects which the control function has learnt are necessary to give it an adequate picture of the sub-systems. However, in general, the more complex the sub-system the greater the demand to maintain an adequate picture. To illustrate this monitoring activity we can use a decentralized private corporation which sets its divisions a profit target of, say, 20 per cent. on capital employed. Head office may not be at all interested in the particular activities its divisions follow to achieve the 20 per cent. returns, i.e. the divisions (sub-systems) have a large degree of autonomy. Suppose that one year a division failed to reach its target. One response may be to sack its manager, and cases like this can indeed be found. However, the failure may have occurred for reasons which the division could not be expected to take account of. Perhaps the increased cost of energy made it impossible for that year to achieve the 20 per cent. return. Equally, another division which held

large reserves of energy should, perhaps, be expected to make a 30 per cent. rather than a 20 per cent. return for the year. The head office will only know these things if it has more information than just the return on capital for each division. A common way to collect this information in real cases is through a financial audit, looking at the way money is used in the division. Thus flows of money are monitored and these enable head office to apply a particular type of model to form a picture of its sub-systems. These monitoring activities do not themselves restrict the discretion of the sub-systems. Rather, they provide the basis for effective use of the executive component of control. Taking these three components together it can be seen that the nature of the demands on the control function can change as the discretion exercised by a system level increases. In cases where sub-systems have general objectives the character of control is determined by the need to monitor and deal with exceptions arising from the coordination process. As more discretion is exercised (and sub-system objectives become more detailed) the character moves towards an executive nature. If the components of control capacity are insufficient then the system will be unable to set and review objectives to sub-systems, and the directions the system follows will no longer follow from policy decisions as intended. There will be a tendency for the system to degenerate into separate systems. Too much control capacity may imply a waste of resources or a distortion of system behaviour compared with the intentions of the policy function. The sub-systems will be overcontrolled and may lose some of the discretion implied in their objectives. Finally, the implementation function is considered. This is, of course, simply the set of sub-systems. As increased discretion is exercised at a level, more specific objectives are set and the possibility for the sub-systems to respond to the environment is reduced, in which case they themselves need to have less capacity. If sub-system capacity is insufficient, however, ineffectiveness may result. As noted above, distortions may occur in system behaviour, such that the sub-system loses some of its intended discretion to the level above. Finally, an overcapacity here, especially if combined with a deficit in control capacity, may lead to the sub-systems taking more discretion than intended. The discussion of balance has now covered all the five functions. The relationship between the discretion exercised at a level and functional demands has been explored. The point at which each function is at the appropriate capacity or in balance with discretion exercised has not been directly addressed, although it is clear from the logic used that such a point must exist. The criterion of internal balance is satisfied when this balance occurs at each system level. However, although the criteria relate to a 'point of balance' in understanding and applying the criteria, the use of the dynamic relationship presented here (i.e. how does a change in the discretion exercised influence functional demands) is more useful. In fact what has been referred to as internal balance is a sufficient condition for effectiveness. It contains within it the condition of overall balance. The need for an appropriate perception of the environment overall is satisfied

when the intelligence capacity at every level is adequate to support the discretion exercised. The need to respond is satisfied by having an implementation function of appropriate capacity. When these conditions are not satisfied the system is not effective and dysfunctions will occur. If a capacity exists at more than the requisite level, resources will be wasted. The opposite case can lead to unresponsiveness to relevant environmental change or the system may degenerate from being a single system. These effects all have different consequences, especially in the shorter term. In the longer term each may threaten the survival of the system. The application of the effectiveness criteria allows one to identify when such dysfunctions are occurring in the program context and to point to changes (in the language of the model) which should lead to effectiveness. 4.3 Organizational strategies-generation and assessment

The criteria governing effectiveness have now been introduced and we go on to discuss how they can be used. Thus the discussion moves from describing concepts to describing a process. In this process one should move from the description in systemic terms of participating institutions as they exist to the generation and assessment of new designs for program management. Because many of the conditions governing appropriate solutions in a particular setting are necessarily excluded from the model description, the model itself cannot generate such solutions. Instead, it could be viewed as a kind of filter which excludes some possible designs as ineffective but still passes through others which may be inappropriate for the setting. These will be excluded by a second filter represented by the policy maker who is familiar with the setting. While the situation in reality is less simple, this way of presenting it does serve to focus attention on how the criteria of effectiveness can be used as a filter, or, put slightly differently, how statements can be made on the degree to which the system formed by the institutions involved in the program management is balanced with the complexity of the environment defined by program objectives. It is worth reiterating, although it should now be clear, that the criteria of balance cannot imply measurement and comparison of numbers. There is no simple measure available for the amount of discretion exercised which might be compared with a set of other numbers representing functional capacities of each type. Although such a simple procedure has some attractions as the goal of a diagnostic approach to program management, its very simplicity against the observable complexity of real situations suggests that it is not an appropriate aim. Certainly we would not, here, wish to suggest that this simple procedure is available. Instead, the criteria are applied in two somewhat different stages, neither as neat but both more convincing than using simple measures. The first stage does not address at all the question of whether the overall response is appropriate. Instead it looks at the system as it currently operates

and looks for obvious dysfunctions. The elimination of these will not necessarily result in an effective system, but may bring that operation nearer to what policy makers expect it to do or think it is doing. It is easy to see this process with respect to linkages. Perhaps institutional resources do exist but are not linked in a way that they can add to the capacity of the system. A perhaps familiar example of this is a potential intelligence capacity which has no links to a policy function, or two different units which are both contributing to the same functional capacity but need to communicate with one another to enhance that capacity. It may also be that gaps are found for some functions at some levels which become apparent in the hierarchic logic of the model but are not apparent in hierarchies as they are more conventionally described. No rigorous procedures can be set for obsening these dysfunctions. These observations are the result of a more or less structured examination of the system description with the criterion of balance in mind. If it is a difficult process to define, it will certainly not be one that is of an unfamiliar type. It must be emphasized that although many dysfunctions might be identified as a result of this stage of diagnosis, correcting these will not necessarily lead to an effective system for program management. Complexity arising from program objectives will not yet have been considered. The term management challenges has been used to capture the idea of new environmental complexities arising out of program objectives. The second stage of using the criteria involves looking at particular system responses to that complexitv. These challenges - always have imdications for the environmental complexity faced at some system level and, consequently, on the functional demand at that level. Plausibly, the increase in discretion exercised may be mainly at the general system ievel or mainly within the program system. It must be remembered that environmental complexity relevant to a level is just a consequence of the nature of policy decisions taken at that level, and does not necessarily imply the appropriate level of functional support. It is only when the environmental complexities forming the management challenges are perceived somewhere in the system and where the functional support at each level supports the discretion that is exercised that the criteria are satisfied. The effectiveness criterion can in any case be applied only in somewhat broad terms, but it is obvious that the more precise the system description and understanding of the challenges then the greater the precision results in their application. In essence what is done is to look for functional capacities contained in levels addressing specific aspects of complexity contained in the challenges. To this search is added the general understanding derived above of how functional demands change with discretion exercised. The result is an impression of how response balances with changes in discretion. This comparison is not something which is done only after the transformation process but can be in itself a step in the iterative process of transformation. In this way an initial crude comparison can be refined. The essentially non-linear process of transformation and assessment effectiveness

is once again emphasized. At the end of the process areas will have been identified where either no response has occurred or the response seems to the analyst or policy maker to be clearly insufficient. The concern is not to detect or measure small imbalances which always occur in the system and which are (only to occur generally eliminated through a normal- adaptation elsewhere because of environmental change); it is to identifv serious areas of - , mismatch where learning would be slow and unduly expensive. The result of this assessment of effectiveness has to be transmitted to the policy maker. This requires a translation of imbalances detected from the language of the model to a language which is readily understandable to policy makers. Sometimes this translation may be quite straightforward, as would be the case, for example, if a link is missing between two functional capacities when those capacities are readily identifiable institutions. At other times it may be harder to capture in the conventional language in which institutions are described some particular type of imbalance. The issue is an important one, because unless the diagnosis is well understood by a policy maker it is less useful as a basis to generate new suggestions for program management. It is possible from a consideration of balance to go beyond a diagnostic statement to the generation of effective organizational strategies for program management. In the language of the model, many ways can be found to modify the system to achieve this balance. Two somewhat distinguishable approaches are either to suggest changes to the way discretion is distributed through the system so that the functional demands at each level more nearly correspond with what currently occurs. Alternatively, the distribution of discretion may be left as it is, but the need for new functional capacities is suggested. Of course, any mix of these approaches is possible, and ultimately each is designed to achieve the same end-balance. While in principle many such strategies could be generated, very likely some of them while satisfying the first filter (effectiveness) would not pass the second filter of appropriateness and feasibility as understood by the policy maker. However, this simple picture of the analyst with his model generating many possible strategies, most of which are rejected by the policy maker, is unlikely to occur. This is because for the interaction between the policy maker and analyst to occur these possible strategies have to be translated or made accessible to the policy maker. This discipline imposed by translation, requiring some broad statement of how the strategy might be implemented in institutional terms, may of itself act as a filter. Of course, it requires some understanding by the analyst of what will be appropriate for the setting and so blurs the clear distinction so far set up between the analyst and policy maker roles. During the process of constructing the model, the transformation process, the analyst will learn a great deal about the range of organizational strategies which are appropriate in the context of the traditions and values of the program setting. In fact, in the case where the analysis is carried out by researchers in their home settings, the need for a clearly definable stage when appropriate

strategies are selected from a larger set of effective ones may be somewhat redundant. Put more simply, for those who are intimate with the values and traditions of the program setting the set of organizational solutions which are inappropriate for the setting may be immediately obvious. For the analyst undertaking research in a foreign setting, by the time the transformation and analysis itself have been camed out, the analyst will have gained a rather 'gut-level' understanding of the characteristics of organizational strategies which will be appropriate. That is not to say there is no point in purposefully examining the full range of effective organizational strategies; this is a useful exercise to stretch the imagination of those seeking to generate solutions. However, the application of the criteria in this process is more subtle than that suggested by the logic suggested earlier. The considerations which relate to appropriate strategies, i.e. which satisfy the conditions of the policy makers of what is appropriate to the setting, is somewhat beyond the scope of this chapter and to some extent outside the scope of the book. Nevertheless, the types of issue involved are partly illustrated by the case studies and discussed further in the final chapter. They revolve primarily around the way discretion is distributed, i.e. the levels at which particular types of decisions are made and types of objective are set to sub-systems, and the nature of the mechanisms employed to influence institutional actors important to the achievement of program objectives. When the policy maker receives from the analyst just the statement of a diagnosis, then the policy maker may suggest new solutions bearing in mind these considerations. Hence the process of assessing potential solutions will have started at a different point; the suggested solution will presumably be appropriate'but it requires translating into the model language to test for effectiveness. This process may go through several cycles and the starting point is not important. Ultimately as a result of iterations, solutions which are effective, appropriate to the setting, and feasible to implement should appear. If this convergence does not appear to be happening it may be that the objectives of the program are beyond the organizational resources of the setting. From identifying which aspects of environmental complexity are not able to be managed effectively, suitable ways for modifying program objectives can be suggested. Thus the model can address system malfunctions arising not only from inappropriate organization but also from inappropriate objectives given the resources of the setting.

CHAPTER 5

An Approach to Eflectiveness Purposes, concepts, and processes for studying the organizational dimension of program management have already been discussed. Complex development programs were related to systems concerned with the management and implementation of objectives in uncertain environments. Both system and environment are abstract representations of institutional, social, political, cultural, and economic aspects of concrete settings where a program is carried out. The systemic language is the instrument to make possible organizational analysis. Because the concern of this book is complex programs in any setting, the approach needs to be holistic. The challenge is to develop a useful support to policy making, provided the abstraction does not devalue the richness of the real situation. If this is achieved, abstraction will permit useful operations, otherwise not possible, to deal with the sheer complexity of reality. As in mathematical transformations, retransfoming to the common language after the operations have been done permits the perception of new solutions to organizational problems. Because the mode of the previous chapters was mainly analytical, implying with that a stepwise unfolding of concepts and processes, simplifications were necessary. This chapter comes back to the same concepts for studying organizations, however now with a synthetic viewpoint. This is a necessary step to capture the richness of the theoretical framework that supports our understanding of organizational behaviour. Certainly this implies a level of abstraction which might make the chapter more interesting for organizational scientists than for practitioners. The theoretical background of the framework is cybernetics applied to management. In particular Beer's work has been fundamental in its development (Beer, 1972, 1979). 5.1 Systems approach and program management

Program characteristics Programs are set up to achieve certain objectives in a given time frame. Programs are goal oriented. Thus, developing a characterization of program

objectives is central to the methodology: Programs or organisational goals are manifest statements describing the specific state a receiving system (i.e. environment) should obtain by a specified time. Goals facilitate two functions of organisations or systems: evaluation of program effectiveness relative to receiving systems and control over system behaviour. In order to provide such facilitation goals must exhibit four characteristics, goals must: 1. be manifest statements. 2. be specific enough to permit objective interpretation. 3. focus on the receiving system, and 4. specify a time dimension. Each characteristic is necessary for the existence of a goal. (Morasky, 1977) These characteristics of program objectives or goals, however useful in the context of our framework, are more a reference for analytical purposes than necessary conditions to define a program. In fact, for a given program the problem might be to elucidate the underlying operational objectives. For the purposes of the conceptual framework these characteristics are interpreted as follows: 1. An objective must be a manifest statement. Objectives are the result of the decision process. This implies that at a certain organizational level a problem has been structured and that a particular decision has been taken reducing the possible alternatives to just one or a few. 2. Objectives must be specific enough. This is a subjective proposition relative to a decision level. At high decision levels specificity does not necessarily mean a quantitative definition of objectives but a degree of precision in the language that permits its unfolding in more precise sub-objectives. Thus, complexity is gradually removed by following a hierarchical logic. Objectives should be specific enough to define reference for organizational behaviour. 3. Objectives are focused on the receiving system, i.e. systems environment. Objectives are meaningful if they imply environmental changes. It is the impact that a system has on its environment and not, as an end, in its internal processes that makes sense in program implementation. There is an iteration between the system and its relevant environment. The system objectives define its environment, which in its turn shapes the objectives, according to the complexity natural to that environment. 4. Objectives are framed by a time dimension. This is a fundamental dimension to measure the environmental complexity that the system has to deal with in the process of objectives implementation. The system's perfomance is related to a time frame. Certainly to try to achieve the same result at two different times is to talk about two different objectives. Unless there are temporal benchmarks, coordination and integration of organizational resources do not have a measurement reference.

This characterization of program objectives permits one to draw many useful conclusions. They will become apparent along with the exposition. However, in particular, it is important to understand one of them from the beginning. This conclusion has important logical implications. There is a natural process by which objectives are unfolded from general statements (though specific for the relevant decision level) to more precise objectives, until they match well-defined operational capabilities. For example, a regional program might go from the general definitions of its objectives, like 'the development of the hydropower and water resources of the region', to more specific objectives, like 'construction in six months of the part A of dam X' or 'afforestation of area Y during the next summer period'. For large programs, whatever the level of generality (or detail) of the objectives, there is one invariant; their realization faces a huge environmental uncertainty. Only in trivial situations can we think of deterministic tasks. This consideration has important consequences upon organizational analysis. For the time being what is useful to keep in mind is that programs can be represented by a hierarchy of objectives, each level addressing large environmental uncertainties. The program system

In general, complex programs involve many enterprises. Only by exception is program implementation the result of one institution. No doubt there are many possible organizational strategies; one extreme is the creation of an autonomous institution with full responsibility for program implementation. Another possible strategy is a broad use of institutional resources and expertise, so that the program is implemented by many institutions. In theory, the latter arrangement allows a higher specialization and more effective use of resources. In practice, this implies a need for a large interinstitutional information-processing - capacity. . - It is common in our societies that the multi-institutional arrangement is, de facto, the strategy to cope with program implementation. Thus a program is characterized by a set of institutions (or institutional - parts) interconnected by relationships emerging from the recognition of common objectives. This is a system by definition. When studying systems a distinction is made between system objectives and purposes. While objectives are formally defined tasks that the system should accomplish, the subjective interpretation of these objectives defines the purposes of the system. The nature of the system is a consequence of objectives; however, its boundaries are a function of the specific purposes that individuals, e.g. policy makers or analysts, may ascribe to that system. Systems do not have purposes on their own; these are a property of the 'observers' (Maturana and Varela, 1975).'Observer' in this context is any person who may, or may not, be part of the system, perceiving the system from his or her particular viewpoints. For most of this book the distinction between objectives and purposes is not made apparent, implying that the

purposes of the observer, e.g. policy maker, overlap with program objectives. The observer defines a purpose for the system and with that its boundaries. Unless different observers agree on system purposes they might be talking about very different systems. The understanding of this distinction is fundamental to make useful organizational analysis. Once agreement is reached on system purposes-a step related to the policy process-the boundaries of the system can be logically deduced. Program objectives are statements that define the nature of the system, e.g. regional, industrial, and technological development. Different observers will see these objectives from different perspectives. For example, if the program is regional, people in central government might attach to this objective the purpose of ecohomical development; at the same time local government in the region might see in this program the purpose of environmental quality. For each situation the system boundaries are different. Implicit in this way of perceiving systems is the fact that to do organizational analysis it is not enough to know program objectives. To structure the problem the analyst has to find out the purposes that particular policy makers ascribe to the program. There are many possibilities to perceive the sheer complexity that proliferates from a particular definition of objectives. The particular relationships that are pointed out by the defined purposes for the program specify the system boundaries. However, even after this filtering, the recognition of the relevant relationships defining the system organization is a hard task that demands a model. This is a major concern of this section. Studying the intersection of purposes with objectives, and thus defining the organizational domain, is a first step for organizational analysis. Under the assumptions of well-defined program objectives and the possibility of finding out system purposes as seen by policy makers, it is possible to define the program system. The behaviour of this system has as its reference the program objectives, and its boundaries are shaped by its purposes as seen by particular policy makers.

System environment Implicit in the definition of boundaries is the fact that a system operates in a wider context or environment-the universe in which we draw the boundaries (Figure 5.1). For program systems this context is the concrete setting in which the program is implemented. Of this environment, only a part is relevant to the system. All the states outside the control of the system, yet relevant to the objectives achievement, constitute the relevant environment (Figure 5.2). Figure 5.2 indicates that the system should have a capacity to respond to those relevant environmental situations. To different degrees environmental states are shaping system behaviour. If the system can fulfil its objectives without paying attention to particular states of the environment, these are not relevant to the system. This criterion needs much more clarification to reflect the nature of the balance between the system and the environment. More

Environment

System

Figure 5.1. A system in its environment

complex objectives certainly imply that the system has to deal with more environmental states. The problem is one of responding to the system's environment to fulfil the objectives. One of the most important characteristics of the environment is its intrinsic complexity. The number and diversity of states and, fundamentally, their interdependencies udolding along with time account for this complexity. The structure of program activities cannot be deterministically designed. New situations will always emerge that were not considered at the time that the structure was defined. This uncertainty part of the complexity natural to the system's environment has fundamental organizational implications. In particular, it is responsible, as we shall see later, for the organizational structure of the program system. Environmental complexity makes it necessary for a system to recognize the environment through a model. The number of interdependencies between environmental elements and the unfolding of different environmental states along time is such that the system can perceive only some of them. Together they define the model that the system has of its environment (Figure 5.3). No doubt better models of the complex environment facilitzte the fulfil-

Figure 5.2. System/environment interaction

Environment

Figure 5.3. Model of the environment ment of objectives. Thus, the understanding of these models is another important step towards organizational analysis. This understanding as well as the program characteristics should support the efforts of systems analysts in struo turing models of the environmental complexity buffeting program implementation. These are the 'logically deduced models' explained in Chap ter 3. The latter models help to define the environmental dimensions that should be responded to by the program system if it wants to fulfil its objectives (at a given level of performance).

Unfolding program objectives The program system was defined as a set of institutions or institutional parts whose sole identifiable concern is the achievement of program objectives. The transition from general objectives to more disaggregated objectives is a necessary condition to make objectives manageable. Were this not the situation, the implication would be that all the activities related to objectives implementation could be precisely defined, or defined with no remaining uncertainty in one step. This is only possible for trivial objectives and not for complex programs. More realistically, we find that the logic of system structure corresponds to the logic of elaboration of program objectives into subobjectives, managed by sub-systems that also face large environmental complexity, and so on. This logic implies a recognition of the fact that the implementation of complex objectives requires the creation of relatively autonomous subsystems concerned with the implementation of more limited tasks, though complex enough to make further clarifications of these tasks into sub-tasks necessary. Independent of the generality of the task, the invariant is that each one of them is implemented in interaction with a far more complex relevant environment. Underlying this argument is a nesting structural logic in which a system is embedding sub-systems and the sub-systems containing sub-subsystems, and so on (Figure 5.4). The references for behaviour at each level are given by the objectives as provided by the larger system.

Figure 5.4. Structure of a system

The degree to which these objectives are elaborated before they are handed down to the lower systemic levels has important organizational and behavioural consequences. The details of this process are the subject of the final section of this chapter. For the time being the point is to capture the logic of objectives unfolding. For instance, if the program system elaborates sub-objectives in great detail before it hands them down to the sub-systems it implies that the managerial strategy is to emphasize the response to environmental complexity at the program system level. This centralized strategy requires at this higher managerial level a capacity commensurate both with the degree of sub-objectives elaboration and the control implications of this definition of objectives. This strategy also has implications upon the sub-systems role in responding to the environmental complexity. Two aspects become apparent in this analysis. First, there is a recognition that the response to the complexity of the environment is distributed between different systemic levels. Second, there is a recognition that this distribution is an expression of the organizational strategy to cope with its environment. In theory the response as a function of the degree objectives is elaborated before it is handed down to the lower systemic levels. That is, the relevant environment to each systemic level is a function of objectives unfolding (see Figure 5.5). The extreme strategy that does not give any autonomy to the sub-systems implies that all the response to the challenges is at the program system level. This extreme either means that the sub-system tasks can be completely determinate or that any exception to the rules, norms, and procedures of the sub-system objectives should be reported and solved by the program management level. As said before, this is only possible for trivial situations. The other extreme in which the response to environmental uncertainty is

System

Sub-systems

Environment

Figure 5.5. Distribution of the system response to the

environment completely in the hands of the sub-systems is a denial to the very existence of the program system. In Figure 5.5 the shadowed areas represent the sub-system (theoretical) areas of autonomy. In real behaviour we might find inconsistencies between this clear-cut definition of areas of autonomy and the actual discretion that each level exercises. To sum up, the implementation of program objectives implies their unfolding into sub-objectives, and this process has the structural implication of systems containing sub-systems, all of them confronting the same problem-the response to complex environments. Thus, logically, the nature of the system, sub-systems, and so on, is the same; all are confronted with developing an organization capable of responding to unpredictable environmental complexity. If this organization is achieved at each level, the system and its sub-systems are said to be viable. This invariance, if mathematically defined, means that systems have a recursive structure.

Program management; definition of systemic functions Objectives unfolding suggests the need for organizational capacities to struo ture, monitor, and implement sub-objectives. The recursive structure of systems suggests that these capacities are necessary at each level in which unfolding occurs. These logical statements support a further development of an organizational model for program management. The need for organizational capacity to respond to environmental complexity gives way to a set of five functions that are both necessary and sufficient for program management (Beer, 1979). Because the program is structured so that each sub-system corresponds to a sub-objective (or set of sub-objectives) whose implementation is confronted by environmental complexity we conclude that each sub-system also exhibits these five functions. Thus each level within the program system, from the most macro level, i.e. the system itself, to the lowest level, is functionally defined by the same set of five functions.

These five functions, i.e. policy, intelligence, control, coordination, and implementation, have already been presented and defined in this book. However, the point here is to clarify the logic from which they emerged. That these functions are necessary is not difficult to prove; however, that they are also sufficient can only be proved by falsifying the contention. If a reader has the impression that any functional task is not covered by the five functions, the reason for this may be a misinterpretation of function definition. To diminish this danger the derivation of the functions has been approached in two rather different styles-here and in Chapter 2. In what follows the five functions are defined giving emphasis to information linkages between them. The policy function is necessary to exercise the discretion of choosing between alternative strategies in program development. Choice implies the possibility to select among multiple possibilities. It has already been pointed out that the choice of structural strategies for program implementation, a consequence of the way objectives are unfolded, is an important instance of the use of this discretion. However, at a more general level, these strategies are embraced by the selection of alternatives supporting present- or future-oriented activities. If the former is the strategy it means that the allocation of resources will mainly support on-going activities, i.e. activities of the already existing sub-systems. If the latter is the dominant strategy new undertakings will be the hallmark of this organization, i.e. the policy function is giving priority to the overall program environment and not to the environments of the on-going systems. Of course, the policy function ideally should aim for a balanced strategy that, at the same time as giving a sound basis for on-going activities, allocates resources which permits a program to adapt to changing environmental conditions. It is very likely that the 'program' itself emerged as one of these new undertakings. The policy function in this role is supported by information flows structured by the intelligence and control functions. The intelligence function of the program system is to filter environmental information and structure problems relevant to the overall program. The control function is to filter internal information (of the sub-systems) and influence the allocation of resources so that sub-systems can respond effectively to their own environments (which are parts of the overall environment). The policy function, independent of the individual policy makers and their personal interactions with their own relevant environments, relies on these filters to define organizational strategies. It seems important to highlight this distinction between personal and organizational environments because normally we confuse them. Of course, individual environments do influence the behaviour of policy makers, but this is meaningful only as long as they recognize the systems environment (through the intelligence function) and the internal environment of the program (through the control function). The policy function is necessary in each system level simply because at each level it is necessary to select among alternative strategies to fulfil the

particular level of objectives. An interesting dimension with implications in organizational analysis is the discretion that is exercised by the policy function of each system level. The intelligence function generates and examines alternative development strategies for the relevant system level as a whole. The intelligence function of the program system looks at the overall relevant environment, and so do the intelligence functions of each sub-system for their own relevant environments. Lang-term viability is the concern of this function. Structurally all activities connecting the program system to its environment will fall into this function. With this aim it is, on a continuous basis, restructuring the model that the system has of its environment. Integration of the activities fulfilling this role is necessary for a successful program implementation. Alternatives for long-term development should relate to the internal capabilities of the system. This implies that the intelligence function in doing its task should get information on the internal state of the system. Thus, a balance between the intelligence and control functions is necessary. In whatever way this function is structured, i.e. whatever is the organizational form, independent of its effectiveness, the outputs of this function are a necessary platform to support the policy process in its selection of development alternatives. Thus, the intelligence function is also responsible for the particular courses of action that the policy function decides. The control or operational management function is a necessary function to keep the unity of the system along time. It is not enough to have sub-objectives for sub-systems to be sure that their behaviour will be defined by those references. Moreover, sub-objectives are not defined once and for all. They have to be adjusted and monitored along with practical experience. Thus, the control function focuses on the internal system environment, by monitoring and controlling sub-system behaviour against objectives. It is also concerned with managing sub-systems interactions and with the allocation of resources. This function is the bond between the parts, i.e. sub-systems, and the whole, i.e. the program system. In this context it is responsible for information necessary in program policy processes. The way it hands down to the sub-systems the decided sub-objectivesdefines de facto the distribution of the response between system levels to the environmental complexity. Suppose the policy function spells out sub-objectives with great detail and that, at the same time, the control function does not exercise control over the actual implementation. If this is the situation there is no way to stop the implementation function doing what it wants, independent of the program system's policy decisions. Equally, very general policies (but with a control function commanding details) will, de facto, constrain the sub-systems' degrees of freedom. Management of sub-system interactions is the very substance of a systemic management. A system that makes use of specialized resources and finds out

-

opportunities for intrasystemic operations should get an output higher than the simple addition of sub-system independent behaviours. However, the degree to which sharing resources actually happens depends on the capacity of the control function to process information and respond to conflicting situations. The same descriution of the control function audies .. for the interaction between any two consecutive system levels. In understanding program management, this fundamental invariant is important. Implementation is the fourth of the five necessary and suficient functions explaining system behaviour. The logic of this function should be apparent if the concept of recursion is understood. This function is carried out at any system level by the sub-systems. Thus, implementation is done by a set of sub-systems, each one of them endowed with a relative autonomy. A degree of autonomy is necessary to make possible the implementation of subobjectives in a complex and uncertain environment. To study this function we need to have clear the level of resolution of the organizational analysis. Either we want to understand its internal organizational structure, in which case sub-systems are 'opened' for

F3 Functions

Program system

Figure 5.6. Level of resolution in organizational analysis; the

concept of black boxes

organizational analysis to study their five functions, or a decision is taken to consider each sub-system as a black box, in which case the analysis is limited to comparing outputs against reference levels or objectives. In any case, sooner or later, we shall arrive at the point at which sub-systems are seen as black boxes (Figure 5.6). For instance, in Figure 5.6 it was decided to do the analysis up to the sub-sub-system level, i.e. the sub-systems were opened for organizational analysis but not their sub-systems. This decision has important practical implications in the nature of the policy advice given by this framework. The coordination function is the last of the functions. Its role is to provide for a direct interaction between sub-systems. Interdependencies between sub-systems is normal to programs. Decisions of one sub-system will affect decisions of other sub-systems. Unless each one knows what is relevant of other sub-system decisions, e.g. their plans to achieve objectives, sub-systems will oscillate. Only by chance could they make use of opportunities. A function to take care of the potential oscillations is necessary. Information transfer is necessary to achieve stable behaviour. In this context this function is aservice to the sub-systems. If it is not there, a large number of exceptions would reach the control function. Besides the overloading that this situation would imply for the control function, the idea of autonomy would fall apart; even small details of the sub-system operations would be under the control function concern. Coordination, like the other functions, is recursive. There is coordination between the systems and there is coordination between the sub-systems of a system as well. It is natural to think that information supporting coordi~ation between sub-systems of a system, at some level of aggregation, will be relevant information for system coordination. This implies that the information flowing at the sub-system level needs to jump to the system level. This is achieved by an information link between the coordination and control functions. Underlying the recursive structure and the five functions of each level a complex information network is operating. Here the general concepts were introduced. Later in this chapter, while referring to the concept of effectiveness, the behavioural implications of this network will become apparent. Decisions on the program; the general system The application of the concepts developed above makes it possible to study the process by which a program is decided. The definition of program objectives is done by the meta-system of the program system. The meta-system is that system in which the program system is embedded. The general system level, discussed in Chapter 3, is thus an instance of a meta-system. This is consistent with the logic that references defining system behaviour are defined outside the system itself.

Decisions on program objectives are the result of trade-offs between these particular objectives and many others affecting other areas of concern. The set of institutions or institutional parts structuring, deciding, and controlling program objectives define the meta-system. The program, any other activity under the control of the meta-system, and the meta-system itself define the 'general system'. Of course, for the purposes of this analysis only the meta-system and the program system of our concern are relevant. Moreover, only the parts of the policy, intelligence, and control functions of the general system that are considering the program system are of interest, i.e. the functional capacity of the general system involved with the program system. Functional capacity and mechanisms used by the meta-system to structure and control program objectives have fundamental implications about the effectiveness of the program system. Decisions in areas apparently unrelated to the program objectives can constrain dramatically the response capacity of the program system to environmental complexity. If this is the case, the general system is, de facto, responding to environmental complexity to a degree that might not be apparent in the definition of objectives. The overall conditions of the setting, values, social objectives, and so on, define the nature of possible organizational solutions for program management. Thus arises the relevance of studying the meta-system.

Institutions and organizations So far a systemic logic has been developed to study program management. This logic permits the transformation of actual institutions into abstract systems. Organizational assessment and design is possible in this abstract domain, which is the concern of Section 5.3. However, at this point, the problem is to reinforce the understanding of this transformation. Only by exception is a program system completely defined by one institution (Espejo, 1976). Even in settings where explicit decisions have been taken in this direction, many other institutions, to varying degrees, will see in the program objectives particular objectives for themselves. It might be easier to focus the attention in only one particular institution. However, the usefulness of this framework is its capacity to capture alternative multi-institutional set-ups, in response to whatever purposes are attached to the program system. The most general situation suggests that program objectives are implemented by the consolidation of multi-institutional resources (sharing resources-in particular, specialized resources); however, the effectiveness of this integration is a function of the available managerial capacity. Assuming that there is functional capacity the multi-institutional strategy will make its way as a matter of fact. Thus, the problem is to know how to make this situation more effective and not to stick to an arbitrary definition of institutional forms, i.e. the strength of the concept of organization as opposed to institution. For the purposes of organizational analysis institutions or institutional parts

Figure 5.7. Institutions and organizations that are fully concerned with program objectives, i.e. their objectives are not trade-offs between other external objectives, constitute the already defined 'program system' whose 'organization' follows the logic and invariants pointed out in previous section. The transformation of form into function makes it possible to study organizations instead of institutions. Problems that are not perceived with an institutional logic might be apparent if the organizational logic is used. For instance, the necessary integration and coordination of organizational forms, i.e. institutions, which are parts of the same function at the same system level become more apparent. Also, this logic might add to the understanding of behavioural conflicts in particular institutional set-ups. For example, a particular institution which is recognized as part of the program system might also be part of another system (Figure 5.7). Of course, although this adds to the problems of management, at least it is helpful to understand why conflicts emerge or behaviour does not follow expectations. 5.2 Variety and the law of requisite variety The organizational response to environmental complexity has been a central part of the theoretical presentation. Are there any invariants in the management of complexity? In cybernetic terms the measure of complexity is 'variety' (Ashby, 1964). Variety is defined as the number of possible states of a particular situation. Natural to any situation is the proliferation of variety. Even in simple situations variety unfolds along time into very large numbers. For example (Beer, 1979), a situation with eight inputs and one output (Figure 5.8), each one of them having only two possible states, has a variety of 2256.This figure is large enough to make it impractical to write it in a non-exponential manner.

+ $. I S f S

Inputs

I

oulpul

Situation

t

J( J(

28 = 2 5 6

I

Variety ofsituation = 2'"

2

Figyre 5.8. Proliferation of variety The logic of this calculation has been developed by Beer, and its general formulation is: where

VS = vow VS = variety of situation VO= variety of output (in the example it was two) VI = variety of input (in the example there are 256 possible configurations of the eight inputs)

However, we can find ways of stopping the proliferation of variety. For instance, if the above situation is divided into two parts with four inputs each, the result is a gigantic reduction in the number of possible states of that system (Figure 5.9). For instance, divisionalization and functionalization are some of the mechanisms used by management to cope with variety proliferation. From a cybernetic point of view the problem of management is precisely the control of complexity. If management wants to control a situation under its concern it has to respond to each relevant state of that situation. For example, if one of these states is 'In two days plant X will not have a particular raw material', management either gets the raw material, i.e. responds to the state, or faces the situation of having the plant out of work, i.e. the situation is out of control. However, there is more than one way to respond to this situation. It is the way in which management copes with these relevant states that in the extreme defines good from bad management. The important underlying invariance to all these situations is the law of requisite variety (Ashby's law): 'Only variety can absorb variety.' The law points to the fact that the nature of our response to external situations is a function of our internal complexity. If we develop more internal

2

2

I

Variety of situations =

+

2'6 216

Figure 5.9. Reduction of variety

complexity we can cope with a more complex environment and therefore fulfil more complex tasks. A different way of saying the same thing is to conclude that the varieties of the environment and the system always match one to the other. There is an apparent contradiction between the already stated fact that the complexity of the environment is much larger than that of the system and this last statement. However, what the latter says is that the law of requisite variety will assert itself in any case; thus the number of possible states of the environment (V,) that will be matched by the system is defined by the number of possible states of the system (Vs): Because this matching always happens the problem is to pay attention to the ways in which environmental variety is reduced and the ways in which system complexity is increased. For example, it does not help to design a very simple planning system, i.e. a way of reducing environmental complexity, just because many exceptions will certainly emerge to the degree of making useless this managerial tool. From the point of view of program management several conclusions can be drawn from this law: 1. The complexity of the organizational response should match the complexity of the environment. 2. The complexity of the environment is a function of objective definition. Objectives should be specific enough so that a level of performance is implicit in their definition. The complexity of the organizational response should match the environmental complexity as defined by that level of performance. 3. There are many possible ways to build up the necessary organizational complexity, some of them more effective than others. This indicates the need for criteria of effectiveness. However, in general, we can say that if the system fails in building up the necessary complexity then the environmental complexity will, de facto, be responded to at a lower level of performance, e.g. an industrial plant will be ready in five instead of three years, the initial reference of performance. 4. From the organizationaldimension the substance of the decision process is in deciding the ways or strategies to reduce or filter the environmental complexity and increase or amplify the organizational complexity. The design of 'filters' and 'amplifiers' is in the core of this organizational dimension. There are multiple means to filter environmental variety. The design of organizational structures is one of them, and in particular the logic of objectives unfolding as developed before is a powerful one. It defines the areas of relevant environmental complexity. The model of the environment supporting this decision process is in itself a filter. There are also structural mechanisms to amplify organizational complexity. For instance, emphasis in coordination as an alternative to self-contained tasks permits, if that functional capacity is built up, a better use of specialized

resources and therefore a more complex response to environmental complexity. Later in this book, while presenting the case studies, we shall refer to 'mechanisms' supporting program implementation. These mechanisms are the specific ways in which a setting either filters environmental complexity or amplifies management capacity. Their assessment is facilitated by this theoretical framework. They should be seen in the light of objectives and the complexity of the environment that they intend to match. The analysis of variety and the law of requisite variety has been focused in the system/environmentalbalance. A second dimension in which this analysis is also useful is the internal balance of system functions, in particular between the control and implementation functions. This is a situation in which, by nature, the variety of implementation (V,) is much higher than that of the control function (V3,yet both varieties should match if management wants to control implementation: V I=

v,

The analysis of this variety matching is done in the next section. It is noteworthy that it will stand only if the parts recognize the whole in the context of general objectives. 5.3 Effectiveness and consistency

Decisions about program objectives and their unfolding are not as clear-cut as they might have appeared earlier in this chapter. The developed logic is helpful to grasp the nature of the problem, in particular systems invariances. However, if all this is going to be useful we have to consider the characteristics of the different settings in which this logic might be applied. Objectives might be clearly defined yet the actual references supporting behaviour might be the result of many other factors not so clearly stated. If this is the situation a result of organizational analysis could be the elucidation of these references, i.e. real objectives. Were this the problem, the analysis would be focused in particular institutions and its output would be an explanation of dysfunctions between stated objectives and real behaviour. In some other situations objectives might not be explicitly defined. Still the analysis could be directed towards their elucidation once policy makers make clear the areas for which they want organizational advice, i.e. once they define the purposes of a yet-unstructured system that nevertheless might be, in one way or another, already in operation. Still another possibility is a situation in which the decision on a particular objective is in process and the problem is to find our alternative organizational strategies to cope with it. Organizational design is implicit in this situation. Whatever the situation is, and of course there might be many other possibilities, organizational analysis has meaning only if it is related to relevant observers of the system or potential system. Because of the

proliferation of variety, there are so many ways to look at a system that unless we define a reference, i.e. a particular observer, the solution of the problem is impossible. Organizational analysis, in the same way as planning, should be on a continuous process. The environment unfolds the richness of its variety along time. The program system should adapt its organizational response as new relevant states emerge. The definition of objectives, discretion of system levels, and mechanisms to filter and amplify variety should be assessed on a permanent basis. Organizational effectiveness is a function of learning and adaptation, and both are on-going processes. Consistent with this view, the method for organizational analysis that is developed in what follows can be used as a one-off policy analysis tool or on a continuous basis. The approach is considered to be useful both for organizational design and assessment. A final methodological note before moving into the analysis of organizational effectiveness. The approach is more synthetic than analytic. With the sole purpose of making understanding easier the approach has been structured in diierent parts. However, these parts are not necessarily separable in the mind of the analyst while applying the approach. These parts have a

Effectivenessof system /environment buknce belween system levels

@

Effecliveness ofthe internal functional balance

Figure 5.10. Study of organizational effectiveness

meaning only in the context of the whole, and thus there is not much meaning in the independent application of any of them. Three parts are developed in what follows: the organizational consistency between system levels, the internal consistency of a system level, and the nature of the response of each system level to the relevant environment. The three together provide criteria to study organizational effectiveness (Figure 5.10). The outputs of this organizational analysis can be clustered into two groups: (1) strategies to develop organizational complexity consistent with objectives definition and (2) propositions to redefine (or define) program objectives so that they are consistent with the resources and other characteristics of the specific setting. System and environment; analysis of the response to environmentalcomplexity Does the complexity of the program system match the complexity of the environment it seeks to control? Do the sub-systems match their own relevant environmental complexity? How effective are the mechanisms supporting these matchings? The answer to these questions depends on the observer. These answers are relativistic simply because of the already discussed issue of variety proliferation, and not because the approach is vague. In Figure 5.11 we are introduced to the elements supporting this part of the organizational analysis. A model of the relevant environment is structured in one way or another by the intelligence function of the system. The complexity of the model should be a function of the program objectives. This model makes it possible to evaluate the appropriateness of the objective and gives a reference to study the amplifiers of management variety and filters of environmental variety that have to be built up in the system. The degree to which these mechanisms actually match the environmental complexity, as defined by the measures of performance of program objectives, is a measure of the effectiveness of this system. Amplifiers

Filters

Figure 5.11. Filters and amplifiers of variety

Program system

Sub-systems

Sub-sub-systems

Figure.5.12. Environment confronting each system level

If the model of the relevant environment is not consistent with the level of performance implicit in program objectives, it is likely that mis-matchingswill emerge between actual behaviour and objectives. The complexity of the organizational mechanisms might not be up to the level of environment complexity. Also, it is possible that the model is highly developed yet there are not enough resources to build up complexity. The logic of this organizational analysis is the same for all system levels. However, the environmental models of sub-systems are not parts, like those of a jigsaw, of the model of the system environment. While the latter model is comprehensive and therefore aggregated, the models for sub-systems disaggregate particular parts of the environment. This implies different language levels for these models. The consequence of this is important to understand the role of the intelligence function at different system levels. This analysis of the system-environment interactions points to the already mentioned fact that the response to the environmental complexity is distributed in different system levels (Figure 5.12). The theoretical distribution of the response between system levels is a function of the definition and unfolding of objectives. In practice the distribution will be a result of the interactions between the system levels. The relevance of the intelligence function should be apparent after this discussion. Explicitly or implicitly this function supports the definition of relevant areas for management concern. This part of the organizational analysis has been concerned with the response of the different system levels to the environmental complexity. The reference is given by stated objectives (and sub-objectives). Consistency between system levels It is not enough to find discrepancies between behaviour and stated objectives. The point is to know why they are occurring. For that we have to study the system itself. Organizational functions and the law of requisite variety will be the instruments for this internal analysis. If the aim is to focus study at the level of resolution of the system as a whole, it follows that its implementation function, i.e, sub-systems, is seen as a

black box. It is not necessary to unfold its internal complexity; it is only necessary to see its inputs, outputs, and feedback loops. By studying a system the attention is, de facto, focused on the interaction between two system levels, i.e. the system and its sub-systems. However, it is also important to study in general the consistency between system levels, i.e. more than two levels. If this is done, it is necessary to unfold the complexity of sub-systems, i.e. to study their five functions, in which case the black boxes are two or more levels below the reference system. The latter approach to consistency is particularly useful to study the linkages between the meta-system and the program system. It would not be useful to focus the study at the level of resolution of the general system. The program system would be a black box, pushing the study to higher organizationallevels that are not relevant for program management. However, if the relevant complexity of the general system is unfolded (relevant to the program) the focus is in the interactions of three system levels, i.e. general system, program system, and sub-systems. It is not enough to have discretion to define objectives at an arbitrary level of detail; functional capacity up to that level is necessary as well. The first organizational level at which program objectives are defined is that of the general system, and thus we see the relevance of studying the consistency between system levels. The problem is to elucidate the pattern of distribution of discretion among system levels. For this purpose, it is useful to think in terns of functional capacity. It suggests that attention is given to particular functions as opposed to the more general concept of organizational complexity. This distinction is particularly useful when we refer to the general system, because we are more interested in its functional capacity relevant to the program objectives than in its overall organizational complexity (which is focused in many other alternatives). As an ideal it is suggested that the discretion exercised in defining and unfolding objectives should be matched by functional capacity. The distribution of the response to environmental complexity should be consistent with the distribution of functional capacity. This criterion of effectiveness overlaps with that developed earlier. However, the dimension of functional capacity is new. The distribution of discretion is a major mechanism for system response to its environment. At one extreme we find complete specification of objective parameters and a consequent dismissal of a need for a distinct sub-system level. If so, policy discretion for all activities will have been retained at the system level. As said before, this only applies to trivial situations. The other extreme implies the negation of the system. Thus the distribution of discretion is a matter of degrees. Different aspects influence this distribution. For instance, social values and management traditions might be determinant, limiting to a large degree possible organizational solutions. One criterion to study the discretion appropriate for a system level in relation to a particular environment is derived from the stability and predict-

ability of the environment with which the system level is interacting. The more stable and predictable the system environment, the less discretion is needed and the more specifically objectives may be defined. The more unstable and unpredictable a system environment the more discretion is needed with respect to a particular environment. Thus, the more specifically objectives are defined outside the operating system level, the lower the likelihood of success. For, in this case, the operating system will have fewer alternatives with which to respond to the changing demands made by the environment. Though criteria to decide consistently the distribution of discretion are fundamental, it is equally relevant to study the consistency of the arganizational mechanisms supporting the actual achievement of whatever distribution of discretion is decided. For instance, if the general system defines objectives for the program system implying an integrated management of a set of sub-objectives (corporate management) and the organizational mechanisms supporting its behaviour (of the general system) are, de facto, limiting the degrees of freedom of the sub-objectives(e.g. by setting standards and norms that affect particular sub-objectives), then there will be an inconsistency between the theoretical discretion allocated to the program system and the discretion it can actually exercise. Situations of this nature might imply that the program sub-systems are in fact sub-systems of the general system. If this is so, the management of the program system, even if it has functional capacity, does not have the authority to define an autonomous response to its relevant environment. This mis-matching between functional capacity and actual response hinders the effective use of resources and, therefore, the achievement of program objectives. These considerations are particularly relevant for multi-institutional programs where the possibility to observe these inconsistencies are hindered by the lack of formal, institutional linkages. Consistency analysis in a system level

An important conclusion of the above is that it is not sufficient to define and unfold objectives to actually have a program system and sub-systems. What, then, are the conditions for a program to be a system? In particular it is important to know under which conditions the program is the concern of a system with autonomy. The answer comes from the equations of variety developed in the last section. The system/environment balance has already been considered. The balance between the system and sub-systems, i.e. the control and implementation functions, is the core of this section and one of the most relevant dimensions of the organizational analysis. In the same way the balance between system and environment is related to the specific definition of objectives, the balance between the control and implementation functions is related to the normative distribution of discretion, i.e. unfolding of objectives. Once the normative distribution of discretion is decided there are many

possible ways of achieving the balance between the control and implementation functions. The extremes of centralination and decentralization are non-viable and thus ineffective to achieve objectives. Which are the factors influencing this balance? The degree to which a system level defines objectives has been suggested as a first aspect. For instance, we said that, if the general system defines objectives in great detail, on the one hand it needs functional capacity consistent with that level of definition and on the other it is limiting the environmental demands on the program system, i.e. a relative lower functional capacity is necessary at that level. In particular, it seems to imply that the intelligence and control functions of the general system will need more complexity: the intelligence function because it would be dealing with a more detailed environment and the control function because it would have more parameters to control. However, these conclusions do not capture the complexity of dynamic processes in a system. As the approach should be useful for program management, a dynamic process, a more complex analytical tool, has to be developed. The system-environment interaction has already been studied. Also, while defining functions the necessary linkages between the policy, intelligence, and control functions have been pointed out, so that redefinition of objectives or the definition of new objectives could be possible on a continuous basis. Program objectives are implemented by sub-systems. Independently of the degree these objectives are structured before they are handed down, the sub-system discretion is shaped along time as a result of the dynamic interaction between them and the control function. Control can be achieved in different ways, some of them limiting more than others the degree of autonomy of sub-systems. Independent of this it is assumed that the control function does control and therefore it does provide the actual capacity to integrate sub-system objectives (as defined by the policy function). The assumption is necessary because we cannot take for granted the viability of a system level only on the basis of objectives unfolding. Behaviorally sub-systems might be sub-systems of a higher system level and not of the immediate upper level. However, if they are actually under the control of this upper level the varieties of the control and implementation function should match (see Section 5.2). Yet we know that the implementation function is far more complex than the control function (i.e. implicit in the logic of objectives unfolding). Thus, the problem is one of finding ways to achieve the balance. Unless amplifiers of control variety and filters of implementation variety are designed this is not possible (Figure 5.13). Because of the law of requisite variety, the implementation function, i.e. sub-systems, and its relevant environment have their varieties matched (system/environment balance). Moreover, it was said that the effectiveness of this matching is a function of the sub-system objectives. More complex objectivesimplytheneed to matchmoreenvironmental states; therefore amore

0 Control

Amplif~ers

F~lters

lmplementot'on

Figure 5.13. Amplifiers of management variety and filters of implementation variety

5' Control

Vc

Figure 5.14. ~nvironment-implement&ion and implementation-control balances complex implementation function is necessary. Of course, this has implications in the system (Figure 5.14). The end result of this variety analysis is

v, = v,= v, If sub-objectives were defined so that the implementation function had to match a n environmental complexity V*, but

the implication is that sub-objectives will be achieved with a lower level of performance because the law will assert itself so that

v, = v,

The program system defines the sub-system objectives, and in doing so the relevant environment for sub-systems is determined. Because the complexity of this environment is very large sub-systems are faced with the unfolding of their own objectives as well as devising other filters and amplifiers of variety.

It is implicit in this logic that the variety of the sub-system management function is much lower than the variety of their own implementation functions. To unfold objectives means relying in sub-systems to generate the necessary complexity:

where

V , , = variety of sub-system VMss = variety of management function of sub-system V,,, = variety of sub-sub-systems

The following condition is in general true:

Given these considerations it is now possible to study the processes by which the control and implementation functions match their varieties. The higher the variety of the implementation function, the higher should be the variety of the control function. If all the variety flows through the command channels, i.e. the channels by which objectives are handed down, the autonomy implicit in the way the objectives were unfolded has no meaning. Every single exception in the sub-sub-systems is reported to the control function; thus discretion is none. Certainly this is inconsistent with the intention of allocating discretion to sub-systems. In fact, consistency will happen only if very little variety flows in these channels. Of course, if objectives are defined more precisely more variety should flow in these channels. Yet in any situation this would be a function of the discretion given to sub-systems. If this is so then how does the control function comply with the law of requisite variety so that V, = V,? Certainly through the command channels only a relatively small variety can flow if behaviour is going to be consistent with decisions on discretion. The higher the discretion, the more the potential variety generated by sub-systems and the lower the compatible amount of variety in the command channels. Yet if control is going to be achieved the variety of the control function should match that of the implementation function. This apparent paradox is at the core of the management problems. The misunderstanding of this point is responsible for many mis-matchings between stated objectives and actual behaviour. Objectives may be defined very broadly, thus implicitly giving discretion to the implementation function. Yet soon after operations begin the control function is sending down, through the command channel norms, regulations, standards, etc., overloading this channel and certainly going beyond the agreed level of discretion. Paradoxically, the control function feels that it does not control the program and the implementation function that it does not have the necessary discretion to do its tasks. There must be other mechanisms to balance the interactions between these two functions. There are two other mechanisms to achieve requisite variety.

One is the coordination function, already explained in the first section, and the other is a mechanism natural to the control function but different in nature to wmmanding. This is monitoring. The distinction between these two mechanisms and wmmanding is that, though they also constrain the variety of the implementation function, they do not interfere with its degree of discretion. They simply take care that the discretion is used in the context of the overall program objectives. Coordination is supporting the flow of information between sub-systems. Though each sub-system has its own objectives, it is also part of the same whole. To different degrees the actual implementation of these objectives affects the objectives of the others. Each sub-sysrem, instead of reporting to the control function every time there are inconsistencies between behaviour and plans, reports automatically to the other sub-systems so that they adjust their own behaviour and plans to avoid oscillations. Only when this is not possible, or if it is possible only by affecting the overall program objectives, will the coordination function transmit information to the control function. In general, only a few of the multiple problems will reach the control function. If objectives are highly structured so that an implicit decision has been taken to reinforce the control of the implementation function through the command channel, there should be less overlapping between sub-systems (many of them are considered in the definition of objectives). Therefore the program system relies less upon coordination to achieve control. The opposite is valid if objectives are broadly defined. However, the development of a structured coordination function is not sufficient to achieve requisite variety. There is nothing in this function to permit the control function to achieve a grasp of the consistency between objectives, allocated resources, and actual performances of the sub-systems. For instance, the achievement of objectives might be done at high costs or by stretching the sub-system human andphysical resources to a degree that might jeopardize their future viability. The monitoring of objectives implies a mechanism, a communication channel, that is not apparent either in the coordination or in the command channels. Coordination only gives information on what is happening in relation to plans. It says nothing about whether this is consistent with resources and objectives. To achieve this through the command channel will imply a high variety channel that is against the distribution of discretion. The monitoring channel is different to the other two (Figure 5.15). High variety information on the internal activities of sub-systems flows through the monitoring channels by exception. One example of this channel in common managerial practice is the auditing function. This channel ought to be developed to such a degree that the control function achieves requisite variety. If requisite variety is not achieved, the integration of sub-objectives in the context of the whole program does not occur. Thus, we can say that the functional capacity is inconsistent with program objectives.

V3 (monitoring )

(T>nd ond reeorfs

Figure 5.15. Achieving requisite variety between the control and implementation functions

Of course, the same analysis applies for all system levels. For each system we can study the ways in which the control function achieves in practice the integration of the sub-systems in the context of the whole. Some of these ways might be inconsistent with the definition of objectives; some others might not achieve control at all. Conclusions

The organizational response to environmental complexity is studied with three foci. First, there is a need to study the overall responses of each system level to their relevant environmental complexities. Mis-matchings between actual behaviour and stated objectives is set as the criterion to measure the effectiveness of the response. To study actual behaviour attention is given to organizational complexity in the form of filters of environmental complexity and amplifiers of management complexity. If these mechanisms lack requisite variety, the actual system performance would be lower than that implicit in program objectives. A major mechanism to respond to environmental complexity is the unfolding of objectives and the allocation of discretion to sub-systems. Thus, the second focus for organizational analysis is the internal consistency between system levels. A matching between functional capacity and discretion is necessary for effective implementation. More functional capacitv . . than discretion implies spare organizational complexity. Less functional capacity than discretion imvlies unsubstantiated volicies and ~erformancesbelow exoectations. The more functional capacity a system level has the more discretion is convenient to allocate on that level. To apply the concept of functional capacity it is necessary to understand the internal consistency of a system level. This is the third focus of the organizational analysis. Decisions on objectives should be matched by intelligence and control capacities. The degree to which organizational complexity is matching environmental complexity at all levels is a measure of the functional capacity of the intelligence functions. As for control, effectiveness is related to the

ways, if at all, this function achieves requisite variety with the implementation function. In general, control is effective if it matches the variety of the implementation function while still permitting this function to exercise the allocated discretion implicit in the unfolding of objectives. These three foci represent a whole in themselves. Thus, their meaning and strength becomes apparent when the three are synthesized in a single mental process.

CHAPTER 6

Scottish Development and North Sea Oil: Background Description In this and the following chapter the first of the two cases of the bookScotlancCwill be presented. This chapter will provide the background information to support an understanding of the Scottish case. It presents some parts of the data which will be used in the main analytic sections, forming Chapter 7. Section 6.1 presents a wide overview of Scotland as a region. Next the dimensions of the oil-related development are described (Section 6.2). These dimensions are relevant to several somewhat separately generated policy areas which are discussed in Section 6.3. The British administrative system and, in particular, the main organizational actors concerned with these policy areas are briefly described in Section 6.4. This chapter closes with a consideration of the mechanisms available in the United Kingdom setting to implement government policy. Each section represents a partial view of a holistic setting from a series of perspectives, and, therefore, the chapter overall may appear fragmented. The essential unity of the situation will be better captured in Chapter 7 when an analysis is carried out.

6.1 Scotland as a region

Scotland, since the Treaty of Union in 1707, has been part of the United Kingdom. In physical characteristics, in the state of industrial development and particularly, at the present time, in the problems and opportunities it faces, it is not homogeneous. It also contains within it a system of local administration. Yet, despite this, the basic cultural and political unity of the territory justify viewing Scotland as a single region on which to focus attention. The population of Scotland is about 5.2 million people and, including the Scottish islands, it has a land area of just under 30,000 square miles. However, about 80 per cent of the population live in central Scotland, a belt including the two major cities of Glasgow and Edinburgh. Relative to United Kingdom averages, Scotland must be considered as a lagging region economically. Its unemployment rate through the 1960s has broadly followed United Kingdom cycles but often at twice the level. Its gross domestic product per capita has been only around 90 per cent of the United

Kingdom average (this has improved recently). As a region, it has constantly suffered from outmigration both to the rest of the United Kingdom and overseas. The area most subject to decline has been the Clydeside conurbation based on Glasgow. While the reasons for decline are complex, a part of the problem seems to be with the structure of Scottish industry, which includes a preponderance of basic delining industries such as ship building. Since the Second World War when the United Kingdom initiated substantial regional programmes Scotland has been a major net beneficiary in the tlow of development funds. The evidence suggests that these have had a positive but not dramatic effect on the state of the region. However, together with locally based efforts, and particularly with the more recent impact of oil development, the relative fortunes of Scotland compared with United Kingdom averages have significantly improved. In addition to the effects of oil the rcgion has been successful in attracting new industry, particularly in the electronics and

SHETLAND

lnwerness

a Figure 6.1. Outline map of Scotland showing area!, of high impact from oil development

computer fields. Much of this investment has been from the United States. Perhaps as a function of its high content of heavy industry and reinforced by a depressed state of the economy the Scottish labour force has a reputation for being highly politicized, and poor labour relations have sometimes been given as a reason for difficulty in attracting new investment, particularly to the Clydeside area. Figure 6.1 is an outline map of Scotland. 6.2 Oil and development

Although the purpose of our study is organizational analysis some understanding of the elements of the oil operations and the way they interact with other activities on the mainland is necessary to provide a meaningful background to organizational analysis. With that limited aim some brief outline of both are presented here. An international convention of 1958 paved the way for rapid exploration of energy resources in the North Sea. The first finds in the Southern British sector were gas fields, which are now satisfying most domestic demands for gas. Later, in the Northern British sector oil was discovered. Exploration activity has been intense, and the oil reserves identified are significant on a world scale. Certainly they appear to be sufficient to meet all of the United Kingdom needs for oil on a bulk tonnage basis for several decades[l]. Elements of oil operations[2] Direct oil activities can be classified into three categories. First is an exploration phase, next a development or construction phase, and, finally, a production phase. In the exploration phase drilling rigs are involved in test drilling in the sea, among other survey techniques. Rigs have to be constructed, manned, and serviced from the shore. A wide variety of services are required. Besides the provision of transport (air and sea) for men and supplies, technical services may be required as well as financialllegal services and the like. There are very strong technical reasons why these latter should be locally provided. A large part of the activity in Scotland hitherto has been connected with this first phase, and exploration is probably now past its peak. The second phase follows with decisions to exploit particular fields. Production platforms need to be built. These differ from exploration rigs. One design that uses concrete rather than steel is favoured by oil companies for North Sea production. Platforms are usually constructed at a shoreline site and towed to their final location. These concrete rigs require deepwater construction sites immediately off-shore and several other special conditions that can be met only in a few Scottish locations. When in place, these platforms also need crews and servicing, but at a lower level than the exploration rigs. In additon to rig construction, pipelines, both off-shore and on-shore, may be constructed. Like the exploration phase, this phase is a relatively high creator of employment and will go on into the 1980s.

The third phase of production has a much longer life than the earlier phases--several decades. It is, however, not a stage of high activity. The types of installation that will have been created in the construction phase are not ones that require high manpower for operation, much above a maintenance function. Possibilities exist for degrees of downstream activity. These extend from plants to separate oil and associated gas (which have been built), through to oil refineries (which may be built), to a petrochemical industry. However, unless these downstream activities extend a long way down the spectrum into petrochemicals and secondary manufacturing based on them, the main employment effects are at the time of construction rather than operation. The life of the oil-fields is limited. Final reserves and rates of exploitation are uncertain, but a high level of production is unlikely to last much beyond the year 2000. The period of major employment is, however, much less than this and may not continue through the next decade. It is with this in mind that we can refer to oil activity as an impulse function for the region. A number of technical dimensions of oil exploration and exploitation require support from bases as close as possible to wells and fields. As a result, much of the impact of these activities has been incurred in four regions within Scotland: Grampian, the peninsula on the north-east including the city of Aberdeen; the Highlands, the northern peninsula, including Inverness; the Shetland Islands; and the Orkney Islands. We consider the first three in the analysis which follows. Secondary effects of oil operations

We have briefly described what may be referred to as direct oil operations. These have impacts, actual or potential, throughout the larger Scottish system. The direct oil activities require the manufacture of exploration rigs, production platforms, and laying of pipes, as well as the variety of services mentioned above. While the manufacturing element may be carried out only partly in Scotland, these other services are carried out locally and contribute to the Scottish economy. In addition, oil directly requires a variety of both general and specialized engineering products. Again these are partly supplied locally and partly imported. All of this activity, when local, has multiplier effects. Thus an industry supplying oil needs may make demands on another industry which is in a more general market. There are increased possibilities for this secondary industrial activity to be dispersed to other parts of Scotland. Another possibility is that with concentration a threshold is reached above which a self-reinforcing industrial growth could occur, perhaps seeking opportunities in the large international off-shore technology market. A loss of industrial orders related to oil overseas or a dispersion of orders could militate against this. However, this development may not be cost free. First of all, impacts on

infrastructure are felt. An increase of industrial activity may cause a strain on housing and on roads which may be severe in particular locations. In an effort to mitigate such strains, planning authorities may actually discourage this growth of activity. On the other hand, infrastructure may be used in a positive way; the provision of industrial estates may attract development. Damage to the environment may also be a reason for planning authorities to control development. As well as physical environment we may also include social environment. The influx of a large number of workers into small communities can have a profound effect on the life of those communities. Oil activities also have an effect on the labour market. Workers in oilrelated jobs are often able to command higher wages than the prevailing norms and this can have a distorting effect on wage structures and on prices locally. There is a positive side here also. The new activities require a level of new skills, and when the particular activity is finished the labour market will be enriched with these skilled workers. This could be an important factor in creating what we have termed self-reinforcing growth. Of course, if this does not occur, the result could be a large group of skilled workers who will leave the region to seek employment elsewhere. As well as impacting upon the quality of life of the population these factors-environment, infrastructure, and labour market-relate to non-oil activities. Thus fishing is a major employer in the region. Fishing can be adversely affected by port congestion due to senice boats (the construction of new fishing wharfs at Aberdeen has been held up pending the completion of oil-related wharfs). It can also be hit by increased labour costs or new competition for manpower, and it has been suggested that pipe laying and dumping of oil equipment at sea can interefere with fishing nets. Tourism is another of the area's important activities. Here potential interaction is through road congestion, shortage of accommodation, labour costs, and environmental spoilation of places of natural beauty which have OUTSIDEOF SCOTLAND

I1

SCOTLAND

Figure 6.2. Relationship of oil to other elements in Scotland

become rig-construction sites. However, it appears that actual damage to tourism is limited. The third affected area is non-oil industry. Here loss of skilled men to higher wage jobs in 'oil' (and the inability of industry to respond because of wage control) has at times been a serious problem. This brief description illustrates that an objective of long-tenn growth based on oil must meet many uncertainties and has to consider protection of what exists as well as being able to grasp new opportunities. A somewhat simplified scheme of this is presented in Figure 6.2. 6.3 Political and policy considerations

Policy areas involved The elements recognized here as being in some way implicated in the wider impacts of oil development are ones that are normally rather separately considered through different areas of United Kingdom policy. The relationships between these elements and policy areas are shown in Figure 6.3 (based on a much simplified version of Figure 6.2). The rate at which oil reserves are explored and exploited is the concern of the energy policy area. Energy policy is well substantiated with macroeconomic issues in mind. Questions of industrial development and its regional distribution in the United Kingdom are addressed by industrial policy, taking into account macroeconomic policy. The particular contribution that British and Scottish industry can make will also be to some extent conditioned by the way the energy policy is cast. In the United Kingdom any new development which involves major new building or change of use of existing facilities has to be approved by a planning authority. The area of policy which governs the approval or rejection of particular

I

I

I

I

011activities

1

1

Industry policy I

I

L

I

-

...........................

Figure 6.3. Policy relationships

A

developments will be called development control policy. There is a further area of policy which must be considered in this case: this concerns the distribution of benefits arising from oil between Scotland and the United Kingdom as a whole and the way in which governmental structure for policy making reflects the particular needs of Scotland. We include these considerations under the area of Scottish policy. Any comprehensive consideration of the policy implications of North Sea oil developments must at least be cognizant of these policy areas. Macroeconomic and energy policy The escalation of the world price for oil has reinforced North Sea reserves as an asset of very great importance which can improve the prospects of the entire British economy. For many years the performance of the British economy has lagged behind other major Western economies. The present state of decline in Scotland is but one indication of this. Among other problems in the management of the economy is that economic growth has tended to produce balance of payment deficits which have led to deflationary policies. This has been more acute since the increases in oil prices, since, apart from North Sea oil, British consumption is wholly imported. The shift in the balance of payments position that domestically produced oil implies could provide a new freedom to economic management. With this in mind the government is following a policy of maximum speed in bringing the oil-fields into production. While oil prospects relate to several areas of government policy we assume that these economic considerations expressed in an energy policy focused on rapid exploitation are primary. They provide the limits within which other policy issues must operate. hdustrial policy While most productive capacity in the United Kingdom is privately owned, the state of British industry and, in particular, its maximum participation in oil-related activities is an object of government industrial policy. The decision to rapidly exploit oil reserves of itself influences the contribution of British and Scottish industry in that exploitation. Rapid exploitation in deep and stormy waters has required both capital and new technology on a scale beyond the United Kingdom capacity. Largely this gap has been filled by the United States. Inevitably it has meant a reduced opportunity for local industry which has had less time to adjust to the new demands of the oil industry. Many have argued that a slower rate of activity would favour Scottish development, although this is not entirely clear. Even allowing for foreign industrial suppliers, the scale of activity in the North Sea is sufficient to ensure some industrial impact on Scotland. Estimates of annual expenditure connected with oil during most of the 1970s exceed 1,000 million pounds, and some proportion of this will go to Scottish industry. However, the government cannot rely on market forces alone to

alleviate Scotland's industrial problems. The first reason for this is that the areas which, for technical and economic considerations, benefit most by this activity are not the ones where the problem of industrial decline has been most severe-they are far from Glasgow. Although an estimated 50,000 new jobs (direct and through multiplier effects) have been created (Scottish Office, 1975), perhaps less than 10 per cent of these are in Glasgow (Mackay and Mackay, 1975, p. 119). So the economic activity related to oil does not make a straightforward contribution to the solution of Scottish problems. A second point is that many of the jobs created are not permanent but are associated with particular phases of oil activity. Oil employment could take the form of an impulse function with no net long-term benefits unless steps are taken to avoid this. To create some balance both geographically and temporally the government has available several policy instruments. Although the United Kingdom is a market economy, government has been taking a progressively more interventionist attitude towards private industry. Formally, this is a point of major difference between the G o major parties. However, over the past fifteen-year period, which has included both Conservative and Labour governments, there has been a de facto trend towards greater intervention. It is, thus, natural that government should seek to modify market forces with the objective of regional development. To achieve this, however, requires a coordinated use of various mechanisms concerned with industry which has not 'dormally been the case in the United Kingdom. Development control The areas that are most subject to oil impacts are on the whole far from the industrial centres of Scotland. Often they are small and remote communities where the demands made by oil activities on social infrastructure, environment, and life style can be a great threat to the community. An emphasis on the speed of exploitation of oil reserves increases this threat. It is an important governmental responsibility to provide some protection to small communities, and this is achieved through policies which may broadly be called development control. In normal circumstances these policies are largely the responsibility of local government. However, the scale of the demands posed by the need to facilitate rapid oil exploitation has lead to considerable additional demands on these procedures, and implies considering the larger policy framework in which local government operates. Scottish policy

Other considerations allow more focus on the prospects of Scotland. Ensuring that Scotland receives some visible benefits from oil is becoming a political necessity within the United Kingdom. One issue indirectly connected with oil is the level of self-government Scotland is to be allowed. At the time of the

study proposals were being considered by the United Kingdom government that would create a new elected assemblv in Scotland vested with some powers that at present reside with the United Kingdom Parliament[3]. The impact of oil is related to this government policy. Over many years there has existed in Scotland a political movement, the Scottish National Party, which has been committed to the separate Scottish cause. However, the credibility of SNP proposals, and therefore its popular impact, have been limited by questions on the economic viability of an independent Scotland. Central government expenditures in Scotland exceed central government receipts from Scotland by about 15 per cent of Scotland's gross regional product (derived from Brown, 1972, pp. 62-64). Oil could radically change this. Whereas the precise economic effects are difficult to determine, Scottish economic viability and, in the popular mind, economic abundance seem probable. Thus the SNP has become an influential party, gaining parliamentary seats. Perhaps among many more positive reasons we can see government proposals for a Scottish Assembly as a way of neutralizing more extreme appeals. However, the Assembly will not be the direct recipient of oil monies. We have now outlined several separate policy areas which are in one way or another related to oil. We have assumed rapid exploitation dictated by macroeconomic considerations to be the primary consideration of the United Kingdom government. Protection of communities will be dealt with mainly by what we have called 'development control' policies, which will need to take account of the energy/macroeconomicpolicy regarding oil exploitation. This is the first challenge that will be considered in the organizational analysis of Chapter 7. Industrial development involves both industrial policy and development control policy and is similarly constrained by the need for speed in exploiting oil. The way in which these issues are approached, in particular the division of authority between governmental bodies with a national purview and those with specifically Scottish responsibilities, may be thought of as an issue of national policy towards Scotland. The general objective of achieving comprehensive Scottish development on the basis of oil activities addresses simultaneously all these policy areas. Meeting the new complexities that this implies is the second challenge that will be analysed.

6.4 Administration and organizational background

The purpose of this section is to provide the general structure of government and administration in the United Kingdom and to introduce the institutional units which are important actors in this case. At this stage we present only descriptions; in Chapter 7 the functions of these units will be assessed critically through the use of the analytic framework.

Organization of central government

United Kingdom administration is comprised of a political element and an administrative element. The political element with the primary responsibility for policy making is the Government. The Government is responsible to Parliament. The administrative element, the Civil Service, supports policy formulation and administers policy. Each Civil Service department has a political head, a Minister or Secretary of State, who is a member of the Government, and who is responsible to Parliament for the activities of that department. The Government is headed by a Prime Minister. The departments of government are generally organized around the major issues facing society. Some examples familiar in many countries are defence, health, education, industry, and so on. As the perception of issues changes so the organization of Civil Service departments may change. A trend over the past decade or so has been towardslarger and more integrated departments covering what were formerly thought of as separate policy issues. In addition to these departments, which may broadly be described as 'sectoral', there are other departments, among them the Scottish Office, whose area of responsibility is geographic. The Scottish Office is clearly an important actor in this case and will be described separately. Other relevant departments are concerned with policy areas as described in the preceding section. The Treasury is concerned with the support of macroeconomic policy for the whole United Kingdom. Similarly, the Department of Energy covers energy policy. The Department of Industry is concerned with industrial policy formulation, both by sector and as it affects the regions. The administration of these (i.e. industrial) policies in Scotland, however, rests with the Scottish Office. What are called 'development control' policies fall within the Department of the Environment. This is an example of a large integrated department concerned among other things with transport, housing, and local government[4]. Many of the functions of this department in Scotland are carried out by the Scottish Office, both in administering policies and, to an extent, in supporting policy formulation. Outside the main departments of central government we find relatively few units supporting policy making. These include a small Prime Minister's staff and a Central Policy Review Staff (CPRS). Both are able to consider policy implications across departments. Within this broad structure Scotland is treated somewhat differently from England and Wales. There exists no English Office parallel to the Scottish Office, and although there is a special office for Wales it is very much smaller than the Scottish Office. With the Scottish Office in mind it can be argued that Scotland already has a degree of self-government. Plans are in hand to increase this through the creation of an elected Scottish Assembly. This Assembly will take over from the United Kingdom Parliament aspects of policy formulation for Scotland. Exactly what the limits will be to this has not yet been decided. However, current proposals exclude macroeconomic and -

energy policy. An Assembly of this type is not new within the United Kingdom, since Northern Ireland has for many years enjoyed such an arrangement. The Scottish Office As is clear from the foregoing, the Scottish Office is a department of United Kingdom central government. Its political head, the Secretary of State for Scotland, is responsible to the United Kingdom Parliament. It is based in Edinburgh and fulfils in Scotland the administrative role of several United Kingdom departments. The Department of Energy is not one of these. For some policy areas that role goes beyond administration to contributing to policy formulation. In recent years the issues with which the Scottish Office is concerned have increased. The internal structure of the Scottish Office maps these concerns, many of which are of little interest to this case. Two sections of the Scottish Office are particularly relevant. The first is the Scottish Development Department (SDD)[S]. This department is concerned with physical planning in Scotland, an area which in England is covered by the Department of the Environment. Where the Scottish Office becomes involved with development applications from private industry, the SDD is the section concerned. It also provides the interface between central government and local government in Scotland. The second relevant department is the Scottish Economic Planning Department (SEPD). This is concerned with industrial activities in Scotland. It has the role of administering industrial policy in Scotland, taking on what in England is the responsibility of the Department of Industry. In this it administers industrial grants and provides the interface with the special Scottish industrial development agencies. Local government in Scotland The principle of elected local government is very well established in Scotland, as in the rest of the United Kingdom. Within constraints set by central government, locally elected councils formulate policies for aspects of local affairs, which are administered by a local administrative system. Local government is, in general, responsible for the provision of many local services and is the authority that is most concerned with land-use planning. Thus applications for development from private bodies are in normal cases dealt with by local government. This level also has some mechanisms to encourage industrial development locally. The structure of local government in Scotland has recently been subject to major reorganization. The force of the reorganization was both to remove anomalies from the old system and, more importantly, to encourage within local governments a corporate view of their activities. It also provided for a more systematic interface with the Scottish Office. The new system includes two levels, the region[6] and the district. It is at the level of the region that

planning strategy is considered, although both levels have some function with regard to industrial develo~mentand it is at the lower level that individual development applications are initially considered. This split of responsibilities between levels of local government is one which may produce some conflicts, but we will not be concerned with this level of resolution. Local government will be considered only as a whole[7]. The new system envisages some degree of strategic planning at the local governmental level. This involves a cycle between the regions and the Scottish Office which is not yet complete. The cycle starts with the preparation by the region of an outline of development intentions, called a regional report. These go to the Scottish Office (SDD) for comment@]. On the basis of this comment, the regions would develop structure plans for those parts of the region which are proposed for some development. These will be approved by the Scottish Office. Individual development applications would then be judged according to how they fit into the structure plans. Development applications are normally dealt with by the local authority. However, in particular circumstancesl9J the Secretary of State for Scotland may 'call in' the application. Decision authority is then taken from local government to central government. One way central government may reach a decision is to hold a public inquiry. This is a quasi-judicial procedure in which parties to a disputed application provide evidenceto a government inspector, whose recommendation will almost always be the basis of the Secretary of State's decision.

Industrial development agencies One means of implementing national industrial policy is through the creation of specialized agencies. Two are now operating in Scotland. The oldest of the two is the Highlands and Islands Development Board (HIDB). The HIDB was set up by statute in 1965 to help the economic and social development of the Highlands area of Scotland. It has a variety of powers-it can provide grants and loans, build factories, and also acquire equ& in private companies. Since 1965, the Board has used funds (grants and loans) of about 22 million pounds in connection with more than 3,000 projects. More than 10,000 jobs are estimated to have been created. The area with which the Board is concerned includes several which are impacted by oil, and it is actively concerned with identifying industrial opportunities arising from the oil development. The northern area of Scotland is large and sparsely populated, and an important role of the Board is to provide an intelligence service to private industry which might be concerned with locating in the area. Many of the projects involved are small. The Board does not have any statutory planning approval powers, but it is in close coordination with the relevant local authorities. The second agency is the Scottish Development Agency (SDA) which was created by Act of Parliament in 1975 and started operation only in 1976. It is, therefore, very early to make any assessments of how the SDA will operate.

In some ways its powers are parallel to the HIDB but, although its purview is the whole of Scotland, it is expected to focus primarily upon the central belt of Scotland, based on Glasgow, where the industrial problems are larger and more acute. The intention in creating the SDA seems to be that it should have a major impact on Scotland and should act as a powerful new instrument to lead to Scottish economic regeneration. The capital available to the SDA is 200 million pounds (or 300 million pounds with the consent of the Secretary of State for Scotland and the Treasury). It will be able to provide support to a project of up to 2 million pounds without specific approval from the Secretary of State. Thus the financial resources the SDA can use are an order of magnitude larger than the HIDB. Not all of this capital is new capital, however. The SDA has taken over the functions of two previously existing bodies, the Scottish Industrial Estates Corporation and the Small Industries Council for Rural Areas of Scotland. Particularly the former of these had existing commitments which will now be accounted against the capital available to the SDA. Both of these agencies are responsible to the Secretary of State for Scotland. The SEPD provides the interface. We should note also the relevance of the National Enterprises Board (NEB), which is an agency with an all-United Kingdom focus and reports to the Secretary of State for Industry. Created in 1974, it generally has available similar mechanisms to the SDA and HIDB. It has so far been mainly concerned with supporting firms in difficulty where closure would create local unemployment problems and would create gaps in important industrial sectors. Where Scottish branches of national companies are involved, the NEB may continue to operate in Scotland. Private industry Most of the investment in oil and its related activities is by non-government agencies. Foremost among these are the oil companies. The oil companies involved in the North Sea have their head offices in several countries. British companies are active and British Petroleum (BP), in which the government holds more than a 50 per cent share, is particularly prominent. However, by their nature oil companies are oriented internationally and we cannot expect British policy about regional development of itself to be an important influence o n their activities: Supplying the needs of the oil activities involves a more diverse group of organizations. Again these are largely privately owned. Much of the equipment is imported to the United Kingdom but firms of Scottish, United Kingdom, and foreign ownership are involved in much of the activity. The numbers of these groups are large. For example, in one region of Scotland at the centre of oil impacts an estimated 300 firms are in some way involved with oil. Financial and other services to these companies will also be provided, generally by private agencies.

PM = Prime Minister M = Minister or Secretary of State

I

-- --- - - --------- - - -- --1 GOVERNMENT

I

SCOTTISH OFFICE

...

Local government

Local government

= : I = Oil companies

Prtvate Industry

. Nan - governmental

Figure 6.4. Chart of selected organizations relating to Scottish development

The role of governmental bodies can thus be viewed as influencing the activities of those private organizations which are the direct actors in oil development. Figure 6.4 is a chart of organizations showing the major units we have discussed in this section. 6.5 Mechanisms for program implementation in a mixed economy

Because most of the direct activities involved with oil development are carried out by private agencies, to implement its own policies government needs mechanisms to influence these agencies. In principle there are few limits to the form the mechanisms might take. Parliament is the supreme policy-

making body in the United Kingdom and the government is normally in command of a parliamentary majority[lO]. In practice, a well-established range of mechanisms exists which, over time, is being increased. Discussion of these mechanisms has to take account of two important dimensions: first, the degree of influence each is likely to have on the behaviour of private agencies and, second, the flexibility of each in application. Mechanisms used by government have a wide range of expected influence on behaviour. An important example of a strong-influence mechanism is passing a law which makes certain actions mandatory on the part of those affected. Industry is affected by a wide range of Company Acts which are generally concerned with financial probity. They prescribe a set of mandatory behaviours for private companies. The application of these laws is then left to the Courts. In some planned economies broadly parallel mechanisms are used for a wide range of economic management; in the United Kingdom they are not. A quite different type of device is the financial inducement the government offers to private industry to behave in a particular way, e.g. to locate in a depressed region. These mechanisms do not prescribe mandatory behaviour, but are more in the nature of a contract government offers to industry. A company may review the many factors which bear upon its profitability and come to its own decision to accept the benefit or not. Clearly such mechanisms are a more uncertain way of influencing behaviour. The second element is flexibility or selectivity of a mechanism. Again mechanisms in use cover a wide spectrum on this dimension. At one end are laws (like the Company Acts mentioned above) or offered benefits which apply equally to a very wide class of industry and have a low element of selectivity. At the other extreme are mechanisms, such as specialized agencies, which can behave very flexibly according to particular circumstances. In terms of the conceptual framework, the influence of a mechanism relates to whether the mechanism is likely to form part of the perceived relevant environment of the non-governmental agencies associated with the development. The flexibility is the variety of the mechanism, i.e. the number of different states of the perceived relevant environment of the governmental agencies using the mechanism that can be separately responded to. A further point to be borne in mind is the level of government at which mechanisms can be used. While central government has a wide range of possibilities, local government has many fewer. This is because of limited financial resources and limited legal authority. A detailed consideration of such mechanisms is strictly outside of the scope of this organization analysis. Our present general and (admittedly) subjective comments are intended to draw attention to these mechanisms as the ultimate expression of governmental policy. Organizational analysis speaks to the adequacy of the processes and capacity which support deliberations on policy, for which these types of mechanism are the operational instruments. To that degree we note that consideration of both organizational capability and implementing capacities are essential in policy assessment.

Governmental ownership A powerful mechanism for influencing some sector of industry is to take that sector into public ownership. This has occurred for several primary sectors in the United Kingdom. The focus has been sectorial and it has not been a mechanism used directly for the benefit of a particular region. However, at least the short-term operations of some nationalized sectors have been influenced by regional employment considerations (coal and steel). A variant on this which will be used in the development of North Sea oil is a joint publiclprivate company. Parliament has created an oil company, the British National Oil Corporation (BNOC), which is expected to operate in the North Sea with private companies. Although this is a powerful mechanism for influencing behaviour it is somewhat less certain in effect than nationalization, since the private oil company, being international in orientation, could decide to pull out of the North Sea. Both mechanisms allow the considerable flexibility that corporations have in operation. Government control

The above measures allow government the possibility to initiate. In some cases government can use only 'negative' control powers, i.e. it can approve or veto development propositions coming from private bodies. In licensing blocks of the North Sea to oil companies, the Department of Energy is using this mechanism. Similarly for development on land, local authorities behave in this way. The mechanism is asymmetrical in that it can stop undesirable activities but not directly promote desirable ones. Usually the requirement of 'fairness' means that the criteria used are applied uniformly and are few. So, generally, it has limited flexibility. Generalized bene@ts

A major strategy to alleviate regional industrial imbalance has been to offer capital grants to any industry locating in a lagging region. These grants appear to have had an influence on industrial location. They allow, however, only a low element of flexibility and are not focused towards particular types of activity. While only central government and its agencies have the financial resources to provide this type of grant to industry, both central and local government have tried to attract industry by building infrastructure--e.g. good roads and factory estates. Experts have doubts about the influence of these measures on industry. They are, of course, very unselective, but are available to any industry locating in the region. Focused benefits

Several specialized agencies have been mentioned concerned with industrial development. The major device they use is financial benefits to industry.

Table 6.1. Exam~lesof mechanisms Mechanism

Example of use

Joint operating ~ r i t i s hNational Oil companies Company (future) Licensing Oil blocks licensing Controls1 Development control standards Generalized Regional industrial benefits grants Infrastructure provision Focused Scottish Development benefits Agency Highlands and Islands Development Board Selective industry grants Promotional NESDA activity Offshore Supplies Office Government Preference to companies purchases in development areas Not used in this case directly Nationalization Coal, steel, railways

Potential Potential flexibility influence

Major policy consideration

High

High

Energyleconomic

Low

High

Energy

Low

High

Low

(?I

Environmental amenity Regional development Regional development

Low

(?)

Regional development

High

Regional development

High

Regional development

High High Low

Regional development Industrylregional development Regional development

High

High

However, unlike generalized benefits, they are able to use financial resources much more selectively. Because of this selectivity it is possible to focus a large amount of money on selected firms. We may, therefore, expect such agencies to be quite powerful in influencing those particular selected companies. Government purchases

The government is a major spender and by purposeful use of its expenditure it could potentially influence industry. In fact, industries locating in development areas are given preferential opportunity to tender for government contracts. This is general benefit available to all such industry-it has low flexibility. Its influence is rather uncertain in the regional development context. However, it has been used very powerfully to support particular sectors, e.g. aircraft and computer industries. Promotional activiry

We come, finally, to mechanisms that could be supposed to have least influence on the grounds that they offer no cash benefits to industry-although the effectiveness of the promotional activity to which we refer is undetermined. Such activity is one of the main mechanisms available at the local government level. A local authority can advertise its merits and hold exhibitions, both nationally and internationally. In the Grampian Region of Scotland, which is included in our analysis, an agency concerned with such promotion has been set up-North East Scotland Development Association (NESDA). In connection with oil at the national level we find an agency, the Offshore Supplies Office, which does not quite fit into this category but which offers some parallels. Its mandate is to make British industry aware of the demands arising out of oil development. The objective is to increase the participation of British industry in this market. All of these mechanisms are summarized in Table 6.1. It should be noted that they are in addition to general fiscal measures (taxation levels) used by government as an important influence on industry. In Table 6.1, the column 'potential influence' is mainly illustrative in value. Determination of 'potential influence' was beyond the scope of the study. The (?) in that column indicates insufficient data to make confident judgements. 6.6 Notes 1. Quality considerations imply a continuance of trade in oil. North Sea oil is light and cannot economically be used to meet all domestic needs for heavy fuel oils. However, there should be no net imports. 2. More complete descriptions of this are available from a variety of references. See, for example, those relating to the Scottish case: Hutcheson and Hogg, 1975; and Mackay and Mackay, 1975.

3. During 1978, an Act was passed in the United Kingdom Parliament devolving powers to a Swttish Assembly, subject to a referendum in Scotland. 4. Since the time of writing this chapter, transport policy has been taken from the Department of Environment and is addressed by a separate ministry. 5. The following abbreviations will be used throughout Chapters 6 and 7. SDD Scottish Development Department SEPD Scottish Economic Planning Department SDA Scottish Development Agency HIDB Highland and Islands Development Board BNOC British National Oil Corporation NESDA North East Scotland Development Association NESJPAC North East Scotland Joint Planning Advisory Committee

6. The term 'region' may be used in two senses throughout this chapter. Scotland is referred to as the 'region' under study, and we have the present use. The context will make the meaning clear in all cases. 7. For a more complete discussion; The Planning Exchange, 1974. 8. We i n t e ~ e w e dthe SDD in March 1976. The intention then was that this stage would be reached by May 1976. 9. Examples are cases involving strong public interest, disagreement between local authorities, major local controversy, and infringement of national policy (see Uden, 1976, p. 1). 10. Limitations do apply arising from United Kingdom participation in international agreements. In particular, United Kingdom membership of the EEC poses some constraints on its regional policies.

CHAPTER 7

Scottish Development and North Sea Oil: Framework Application 7.1 The system and its environment

The background description presented in the previous chapter provides the basis on which to identify main elements of the program management system and the institutional elements of its relevant environment. The focus of our analysis is on the United Kingdom governmental system in which we include central and local government, government-controlledpublic agencies, and various advisory groups to government. The development objectives imply that the state of Scottish industry, oil development, and local quality of life form part of the relevant environment. However, direct action to change the state of these is outside the jurisdiction of the governmental system, and lies with private industry. We consider those units of private industry as part of the environment of the governmental system. They are not part of the governmental system because they do not subscribe directly to the developmental objectives. However, they are an important part of the environment because their outputs influence the degree to which those objectives wiU be achieved. The governmental system has three levels of interest. The general system level is comprised of Parliament, the government, and the Civil Service departments. At this level main policies for the United Kingdom are established. Within these main policy areas, the various departments behave as sub-systems, further elaborating and administering policy. We can see, therefore, these departments playing a dual systemic role as part of the general system level and as its sub-systems. This observation applies also to the Scottish Office. As part of the general system it is supporting the formulation of national policy directions. Acting as a sub-system dealing with Scottish affairs it is a major component of the program system. In the context of this case two areas of Scottish Office concern lead to the identification of activity sub-systems. First is the physical planning aspect in Scotland; in this context local governments comprise the sub-systems. Second is the Scottish Office concern with industrial and economic aspects; here the specialized development agencies form the sub-systems.

.

The three levels of the system are not equally concerned with all factors of the environment in this case. At the national level the concern is likely to be with the overall state of the British economy and the likely magnitudes of revenues from the North Sea. The industrial sub-system (Department of Industry) will be concerned with industrial development, the activities of major national companies, and the participation of British companies in North Sea activities. The energy sub-system (Department of Energy) will be wncerned with oil operations at sea, and the major oil producers will also form an important part of its environment. The program system (Scottish Office) will be concerned with the state of Scottish industry and the physical environment. More specifically, the indusSrjtem

Environment

,yStote

of B r ~ t ~ seconomy h

State of infrastructure and envlronment In

Scott~sh

State of ~nfrustructure,

+industry, env~ronment,Locallfy

Figure 7.1. Government system and environment for Scottish development

trial activity sub-system will take account of the activities of industry in Scotland, and the local authorities with physical environment and industry at the more local level. Putting all of these observations together allows us to construct the model of the system and its environment presented in Figure 7.1. 7.2 Interpretation of the challenges

We have talked of the development objectives presenting new challenges to the governmental system. In the language of our approach these challenges arise through an increase in complexity of the environment of the system. The response is then appropriately an increase in the functional capacity of the system to meet added environmental complexity. The two development objectives we have assumed imply a concern with different parts of the total system environment. Short-term challenge

The first challenge we will consider is the protection of local amenity and environment in communities with major oil impacts, while at the same time facilitating oil development in the national interest. In usual circumstances the major task of this type of protection falls on local government, and the mechanism it uses is its control over development applications. Although there is a well-established procedure, the level of environmental complexity it must normally meet is quite limited, particularly in small and remote communities. Outside of oil, the local governments responsible for these areas will normally deal with few or no applications for development on a scale that is potentially damaging to the local quality of life. In the context of oil, however, such applications have become widespread. The implication of allowing, for example, a platform construction site in a rural area is not easy to assess. It can have impacts on the social life of a community, can lead to a housing shortage, congested roads, and noise, and even an increase in local crime rates has been documented in one location. Moreover, the view taken towards a first application can in one way or another influence the prospects of further applications. Because the acceptance by local government of an application does not imply a commitment on the part of a developer to go ahead and build, many local authorities may receive the same application if the developer wishes to 'hedge his bets'. Thus a local authority may agree to an application and still have no certainty that it will go ahead. The opposite is also true. Because of the national emphasis given to rapid oil development, the local authority must face the prospect that if it refuses the application that refusal may ultimately be challenged and reversed. The inclusion of national policy considerations in dealing with applications increases their complexity. Where oil-related development does go ahead it may imply a need for increased infrastructure (schools, houses) which is the

responsibility of the local authority to provide. In particular locations, therefore, the environment includes a new element of uncertainty regarding the financial capacity of a local authority to meet these new demands. In these ways, therefore, the scale of oil-related development has provided an increase in environmental complexity associated with an objective broadly described as protection of the local quality of life. The extent of this is such that it is reasonable to hypothesize that a system with a capacity designed to meet the previous, calmer days would be overwhelmed by this complexity in the absence of particular responses to meet it. Long-term challenge

The second challenge addressed is altogether more complex. It concerns using the impetus of North Sea oil activities to provide the basis for a balanced, stable, long-term industrial development in Scotland. In one sense this challenge supercedes, and contains within it, the first. It is implicit that the industrial development will not only create industrial wealth but also will not destroy the quality of life in localities. However, in this context the objective of protecting the quality of life becomes more complex. In viewing development applications at the local level a more careful assessment needs to be made of economic benefits in the short and long term. That is, not only present impacts have to be taken into account but rather how any particular development relates to a longer-term view of community growth. But this is only one element of the total environment relating to this objective. Many separate mechanisms are available to influence industrial development in a positive way. Generally these are used with heavy emphasis on only one environmental factor-local unemployment. A concern with longer-term development could imply the use of these mechanisms recognizing a much wider environment, e.g. the type of industrial growth that seems economically viable in the long term in different parts of Scotland. Oil development has already provided a particular stimulus to development through market mechanisms alone. The relationship between these market effects and the influence of special mechanisms is something that might be considered. In other words, the objective implies a wide consideration of the Scottish industrial environment. Because the areas which are currently subject to development related to oil are not the ones where problems of industrial decline are most severe a spatial element needs to be regarded in this objective. The question is not only the efficiency of particular governmental actions with respect to the total Scottish industrial environment but rather their efficiency in achieving a desirable (however that is defined) location of industry. Many of the elements discussed above have been considered to some degree in the past. However, they have generally been considered somewhat separately by separate departments of central government and at the local government level. The new complexity arises because the development objec-

tive suggests an integrated approach to all of them. When dimensions of an environment which have previously been viewed independently come to be viewed as an interacting whole, the complexity of that environment increases greatly. Not only are the states of the separate factors contributing to complexity hut also the various different combinations of states of factors. Thus the increased complexity associated with this objective has two components: first, an inclusion of more environmental factors, particularly those associated with industry, and, second, the effects of integration of the separate elements. If we can assume that long-term development for Scotland is indeed an objective of the governmental system then, at least in these comprehensive terms, it is a new objective involving an increased level of complexity of the environment to which the system must respond in order for it to be realized. Application of the framework to the challenges

The study of oil-related development in Scotland was an important stage in the development of the approach to program management presented in the first five chapters. Necessarily, therefore, the application of the approach was less complete and differs somewhat from the process described in those chapters. The following paragraphs will indicate the scope of the application here and serve to remind the reader of some of the underlying principles of application. It is the increase of environmental complexity associated with program objectives which poses new demands on the system. This increase may be met at any, or all, of the three system levels we are considering. Each level of the system is concerned with only a part of the total system environment. The environmental factors with which any level is concerned follow from the nature of the objectives that level receives and the nature of the objectives it sets to its sub-systems. Thus it is by examining the process of objective setting that we can determine the environmental complexity that each level must meet. Put another way, it is the process of objective setting that sets up the demands on each system level. If the program objectives are to be effectively managed then the organizational capacity at each level must be sufficient to meet those demands. We must note that an appropriate distribution of organizational capacity between levels is not a necessary consequence following from the objective setting process. A level may set highly elaborated objectives to a sub-system without, in fact, having a commensurate level of intelligence or control capacity to support those objectives. If this occurs, we would postulate a lack of responsiveness of the system to its environment, leading to ineffectiveness. Our analysis will examine the demands and capacities at each system level for each of the objectives in turn. To do this first involves a consideration of the role of each level in objective setting, which sets up the demands. We will then enquire into the capacity to meet those demands. In doing so we will focus particularly on changes that have occurred as a result of the adoption of

program objectives. That is, we will observe particularly how the relevant environmental complexity at each level has altered and study the particular responses of the system level to this change.

7.3 The short-term challenge This challenge is concerned with the protection of the local quality of life in Scottish locations particularly affected by oil development, while at the same time facilitating that development. An established procedure for ensuring such protection exists in Scotland through the use of the control of development applications from private interests. The response to the new demands has worked broadly through this established system. These existing procedures provide some role for each of the three system levels we are considerinegeneral, program (Scottish Office), and activity sub-systems (local governments). Following the process outlined above we first turn to a discussion of the nature of the demands posed by this challenge to each system level and then examine the responses to these demands. The nature of demands

General system level Traditionally in land-use planning the general system level has had a rather limited role. In the context of Scotland this system level will normally have very little to say about any particular planning applications. The major involvement has been in providing normatives for central government grants to local authorities. Over recent years the shortfall between locally collected revenues (rates) and local government expenditure has increased rapidly, so that these central government monies (rate support grants) have become very important. The general system level would be concerned with defining the overall level of this support to local authorities in Scotland on the basis of formulae which are similar all over the United Kingdom. Two changes can be observed in the context of oil. The frrst arises from the policy that oil development should proceed as rapidly as is economically and technically possible. This implies a new interest by the general system level in the fate of particular important development applications, such as for platform construction sites. Potential conflict can occur between national and local interests and national policy must define the balance between those interests. Priority for oil clearly cannot be taken to imply absolute disregard for these other interests. This further definition of poiicy represents a new demand on the general system level. The second change regards central government support to local government. To meet oil-associated demands the level of this support has been increased. However, the definition of new needs is with the Scottish Office

and is not fixed by national norms. In this context we see a handing down of policy discretion to the program system. In another sphere, oil development has led to an increased interdependence between two general system sub-systems, the Scottish Office and the Department of Energy. This is because it is to some extent the activities under the influence of the Department of Energy that lead to planning applications to Scottish authorities. To meet these increased interdependencies implies a new need for coordination within the general system. Program system level

Prior to the impacts of oil, and particularly prior to the introduction of the present cycle of planning between local and central government, the role of the Scottish Ofice in land-use planning and development control had not been great. The Scottish Office has been the agency distributing central government money to local authorities in Scotland, but this has involved rather limited discretionary powers. In addition, for some particularly controversial planning applications to local authorities, it has taken over the power of decision, sometimes through the use of a public inquiry. However, prior to oil these interventions were rather rare. In contrast to this rather limited earlier role, at the present time we find a very much expanded use of policy discretion. This arises in several ways. In particular, because so many of the development applications are controversial or involve a deviation from expected development directions in the local areas, the Scottish Office is more often involved in calling them in for a decision. In fact local authorities have been asked to report all oil-related applications to the Scottish Office, although this will not in all cases mean a loss of decision capacity at the local level. The cycle of planning described previously can be thought of a s some shift of decision capacity on local development plans upwards from local government. The Scottish Office has to approve and may want to influence these. In addition, we have noted that the Scottish Office is producing guidelines on particular aspects of planning for use by local authorities. Second, we have already noted an increased discretion handed down from the general system level regarding the special financing of oil-related infrastructure. This finance is not applied according to preestablished norms but is, rather, considered case by case. In other areas the increased discretion exercised by the Scottish Office has involved some loss of discretion at the level of local government. The increased discretion exercised at this system level implies new needs for an intelligence capacity to support it. In addition, the program system might need increased control capacity to review the activities of the local government sub-systems. The need for increased coordination between local authorities in the light of this challenge is probably not great, because their activities are not greatly interdependent.

Activity sub-systems

Local government is the first recipient of all planning applications and, supported by the Scottish Office guidelines, it has to take an initial view. All of this has placed an additional work-load on agencies and procedures at this level.

Response to the demands General system level

There is some indication that in the early stages of development the increased policy definition, balancing oil and Scottish interests, did not occur. The resulting ambiguity about national policy may have led to uncertainty and inefficient use of resources in the program system. The evidence for this arises in connection with a controversial application to create a platform construction site at Drambuie on the west coast of Scotland. Considerations of oil development led to a support for this site which is particularly favourable due to its deep waters. However. from an environmental ooint of view the site was not a good one. The area surrounding Drambuie is of great natural beauty and would be spoiled, no infrastructure of the scale required existed locally, and the life style of the small Drambuie community was threatened. The issue could only be solved with reference to policy guidelines balancing the local and the national interests. The framework in which this issue was resolved was a public inquiry. This is an established mechanism for collecting the facts about controversial applications so that established government policy can be applied. However, in this case it has been suggested that the result of the inquiry pointed to a lack of government policy, and was used as an issue around which policy was first formulated rather than applied (Uden, 1976). The final outcome was that the Secretary of State rejected the application but one week later gave approval without an inquiry for a nearby site, which to many observers appeared a worse choice on environmental grounds. It could thus be interpreted that the lack of initial policy formulation by the national system led to unnecessary delay and to the waste of resources of both the Scottish Office and private interests. On the coordination capacity of the national system there is also doubt about the sufficiency of the response. On the whole coordination between central government departments appears not to be a well-developed function. Most problems of government arise within a particular department. Recently, there has been an increase of interdepartmental committees, but their use is said to be still quite limited. However, recognizing new demands posed by oil development, a new device-the Task Force-was created. The Secretariat of this Task Force was provided by the Scottish Office, and its membership included several departments most concerned, including the Department of Energy. By the time of this study (March 1976) this Task Force had effeo

tively ceased to operate. Its disuse was explained on two grounds: first, because the need for coordination was past its peak and, second, because through it informal contacts for coordination had been established which removed the need for a formal mechanism. The level of coordination the Task Force provided, or the coordination which it induced informally, in some respects is subject to question. One can pose questions on both theoretical and empirical grounds. On theoretical grounds, we can propose generally that such mechanisms are most effective where there is a broad parity between the bodies coordinating so that each has roughly equal influence and roughly equal to gain from the process of coordination. This is not the case between the Scottish Office and the Department of Energy. The latter seems to have much of the influence, much of the information, and would seem to have little to gain from the Scottish Office. This was confirmed in discussions with the Department of Energy. Limited relevance appeared to be given to the Scottish dimension of oil consideration. Thus for such exchange to occur more powerful and specific mechanisms may have to be created. That exchanges to the appropriate level do not occur is supported by several cases-our empirical type of evidence. The situation with planning applications for oil refineries may be quoted. At some time in the past the Scottish system has been faced with up to six simultaneous planning applications for refinery construction. Processing these has placed a load upon both the Scottish Office and local government. It has been clear in Scotland that not all, and perhaps none, of these applications would come to fruition. However, local information on which were the most likely is limited. Our discussions with the Department of Energy did not focus on precisely this issue, but the impression we received was that here was a clearer idea of the likelihoods associated with each application, perhaps some means to influence these likelihoods, and the final advice on whether a refinery application should be approved. In fact, The Petroleum and Submarine Pipelines Act of 1975 requires the approval of the Secretary of State for Energy before such planning applications are made. With smaller applications, the 'yes' or 'no' to the application could depend on expectations of future development. Again the impression we received was that the Department of Energy had relevant information which was not reaching the bodies that had to decide on the application. To the extent that policy definition and coordination have been somewhat deficient at the general system level, they will have lowered the performance of the system in meeting the challenge. Experience and time appear to have largely led to more explicit policies, but questions about coordination remain. The issue of how to achieve such coordination between the departments, in circumstances where the need for coordination is not equal on all sides, is one that merits more investigation in the United Kingdom. This means that the program system needs to perceive a more complex environment than would otherwise be necessary. This produces increasing demands on the capacities of the program system.

Program system level

We find several responses in the Scottish Office to meet increased demands for a policy function. It is not clear yet that the intelligence capacity (mainly represented in this context by the SDD) has quite reached the new demands. With respect to development control, a spatial development scheme for all of Scotland has not yet been produced, although a selection of particular scenarios is being developed which could help provide a logic for Scottish Office comment on local governments' regional reports. However, these scenarios may not be sufficient and it is possible that the effectiveness of the new planning cycle initially will be adversely affected because of the lack of a Scotland-wide view against which to judge local views. The series of guidelines which the Scottish Office wishes to produce is still only partially complete. Each set of guidelines takes up to several years to produce and involves consultation with many parties concerned, particularly local government. The intention is to produce guidelines on a range of topics such as agriculture, forestry, and river development. At the time of our study only one set was available (Scottish Development Department, 1974). Eventually they may be incorporated fully into the structure plans of local governments, but for the moment they provide basically ad hoc support in the review of individual applications. A number of organizational mechanisms have been created to further increase capability within the program system. The special funding of oilrelated infrastructure by central government is a mechanism which has been accompanied by institutional innovation in the program system. A small staff has been set up to deal with this. It is outside the SDD and the SEPD but provides a link for these two. This unit provides the program system with an additional measure of intelligence and control capacity. Another new body has been created to support policy making in processing applications and in providing coordination between governmental thinking and non-governmental bodies in the region. This is the Oil Development Council, whose membership includes prominent people from many groups including industry, fishing, conservation interests, and so on. It has established committees to examine infrastructural and environmental issues arising from oil development. From this it appears to be more concerned with the shorter-term challenges considered here than with longer-term industrial development. Of probably much less significance to the Scottish Office is the Standing Conference on North Sea Oil, a conference meeting twice yearly with a membership of local government authorities, development authorities, local industry, and oil companies; it is chaired by the Scottish Office. This may provide a small increase in intelligence capacity to the Scottish Office. Finally, we should mention the use of private consultants who, in connection with more specific planning issues, can add very significantly to intelligence capacity.

We have, thus, noted a variety of ways in which the Scottish Office has added to its intelligence capacity to support the increased policy function. For thc moment it sccms probablc that the lack of a comprehensive spatial plan to provide a logic for cvmmcnting on local authority regional planning documcnts and for vicwing scparatc planning applications is something of a limitation. Activity sub-systems-local government

Because the major impacts of oil have coincided with a radical reorganization of local government, it is difficult to identify particular responses at this level. In general, the strategy in meeting the challenges has largely increased the role of the Scottish Office. It is at this level rather than at the local governmental level that the bulk of increase in environmental complexity has been met. Nonetheless, some changes can be observed. In at least one affected region additional planners have been recruited and private consultants have been hired. Rather separately from the need to process individual applications, some regions have embarked upon quite comprehensive planning exercises to look at prospects for their future development. For those regions at least a background exists against which to view applications. This point will acquire some importance when we go on to consider the second, longer-term challenge. In the context of this challenge we have found no evidence that a lack of organizational capacity at the local govenunent level has caused any serious problems, although they (local governments) have sometimes suffered from a lack of financial resources to alleviate perceived strains on infrastructure. Response in another mode-the Shetland Islands

The foregoing discussion is valid for all of the areas subject to oil-related development with one important exception-the Shetland Islands. This is one of the areas affected in a major way. Its location relatively close to significant oil-fields has meant that its use as a service base, tanker terminal, and a landfall for a pipeline is very desirable to developers. Unlike mainland Scotland the small population of the Shetland Islands was relatively prosperous prior to oil. when balanced against economic gain the physical and social impacts of oil were locally perceived to have a clear net disbenefit. The Island Council were prepared, however, to allow development to go ahead only in the national rather than the local interest. To provide the Islands with adequate powers to control oil-related development, the Council successfully promoted a bill in Parliament, leading to the passing of the Shetland County Council Act of 1974. The Act provides the Islands with special powers as the local harbour authority: the right to acquire specific lands

needed for development and to form joint companies with oil companies in connection with terminal facilities. This gives the Island Council an equivalent of a royalty on oil passing through the Islands. The strategy adopted in this case is in contrast to that adopted on the mainland. h e r e a s elsewhere we have seen a great increase in the policy capacity of the Scottish Office, sometimes at the expense of local government, here the shift is in quite the opposite direction. This response appears to have been highly successful. The significance of this type of response may be even more important in the context of the long-term challenge, because the powers that Shetland has acquired are comprehensive enough to deal with longerterm comprehensive development. In fact, however, we will not consider the case of Shetland in the report. Because we regard it as a special case following from the unusual nature of the threat to the Islands, we regard it more as an interesting anomaly within Britain rather than a viable model which is likely to extend elsewhere. Conclusions Our analysis has shown that an increase in discretion exercised by the Scottish Office has been the primary response to the increased environmental complexity. Several steps at this level have been taken, particularly to increase the intelligence capacity supporting policy making. The scope of this study has not been such that we are able to say in any certain way whether the intelligence capacity is adequate in the present situation. The lack of a comprehensive framework such as a spatial plan for Scotland may well be a current limitation, but to comment on how serious this is in practice would require some more detailed study. We might expect that it is, in fact, more of a limitation when it comes to meeting the long-term challenge. The facilitation of oil development is a policy of the general system. However, in the early stages difficulties seem to have arisen because policy balano ing this against Scottish considerations was not explicitly formulated. Coordination between the several national system departments involved, particularly the Department of Energy, also seems to be underdeveloped. A consequence of this has been to place a greater load than would otherwise have been necessary on the Scottish Office. Problems with coordination will also be evident when considering the second challenge. Nevertheless, the total system seems to have coped well. Oil development has proceeded at very rapid rates and while there has been an adverse effect on the physical environment it has not, apparently, reached intolerable proportions. Independent studies have reached similar favourable conclusions (see, for example, Baldwin and Baldwin, 1975). The success has depended largely on the prior existence of an established system for development control. While it has proved necessary to modify and strengthen older procedures, they at least ensured from the earliest stages of oil impacts that some attention was given to relevant factors of the system environment.

7.4 The longer-term challenge

In contrast to the challenge we have just been considering we move now to an area where no ready existing system was focused on the development objective. Comprehensive regional development, based on the new opportunities presented by oil, is not an established policy within the United Kingdom and there is, therefore, no existing system dealing with the relevant environment. The extent to which it is current actual policy in regard to Scotland is, perhaps, open to question. The mode of our analysis will be in terms of the questions and issues that will need to be more carefully considered, if that objective exists or is intended. Like the previous analysis we will be involved with the three system levels, and at each level we will find more units responding to the environmental complexity. The control of physical development which was central to the previous analysis will be but one element in what follows. However, because the longer-term objective somehow subsumes the shorter-term one, or provides a different logic in which it is to be viewed, aspects of the responses described in the last section will take on a new significance. It is this combination of several policy areas and the focus on the longer term which contributes to the new challenges comprehensive development poses. There is a further factor that is important here, which does not arise in the shorter-term challenge, i.e. the effectiveness of the policy mechanisms which are used to implement policy. In development control there is no doubt that if the governmental system decides against a development application, it has powerful legal means to give effect to that decision. In promoting and otherwise influencing private industrial activity the means it generally has available are not so strong. The discussion in Chapter 6 of the types of mechanism used becomes relevant here. There some estimate of each mechanism used made along two dimensions: potential flexibility and potential influence. In system concepts these are related to the degree of complexity of the environment that they can meet. Flexibility or selectivity has a very clear correspondence with complexity. It describes the number of different states the organizational system can generate to meet different states of its environment. Influence is a compounding factor. If the mechanism has 'low influence' we are suggesting that it is not a major factor in influencing those private systems of industry which are in the governmental system's environment. A mechanism can have high flexibility but if it is of low influence we can not be sure that each different state of the mechanism will invoke a distinct response from the system environment. That is, the complexity the mechanism can meet will be reduced. Taking into account all of these ideas, which will add to the complication of the analysis, the general procedure we will follow here will differ slightly from the previous section. Here we will consider each system level in turn, look at the demands arising at that level due to its role in objective setting, and then contrast this with the apparent capacity of the level to meet these demands.

The general system level Demands

The environmental complexity which the general system level must meet follows from the type of objective it sets to the system. With respect to the objective of comprehensive development related to oil activities we can identify three important relevant areas in which policy definition is largely at the general system level. These are concerned with macroeconomic policy, energy policy, and industrial policy. For the purpose of simplicity we will include in this discussion of the general system level those sub-systems involved with these particular policy areas. The whole issue of the areas of policy over which a Scottish system should have discretion has been subject to much debate within the United Kingdom. A shift of discretion to the program system in any of the relevant policy areas would, of course, decrease the demands on the general system level. There have been some developments recently towards decentralization or devolution of policy discretion from the general system level to the Scottish program system. However, they have made relatively limited impact on the present case. Neither macroeconomic nor energy policy has been affected; policies in these areas are still entirely an all-United Kingdom concern. Industrial policy has been affected. Some functions of the Department of Industry in Scotland have been transferred to the Scottish Office. However, this is almost entirely the transfer of an administrative function-the administration of benefits to industry under the Industry Act of 1972. These grants have only a limited discretionary element, which would imply a policy function for the Scottish system. By far the most significant move towards reducing the demand on the general system level is still for the future. This will be with the creation of an elected Scottish Assembly. The extent of the policy discretion this Assembly will have is still not clear. Probably it will not include energy or macroeconomic interests and a significant role for the general system level will remain with respect to comprehensive development. For the present, therefore, policy definition at the general system level addresses a large part of the environmental complexity associated with this challenge. The formulation of energy policy or of industrial policy is nothing new in the British system, of course. What is new in the context of a comprehensive development objective is that there is an implication for integration of these policies, which reflects the interrelations in the environment of the dimensions that each relates to. In addition to integration, the particular ways in which each policy area relates to the Scottish environment needs to be considered. The mechanisms which the general system level uses to implement its policies contain among them some of the more powerful of the set identified previously. So we have a situation where this level is likely to be influencing factors in the environment. This may be in a way which is conducive to

Scottish development, or could make that objective more difficult to achieve. In reviewing the demands on the general system level with respect to comprehensive development in Scotland we can identify the need particularly for a policy capacity focused on Scotland. This should be supported by an intelligence capacity which considers both the integration of separate policy areas and their special influences on Scotland. In addition, because several policy areas impact on comprehensive development some increase in coordination between the departments responsible for these policies and the Scottish Office may be necessary. Responses

Other than responses directed at shifting discretion from the general to the program level (discussed above), we have not been able to identify changes which increase the policy or intelligence capacity at the national level to support the degree of policy discretion which it still retains relevant to Scottish development. Let us address the policy issue first. Within the British system policy is the function of Parliament and government. In government, particularly in the Cabinet of senior ministers, policy attention is most likely to be focused along departmental lines. The Secretary of State for Scotland is but one among twenty or so of these senior policy makers. There has been some suggestion that the influence of Civil Service departments on the choice of policy options by ministers is strong, and if so this would militate against a development of policy function focused on issues of Scottish development. However, observations on this question must remain speculative. Within Parliament is a group of Scottish MPs who consider bills affecting Scotland before they are passed. While important, this group is concerned with amending proposals from the separate policy areas. It will not itself generate proposals so a comprehensive Scottish policy is not likely to be a result of its activities. In practice the way policy attention is focused depends largely upon the way alternative possibilities are analysed. This moves us on to the intelligence function. The rather limited scope of an intelligence function which could be focused on comprehensive development is probably the most serious limitation to the formulation of such a comprehensive policy. The intelligence capacity at this level is mainly located in the separate departments. Comprehensive regional development is an area that cuts across departmental responsibilities. It would not, therefore, be supported naturally in the British system by an intelligence capacity. While interdepartmental groups do exist they appear to be more concerned with coordination than with integration of intelligence capacities. We have not, in any case, been able in the course of our study to identify such a group concerned with comprehensive Scottish development. The Task Force referred to earlier seems to have been concerned with a much

more limited set of issues and was primarily coordinatory in its nature. Outside the departments some capacity does exist to support cross-cutting policies. The most important unit is a Central Policy Review Staff. To our knowledge it has not considered development policy. Outside government, private research bodies have looked at the question of Scottish development. Our impression is that their work has not generally had a direct input to government policy-making at the national level, but this is something we have not been able to consider in depth. The Scottish Office would, of course, be very closely involved with the issue of comprehensive Scottish development. As we shall see a little later, it does not have internal capacity or responsibility to consider all of the elements that relate to comprehensive development. Within the limitations of this study we are left with serious doubts about the capacity of the system to integrate the separate aspects of policy which are relevant. The second requirement that the intelligence function might be expected to fulfil is the consideration of the particular Scottish environment in analysing the implications of separate policy areas. Of the three policy areas we have specifically considered our study has shown an almost total lack of Scottish considerations in the Department of Energy. The Treasury is mainly responsible for formulating macroeconomic policy and we have no evidence one way or the other regarding it. The third area, industrial policy, is an interesting case for closer examination. We shall spend the next few paragraphs enquiring into the extent to which the Department of Industry is able to take into account the Scottish environment in designing mechanisms which are used to attract industry to Scotland. The Department of Industry has responsibility for supporting industrial policy along both its sectorial dimension and regional distribution. The most important mechanism it uses for the latter are a collection of benefits to industry operating or locating in specific areas. The most important component of these benefits is a grant towards new capital investment, but there are others such as preferential treatment for government purchases. In their power to influence private industry these mechanisms have been shown to have a positive effect but are difficult to quantify more exactly. The important point about them, however, is not their influence but their flexibiiity. Their flexibility is very low indeed. (There is a more flexibl-but small-component of these grants at the discretion of the program system. This is discussed later.) The primary criterion for specifying areas where these grants apply is the unemployment level. Once an area is so specified the grants apply indiscriminantly to new capital investment. An area once defined as eligible is unlikely to lose that status. The limitations of this lack of flexibility are clear. All of Scotland qualifies for these benefits (although at two levels) including areas at the centre of oil activities where market forces alone are sufficient to attract industry and the area is under strain in receiving it. The relationship of

grants to capital investment means that capital-intensive industry can receive very large amounts of aid while providing few jobs. If an oil refinery is built in Scotland it will be a major example of this. The single focus on employment does not allow the grants to be used to stimulate potential centres of growth. Nor does it afford protection for areas with currently low unemployment where future decline is forecast. For Scotland, as for other areas in the United Kingdom, it provides no preference for industry that could provide a focus for future diversified growth compared with investments that are likely to remain 'industrial islands'. All of these points are indicative that the complexity of the mechanism is very much less than the complexity of the environment it operates on. Justifications have been presented for this lack of complexity or flexibility. The general argument is that there is some trade-off between flexibility and influence of these mechanisms. That is, simple mechanisms which change only slightly are likely to be more easily communicable to industry and provide industry with sufficient confidence to plan over the longer term. We cannot comment on this. However, it is possible to point to insufficiencies of organizational capacity which may Z ~ be O a reason for the low flexibility of the devices, e.g. the Department of Industry may not have the capacity to provide more flexible ones. The major lines of intelligence with this department are sectorial. Only a very small group is monitoring regional policy and is not currently concerned with developing new policies. (It has in the past had the support of expert committees.) No group is concerned specifically with Scotland. To remedy this almost total absence of capacity, the provision, at the level of the Department of Industry, of devices which take into account the diversity of conditions and opportunities for the different parts of the United Kingdom would require the commitment of very significant resources. The National Enterprises Board (NEB) is a quite different device which could be used to influence the industrial element of the Scottish environment. It receives its operating guidelines from the Department of Industry and is being regarded here as part of the general system level. Here again we were told that in the extent to which the NEB uses regional considerations they are limited to a consideration of regional unemployment levels. The KEB is not an agency that adds intelligence on the Scottish environment to the general system level. Summarizing the intelligence capacity at the general system level as a whole we tentatively conclude that the capacity to either integrate policy areas as they affect Scotland or to take sufficient account of the Scottish environment in particular policy areas is very limited. We have supported this last conclusion with particular reference to industrial policy. Our analysis of the response at the general system level will conclude wlth a very brief look at the coordination function. In addition to the Task Force, some attention has been paid to coordination in relation to industry. Thus the need for coordination between the NEB and the SDA has been explicitly recognized, although it may not yet have been implemented. In addition, the

Offshore Supplies Office probably plays a rote in increasing coordination between the Department of Industry, the Department of Energy, and the Scottish Office over the particular question of the British and Scottish industrial contribution to oil activities. The program system

Demands Figure 7.2 shows the major organization units and mechanisms which form the program system and its sub-systems. We will be concerned here with those parts of the system at the Scottish Office level. The sub-systems will be separately analysed later. Because the general system level addresses a large part of the environmental complexity associated with Scottish development and because it appears not to have the capacity to fully match this complexity, the achievement of a comprehensive development objective may be more difficult. Nevertheless, within constraints arising from the general system level there are instances of policy discretion available to the program system that make the achievement of comprehensive development still a plausible proposition. Areas of discretion available involve the use of discretionary benefits to industry (by general

&General system

Figure 7.2.

The program system and its sub-systems

grants and through development agencies), the construction of infrastructure to attract industry, and some general promotional activity. The direct use of these mechanisms is mainly with the sub-systems. The demands on the Scottish Office derive, therefore, from the way it sets objectives to those subsystems-local governments and development agencies. The more detailed the objectives set, the greater will be the demands on the Scottish Office capacity. We can examine in turn the objectives to each type of sub-system. Let us look first at the objectives to local government. The Scottish Office can be thought of as 'setting objectives to' local government through its influence on local authorities' own planning. Through publishing guidelines, and more importantly through its comments on regional reports from local government, the Scottish Office has the possibility to influence planning at the local level. Since the first cycle of planning under the present system is not yet complete, it is very difficult to say exactly hoiv that influence will be used. Various outcomes are possible. A minimum role we may pose for the Scottish Office (through the SDD) may just be to check each regional report for internal consistency, for consistency with explicit central government policy (e.g. on green belts around cities), and for financial plausibility. This would imply mainly a control function and would not make large demands on an intelligence capacity. Going beyond this the local plans may be checked for consistency one against the other-do the sum of the plans in terms of population and industrial development forecasts, for example, represent a reasonable forecast for Scotland as a whole? Detecting any contradictions is fairly straightforward, but resolving contradictions implies some overall view for Scotland. We might assume this to be the minimum position intended when the system of planning was designed. A comprehensive development objective for Scotland taken as a whole is suggestive of a further role for the Scottish Office, i.e. of generating an overview for all of Scotland against which each local plan on its own can be judged. This would require some intelligence capacity able to combine the spatial and the industrial dimensions of planning. At the moment it is unclear just how much influence the Scottish Office will have on local authority planning, so it is not possible to assess the demands that this will make on Scottish Office capacity. The discretion exercised by the program system is clearer in the case of industrial development sub-systems. A priori, several roles for the Scottish Office could be postulated. The maximum role, which is also consistent with a high influence on local authority planning, would be to integrate the development agencies into a comprehensive logic which considers both the spatial and sectorial characteristics of Scottish industry. A lesser role would involve setting objectives only in terms of a sectorial logic. Finally, the objectives set may, indeed, be very generally objectives and allow the agencies maximum flexibility in responding to problems as they arise. That the latter course had been chosen, at least for the important SDA, seems confirmed by the guidelines produced for its operation by the Scottish Office (Scottish

Economic Planning Department, 1976). Briefly, it is to operate almost as a commercial holding company with the profitability of its investments as a key factor. The major differences with a private company will be the possibility to take a longer-term view of a company's prospects. It is to provide support to companies that in the short term may have gone bankrupt but seem to have longer-term prospects. The guidelines are explicit that the SDA involvement in a company should not give it unfair advantage over competing companies. The mechanism of the SDA seems to be intended as a somewhat minor perturbation to the operation of market forces rather than the implementation of a planned strategy for industrial regeneration. The perturbation is in the direction of protection of the weakest from the impacts of the market, rather than reinforcing the strength of the strongest, which would require some degree of long-term planning. This will be a particularly important factor when the closure of particular companies would make worse a poor local employment situation, and it indicates a focus of the SDA very much towards the Glasgow region. To support objectives of this nature does not demand a large intelligence capacity in the SEPD. The generality of these objectives and the probability that Scottish Office influence on local government planning may initially be quite limited suggests a very high need for a coordination capacity in the program system. Issues of location of industrial development are ones in which there is a high interdependence between different localities. While the intention is to increase the total level of development, it is the distribution of a given level of development which can be the most visible result of policy in the short term. This requires some measure of coordination and consensus between local authorities. In addition, because both the local authorities and the development agencies are in different ways dealing with industry, it is clearly desirable that they coordinate activities. To the extent that all of the sub-systems are not operating under a consistent set of objectives set by the Scottish Office, the need for coordination is increased. In summarizing the demands on the program system level we have observed that, in setting objectives to its sub-systems, it is using only a small part of the policy discretion which is apparently open to it. This suggests some closer consideration of the policy capacity at the regional level. The nature of objectives set do not pose great demands on an intelligence capacity at this level. The main demand is to provide a logic in both spatial and economic terms to assess local government plans. These general objectives, do, however, pose a high need for coordination between sub-systems. Responses

The Scottish Office is the lowest system level at which comprehensive development issues can be considered. Below this level only the development of particular regions or particular industrial questions will be considered. If

we assume that comprehensive development for Scotland is an objective of the system, we might expect to find some minimum policy function within the Scottish Office. Both the SDA and the current system of planning at the local level are too new to base any comments on actual operation. But on current evidence it seems possible that the Scottish Office will not provide the minimum level of integration between the several sub-systems to make comprehensive development meaningful. This could suggest that the objective we are assuming is not the actual one. Quite possibly the pressure of a series of short-term issues is such that they demand all the attention and resources available to the Scottish Office. This, in itself, would suggest a lack of organizational capacity to meet a comprehensive development challenge. A diierent possibility is that the Scottish Office does not have as much policy discretion to determine its sub-system objectives as we have assumed. Rather it could be argued that through traditional and legal factors the level of autonomy of the sub-systems is high. This is more or less likely depending on the sub-system. It is certainly true that by long tradition there is an established separation of powers between local and central government. Local government derives its legitimacy not only from central government but also from the electoral democratic process. The current system of planning could be seen as shifting the line between central and local government towards an increased role for the former. The increased dependency of local government on central funds has at the same time increased the possibility of central government to control local government sub-systems. Nevertheless, there are probably limits to the influence central government can have on the way local governments view their future. Turning to the industrial side, it is more doubtful that such limitations exist. The act creating the SDA sets the broad boundaries on the way in which the SDA may be used. Those boundaries are wide and seem to envisage a mode of operation with a long-term comprehensive view. The contrast between the possibilities apparently implicit in the act and the objectives set by the Scottish Office in the SDA operating guidelines is very noticeable. The whole issue of what the real policy discretion of the Scottish Office is and to what objectives that discretion is directed is a very major one and needs more study. An assessment of the adequacy of the intelligence capacity of the Scottish Office depends critically on assumptions made about actual policy. Because there is uncertainty about this issue we cannot set up with confidence a demand for intelligence capacity against which we can compare the capacity which appears to exist. However, the comments above are suggestive of a rather limited policy role in the Scottish Office, and to support this the demands for intelligence capacity would not be great. Consistent with this we have found that, in fact, the internal capacity of the Scottish Office is not large. The spatial and the economic intelligence capacities are located respectively in the SDD and the SEPD. Only in a rather narrow context of infrastmctural aspects of oil development have these sides been brought together. No comprehensive plan for Scotland linking these two

exists. Indeed, as we observed earlier, no comprehensive plan on just spatial aspects exists. This seems sure to limit the degree of comment on local government plans, at least for the next year or so. On the economic side little intelligence capacity appears to exist. To extend that capacity with respect to applying the discretionary element of grants under the 1972 Industry Act, a new board including prominent members of the Scottish industrial community was created, in the same act which created the SDA. However, it is unlikely that this can support longer-term comprehensive policy. Nor do we find much use of industrial or economic modelling to support assessments of this type of policy. One interesting reflection of this is in the fact that the first input-output model of the Scottish economy is being constructed by private organizations-the Scottish Council Research Institute, the Frazer Allender Institute, and IBM. The SEPD do not have the internal resources to build such a model and it does not seem to have an obvious interface that could be useful in policy formulation. While it is expected that the SEPD may be a customer for the model once it is running, the SEPD has not played any central role towards the construction of the model. This example does indicate that there are private research groups which could make up for a lack of internal capacity in the Scottish Office. In particular, the Scottish Council--Development and Industry has considered the problem of comprehensive development leading to far-reaching policy proposals. We found no evidence, however, of a systematic attempt by the Scottish Office to direct this capacity in directions that could support its own policy making. Overall we find a quite limited intelligence capacity in the Scottish Office which is broadly consistent with the policy function at this level. An intriguingquestion that we are not able to answer is whether it is the limited intelligence capacity that arises because of the limited policy discretion exercised by the Scottish Office, or vice versa. The requirement for coordination in the program system has three components: coordination between development agencies, between local authorities, and between local authorities and development agencies. The need for coordination between development agencies is recognized, particularly with respect to the operations of the SDA. There is no obvious reason why such coordination cannot be achieved. The need for local authorities to coordinate arises to the extent that they may be spending resources in competing for the same industry. Some level of competition could be considered healthy and could lead to a greater Scottish industrial development than would otherwise have been the case. However, if scarce resources are being used to build roads or factory estates, then it is desirable that each authority knows what the others are doing. If the Scottish Office takes account of this in reviewing local authority plans then the need for coordination is reduced. Some mechanisms do exist to provide coordination between local authorities e.g. meeting of leaders of local authorities, but we do not know the degree to which they meet this need. For the third component of coordination, that between local government

and development agencies, we find the need to distinguish between the HIDB and the SDA. Whereas the HIDB appears to work in harmony with its local authorities, there are few obvious contlicts of interest between it and local authorities. The same may not be true of the SDA. This latter includes both the natural growth centres for oil-related industry (e.g. Aberdeen) as well as the Glasgow area, which it may do most to support. Already there are womes in the former areas that ad hoc support of Glasgow may have a negligible beneficial affect on Glasgow while dissipating their own growth potential. The location of BNOC in Glasgow rather than in Aberdeen was given as an example of this type of action. It seems unlikely that satisfactory coordination can be achieved if local authorities, particularly in the North-East of Scotland, and the SDA are working from entirely different assumptions of desirable development. Activity sub-systems

Industrial development agencies At the time of our study the SDA was just starting operation and it was too early to make any assessments of its capacity. The mode of operation laid down for it has emphasized flexible operation along broadly commercial lines. It does not seem to be intended that the SDA should develop a long-term attitude to comprehensively view Scottish industrial development. The guidelines for its operations are explicit that under these conditions long-term planning can be nothing more than a broad outline. At the time of our discussions with the SDA there was no intention to set up a special planning department. The several interests of the SDA-small industry, trading estates, and special assistance-will be carried out through separate divisions, and it is not clear how much integration there will be between these interests. The HIDB is in a quite different position to the SDA. Both its resources and the complexities of industrial decline it faces in the northern part of Scotland are much more Limited. The low density of population and low existing level of industrial development over most of its area make the possibilities for comprehensive development of the area unreal. Inevitably the HIDB finds itself considering a large number of small industrial projects in far separated areas, which have little interconnection one with another. Within these limitations, however, the HIDB attempts, and apparently succeeds, in taking a comprehensive view in close coordination with local authorities.

Local government The real degree to which local government can exercise policy discretion in its development plans is something that still needs to be established as the central government/local government discussions on regional reports proceed. It is likely that some considerable discretion at the local level will emerge from this.

Our experience of the capacity of local government to formulate development strategy comes mainly from study of the Grampian region. This region includes Aberdeen and is an area greatly affected by oil development; there is some reason to suppose its strategy formulation is somewhat in advance of the average. The new system of preparation of regional reports was anticipated by this region and the integration of spatial and economic dimensions in a corporate approach is well advanced. Prior to the reorganization of local government which created this region, planning on the basis of this area was carried out by the North-East Scotland Joint Planning Advisory Committee (NESJPAC), established in 1970. The preparation of a regional report was approved in January 1973, and by September 1974 the summary and conclusions of this report were prepared. This anticipated Scottish Office instructions to regions to produce such reports, which were circulated only in 1975. The report was produced with the support of Aberdeen University and other similar bodies, and involved industrial, governmental, and other bodies. Thus, it appears to represent a considerable focusing of intelligence capacity. Since the reorganization the functions of NESJPAC fall naturally to the Grampian region. For this one region at least the capacity to base policy on a reasoned assessment of the future possibilities does exist. The possibility to implement (or influence) a particular future is somewhat limited. One device is the use of infrastructure. Several factory estates have been built which are thought to have had a positive influence in attracting industry. Another means is through promotion. A North-East Scotland Development Agency (NESDA) existed prior to reorganization and is now part of the Grampian administration. It has been very active, promoting exhibitions, advertising, and producing publications to help customers identify potential suppliers in the region. It is exceedingly difficult to make an assessment of the degree of influence local government can exert towards achieving comprehensive development other than to say that it must be positive. On the basis of this one region we would summarize the situation at this level as follows. It is likely that with respect to comprehensive development, local government will emerge from the current planning cycle having established a good deal of policy discretion. The intelligence capacity exists to support this, but the mechanisms available at this level are such that it is questionable whether local government has the influence to achieve a particular chosen future.

summary An analysis of the response to the challenges posed by achieving comprehensive Scottish development on the basis of oil has involved looking at the three systemic levels: general system level, program system level, and activity subsystems. The scope of the challenge is such that it has at times raised issues beyond the scope of our data, and several questions have been raised which

Table 7.1. Organizational capacity System level

Policy discretion exercised with reference to development objective

Intelligence capacity to support policy

Means to implement policy

General system level

High

Low

High

Program system level

Low

Low

Through objectives to sub-systems

Middle to high (?) High

High

Low

Low

High

Activity sub-systems Local government (Grampian) Development agency (SDA)

merit closer study. This is particularly true if one moves from the mode of diagnosis to positive policy recommendations. Despite the restrictions inherent in this limited study, it seems possible to conclude some degree of maladaptation of the organizational system to meet a comprehensive develop ment objective. Whereas in looking at the objective of protecting the local quality of life we were able to identify some particular strategy to meet the challenge, that is not the case here. Of course, this could imply that comprehensive development is not, in fact, a system objective. If it is, there aDoears to be a mis-match between the distribution of poliw discretion, intelligence capacity, and mechanisms for implementation between system levels. We have found that through its national ~oliciesconcerning - economic management, energy policy, industrial policy, and regional policy, the general system to svstem level has ~rovidedclose limits to the freedom of the program - respond to the complexity of its environment. While substantial intelligence capacity is available to support each of these policies separately conceived, very little capacity is focused on their effects with respect to Scottish development. This is a consequence of comprehensive regional development being of an interdepartmental nature. This argument suggests that policies which have an impact on Scottish development are insufficiently supported by intelligence capacity focused on Scotland. Within national policy constraints there is an area where discretion exercised within the program system can be effective. This is through both the use of infrastructure and financial support to industry. The Scottish Office, as the highest level of the program system, might have, but appears not to play, a significant role in elaborating these policies. On the 'infrastructure side', one reason could be the separation of powers between central and local govem-

..

A

-

.

ment. On the financial grants side, the main intention seems to be operation within the market with an emphasis on the short term. Only at the local governmental level does there at present appear to be integrated intelligence capacity. However, the implementing mechanisms available to it are limited. Table 7.1 makes a tentative and simplified presentation which highlights the mis-match of capacities. The establishment of a more complete and better substantiated table of this type would be a major step towards practical recommendations to support policy. 7.5 Directions for future policy

The scope of this case study is not sufficient to support policy recommendations. It is instructive, however, to illustrate how the m.- e of results obtained could be used to support policy. An important point is that by highlighting mis-matches in functional capacity we are not pointing to some particular solution but are preparing the ground to assess the adequacy of alternative proposals. There are, in principle, many ways of adjusting capacities at different levels to achieve the desired balance. If we address what appears to be a major mis-match-the lack of intelligence capacity of the general system level supporting policy with respect to comprehensive development-then two contrasting proposals immediately are suggested. We could either increase the intelligence capacity to support the existing exercise of policy or, alternatively, policy capacity could be handed down to the program system, so bringing the exercise of discretion at the general system level in line with its intelligence capacity. The first alternative supports a strengthening of centralization in the United Kmgdom; the second is devolutionary. The choice between these is not something that can be based on organizational analysis; it is a major policy choice for the British society. However, organizational analysis can point to the requirements for either approach to be successful and to the possible difficulties to be expected. In the United Kingdom there do appear to be difficulties in focusing satisfactory intelligence capacity on regional development. This is because of the interdepartmental nature of this objective. The most complete resolution of this difficulty might be to reorganize the Civil Service departments so that comprehensive development is covered by one department. This is far reaching, but is unlikely unless the policy emphasis towards this type of development becomes much greater than it appears to he currently. This type of solution may also cause new difficulties with policy areas that, as a result of reorganization, are interdepartmental in nature. The difficulty is with managing an undifferentiated capacity. However, as soon as a structure is defined, some issues will cut across it. A more plausible solution lies in the design of new mechanisms to focus the capacity of several departments on important cross-cutting issues on a continuing basis. If there would be difficulties in achieving a fully integrated capacity, the difficulties of introducing a regional focus in particular policy areas are

much less. For example, if the definition of regional industrial benefits is to remain with the Department of Industry, then it seems both possible and desirable that it should add capacity to take more account of the differences between the regions. The alternative strategy is towards devolution of policy capacity. The difficulties here have recently been well debated in the United Kingdom. In essence there are some aspects of policy that cannot be reasonably devolved to regions. While defence is one policy where this point is generally accepted, other policies related to this objective (e.g. energy policy) are ones where there is disagreement. Resolution essentially involves a policy choice by the setting. We might also note that such a policy applied generally could lead to a new and possibly undesirable competition between different parts of the country for the same industries. If a devolutionary course were followed then it would have to be accompanied by a supporting increase of the other functional capacities of the program system. A barrier towards comprehensive Scottish development at the present time is not only through national constraints but because the Swttish Office does not choose, or has not the capacity, to use the policy discretion it has. A further shifting of policy discretion to a Scottish system without an increase of intelligence capacity is unlikely to be a benefit. Within the present system comprehensive development could be furthered by a more explicit role for the Scottish Office. Policy decisions would need to be taken which made clear the relative weights to be given to alleviating current problems in one part of Scotland against supporting possible growth in another. Such a policy would appropriately be based s n considerable analysis of the future of Scotland on various alternative assumptions. It is not clear what is preventing this type of comprehensive analysis going on at present. A final consideration we will mention here is the way in which the separation of powers between local and central government limits the possible distribution of discretionary power. The reorganization of local government has led to planning which is generally on the basis of somewhat larger units than previously. However, they are still quite small units for planning comprehensive development. We have assumed that the necessary integration of local plans could be carried out by the Swttish Office. However, if this is not feasible because of separation of power considerations then some new type of regional organization may have to be considered which would unify the planning of several local government regions which are most obviously linked. 7.6 Conclusions

A major objective of this case study has been to demonstrate the approach to the organizational dimension of large programs. This has justified a level of analysis which sometimes has gone beyond the proper limits of our data. Accepting this limitation a number of observations have been made which, if

accepted, should be of value in the design of organizational systems for comprehensive development. Not all of the observations are new. Some correspond to conventional wisdom in Britain. They are held either because they are intuitively obvious or have been derived from some other methods of analysis or because they correspond to some widely held political view. We cannot be surprised that this new approach gives rise to some older views. It would be somewhat worrying if it did not since the world we are analysing is the same world others have analysed before us in different ways. The particular benefit of the approach seems to be that it has raised all of these questions and possibilities in a unified way. The substantiation of outputs from the approach is scientific-not political or common sense. At the same time as pointing to organizational problems, it allows an assessment to be made of the effectiveness of alternative ways of meeting them. Unlike some approaches to organization, this approach is not concerned with some single, supposed optimal, form. Rather, we are concerned with overall consistency within a whole system to the challenge posed by particular programs. That consistency can be achieved in many ways; the way chosen will be a complex reflection of organizational strengths and policy preferences within a setting. Policy makers, not scientists, are best equipped to judge these things. Thus the type of analysis demonstrated here provides a basic input to the complex process of systems design for program implementation.

CHAPTER 8

The Brats k-Ilimsk Territorial Production Complex (BITPC): Background Description 8.1 Planning and management challenges of the territorial production complex (TPC)as a strategy This chapter presents a study of the organizational and managerial dimensions of the territorial production complex at Bratsk-Ilimsk in Siberia (see Figure 8.1). The projects at Bratsk have been the object of planning and managerial attention for more than twenty-five years. Bratsk was one of a series of TPCs[l] conceived as a strategy for exploiting the vast hydro-power and mineral resources of this part of Siberia. The Bratsk and Ust-Ilimsk hydro-power stations are components of a five-dam cascade system designed to capture the power potential of the Angara-Yenesei river system. The strategy couples each dam with a matrix of complementary, energy-intensive industries and support settlements. Conceived in the context of an electrification strategy during the 1920s, the Bratsk dam was begun in 1954 and completed in 1967; the dam at Ust-Ilimsk is now under construction.

Figure 8.1. Bratsk-Ilimsk territorial production complex in the USSR from Knop, (1977)

149

Figure 8.2. Bratsk-Ilimsk Territorial production complex in East-Siberia (from Knop, 1977)

The Bratsk-Ilimsk TPC covers a land area of approximately 100,000 square kilometres (see Figure 8.2) and is comprised of three nodes: Bratsk, Ust-Ilimsk, and Zheleznogorsk. The nodes are at different stages of development. In 1975 'Bratsk was approaching a steady state with a population of about 250,000 people; the dam at Ust-Ilimsk and the industrial plant at Zheleznogorsk are under construction and there is a working settlement of approximately 30,000 to 40,000 at each centre (Knop, 1977). Recently the management of TPCs has been under discussion by scientists and policy makers in the Soviet Union. This analysis focuses upon the major elements of TPC as a development strategy today using the experience of Bratsk-Ilimsk to increase the level of detail of our understanding of the nature of the planning and management processes involved. The concept of the TPC TPC development has become a primary strategy in the Soviet Union for the development of its frontier, i.e. pioneer regions. In this context, TPC development has become more and more typical. At the same time, however, the concept of TPC, in its goal-oriented complexity, differs from the sectorial development which characterizes much of Soviet national growth strategies. The concept of TPC at present provides a framework to support territorial formations. As such it does not address questions of organization in the steady production stage, but rather it addresses the transition of undeveloped areas into industrialized territories. In this transition the aim is to create a

balanced and complete territorial formation. This generates interrelations that pose important planning and management challenges. The transition is initiated by extensive research on territorial economic potential. Lines of industrial specialization are defined and realized through the creation of industrial nodes. The newly created industrial nodes provide the opportunities for further territorial formations. It is at this stage that TeCs begin to have an economic and organizational significance. The TPC concept, originated in the 1920s, has evolved along with the better understanding of these interrelations. This has implications for BITPC. The operative strategies for Bratsk in the first decade of its development differed somewhat from the concept of TPC as we now understand it. In fact, the process of developing Bratsk affected the then-evolving concept of "PC' formation. In turn, modelling the conceptual research on TPC development affected activity in Bratsk, especially during its-second decade. This symbiotic evolution is particularly relevant when we consider certain of the management characteristics of Bratsk in the light of present TPC definition. One cannot expect to observe all the dimensions of the current concept of TPC in the Bratsk development. At present TPCs are defined as objects of planning in the Soviet economy. This definition has organizational implications. It is not sufficient to have an abstract recognition of interactions. If they are to have a concrete meaning, in the form of decisions, an organizational capacity is needed to realize them. Thus the concept of TPC implies that attention is transferred, in the case of Bratsk-Ilimsk, from the economic dimensions to more specific and clearly interconnected sets of programs. The concept of TPC thus implies the transition from an economic conception of a regional program to its organizational dimension. Planning and management challenges Historically, and to the present time, the development of the Soviet economy has been managed by a mainly sectorially organized planning and management system. TPC development hinges on the notion of intersectorial activity, complemented by social and technical infrastructure development whose timing in a frontier leaves little margin for slippage. A TPC-based development strategy thus places new demands on the Soviet planning and management system. From these demands five planning and management challenges can be identified which are characteristic of TPC development, particularly in the formative period. 1. The definition of TPC specialization presents special challenges to the national planning system. The somewhat separate justification of investments, supported by national norms and standards, may be sufficient for the bulk of Soviet investment in developed settings. However, this procedure cannot capture the complex support of one investment by another that TPC formation involves.

2. Synchronization of industrial development controlled by different sectors increases the demands on the ministries for an all-round coordination across activities related to the TPC. In addition to synchronization of industrial complexes themselves, synchronization of the technical infrastructure which supports industrial activity is of equal importance. 3. Synchronization of industrial development (sectonally managed activity) with the construction of social infrastructure (territorially planned activity) has a significance in frontier regions which is unparalleled in other regions. In the context of an undeveloped region where the TPC forms a sort of oasis in the countryside, coordination demands a very high level of exactness. Miscalculations in this context might affect the balanced development of the region. 4. Planning for integrated systems of social infrastructure represents an area of activity as important as the management of the industrial activity. In this context the challenge is to design and construct attractive and selfcontained settlement communities in the wilderness, not simply to construct adequate shelter. The provision of schools, medical facilities, shops, and public transportation fall within this category. 5. Finally, if the TPC is to be as self-contained and self-supporting as possible, there is the set of management considerations which revolve around the choice and operation of secondary and senice industries, i.e. 'completing' industries[2]. It is these industries, often the responsibility of republican and union-republican ministries, which provide food, clothing, and jobs for second and thud family members. These five dimensions of TPC development provide the basis for our analysis of the planning and management processes in the BITPC. They will be consolidated into three primary challenges (see Figure 8.3) in Chapter 9, where our interest will be to identify the organizational strategy which was used in the BITPC to meet these challenges. Methodological remarks

An examination of the organizational dimensions of BITPC requires a sound understanding of the basic elements of the system of planning. Our under-

Elements -

Management challenges

1

Infrastructure Secondary industry)

,Community formation

Intersectoral Sectoral territorial)

.

-

Implementation -~~nchranization

Figure 8.3. Elements of the TPC as a development strategy

standing of that system is contained in the next section (Section 8.2). It will cover preplanning, the process in which opportunities are recognized and activities substantiated, and planning, the actual decision process in the Soviet context. The complexity of this system of planning is huge and we do not claim an understanding of its totality. Rather, attention has been centred on its implications for the particular TPC (Section 8.3). Following this (Section 8.4), the major actors of the BITPC are identified and their embedding in the system of planning is discussed. In addition, special attention will be given to the management mechanisms particular to the TPC. This background information provides the data base for the systemic analysis of the organization and management of the BITPC (Chapter 9). The thread of this argument is the management complexity of the national and territorial systems. In particular, the implications of this situation in the transition from sectorial to sectorial-territorial management are analyzed. Finally, this analytical presentation of the alternative and viable distributions of control capacity among administrative groups, both national, sectorial, and territorial, provides the springboard for comment on some of the management solutions for TPCs suggested by Soviet scientists and practitioners (Chapter 10). 8.2 System of planning in the Soviet Union

Territorial production complexes (TPCs) have been defined as comprehensive objects of planning. For the purpose of analysing the implications of this definition the system of planning in the Soviet Union is outlined in this section, with emphasis on its territorial-sectorial dimension. Although the behavioural implications of the planning system are most interesting, this research does not focus on the planning system as a whole but rather uses it as background for analysing the processes supporting the BITPC.

Decision time frames in Soviet planniig In the Soviet Union the role of planning is to provide a comprehensive approach to the task of policy making and decision taking. Plan formulation is the decision process in itself. Once a plan has been formulated and approved decisions affecting different horizons have been taken. This is the logic of a planned economy. The Soviet system of planning considers mainly three time horizons; the decisions in each of them are of a very different nature. They evolve from a broad definition of long-term strategies to the very detailed specification of tasks. 1. Long-term plans represent a basic selection of future development strategies, although the means to achieve them are left open for later decisions. Normally these are fifteen-year horizons and represent a selection of driving forces for socioeconomical development.

2. Five-year plans, or medium-term plans, specify the particular programs to implement long-term policies. At this level, technologies are selected and targets specified. Decisions at this stage imply a foreclosure of alternative futures. Their legal status requires mandatory fulfilment by the implementing bodies in the whole economy. Planning for five-year horizons represents the most important decision process in the Soviet Union, and this is reflected in the very careful preparation of these plans. 3. One-year plans, or short-term plans, represent the mechanism to review and up-date the five-year plans. They provide a mechanism to introduce corrections and steer plans. However, it is assumed that the yearly disaggregation of the current five-year plan provides the reference level for the definition of annual plans. In this context annual plans play the role of a policy instrument as well as that of a control device. Supporting each one of these plan-elaboration processes there is an extensive network of 'intelligence' organizations preparing alternatives and substantiating programs. Long-term forecasting, design activities, and so on, are part of this preparatory work. This is called the 'preplanning' stage and functions in support of each type of 'plan' during their elaboration processes. Thus, preplanning operates in parallel to planning and operates on a wntinuous basis. Finally, the instruments for plan implementation are called 'operative plans', which do not follow all the steps for plan approval and are prepared for quarters, months, weeks, and days. This discussion will focus on the processes supporting plan elaboration for the three primary time horizons above. The structure of planning

Planning in the Soviet Union is done by the so-called 'planning organs'. They are embedded within all the administrative structures. At the top is the State Planning Committee of the Soviet Council of Ministries, GOSPLAN USSR. Each of the fifteen Soviet Republics has its own GOSPLAN. Within the Republics, in the regions (oblasts) we find OBPLANS and at a more local level we find the District and city planning commissions[3]. GOSPLAN USSR has approximately sixty departments with a total staff of no less than 3,000, excluding the computer centre. Most of the departments are sectorial and represent interfaces with sectorial ministries, e.g. the Department for Energy Planning works jointly with the different ministries concerned with energy. There are at least four types of coordinating department and one department which produces summaries of all work. The four coordinating departments are capital investment, economic balances, manpower and wages, and the territorial department. Planning for the BITPC is influenced by the activities of the planning organs of three districts and two cities reporting to the OBPLAN of the Irkutsk Oblast (region). In its turn the Irkutsk OBPLAN supports both the

GOSPLAN RSFSR

City and disfrict planning commiss~ons

All-union sectorial planning departmenis

\

.... -.

\

\

\

\ \\

planning departments'

Figure 8.4. General structure of planning organs for the BITPC

GOSPLAN of the Russian Federation (the Republic) and the GOSPLAN USSR. A second and parallel line of planning is sectorial. The all-union ministries have their 'planning departments' reproduced down the structural ladder in department, combinats, and enterprises of the respective ministries. Planning decisions for all-union ministries set the parameters for the plans of affected republics; in this context, they are at a higher hierarchical level. Important links also occur between the Irkutsk OBPLAN and combinats and enterprises. The simplified general structure is illustrated in Figure 8.4.

Preplanning Scientific and technological support to these planning organs is provided by the many 'research' and 'design' organizations in the Soviet Union. They do the preplanning research and substantiation of alternatives for economic development. Their initiating role in the planning process is of particular relevance in understanding the overall structure. Preplanning for 'long-term' plans is mainly handled by the research institutes of the Academy of Science and the State Committee for Science and Technology (SCST). Other plans draw mainly on the activities of institutes under the GOSPLANS, sectorial ministries, and the State Committee for Construction (GOSSTROI). However, in the regions, branches of the

Academy of Sciences also seem to have an important input in the five-year plan. The substance of preplanning research is outlined to the preplanning institutes by the planning organs as 'tasks'. The main coordinative mechanism for tasks is the 'coordination plan'. After much interaction the coordination plan, approved by the GOSPLAN USSR and the State Committee for Science and Technology, sets four parameters of preplanning activity: (1) the hierarchy of institutes for preplanning; (2) those institutes or commissions with primary responsibility for substantive questions; (3) the allocation of resources for preplanning research; and (4) the form and timing of results. In organizational terms, the coordination of preplanning activities for particular substantive questions or tasks (parameter 2 above) is accomplished either by selected institutions or special commissions appointed for resolving particular problems. Within these activities an important role is played by the Council for Study Production Forces (SOPS), a research institute for the GOSPLAN USSR. The SOPS'S main task is the coordination of activities for the elaboration of the Master Scheme of the development and location of productive forces. It coordinates preplanning activities of approximately 600 research and design institutes. Moreover, it develops and provides the unified methodology of the forecasts. The main parameters of this methodology correspond to the indicators of the long-term and five-year plans. Another unit for preplanning consideration is the Committee of Production Forces and Natural Resources (KEPS), under the presidium of the USSR Academy of Sciences. The main task of this committee is the definition of natural resources in the context of requirements for the development of the national ewnomy. This includes such resources as minerals, land, water, and forest. This definition corresponds to the regional structure of the country. The KEPS is also responsible for preparation of forecasts for efficient utilization of these resources. Its activities correspond to the main strategies for the development of the national economy. For coordinating the elaboration of various national projects special commissions are appointed. Usually they act as organs either of the Academy of Sciences or of the State Committee for Science and Technology. However, the leading representatives of the GOSPLAN, ministries, and other adminii trative units also take part in these commissions. Such commissions coordinate the activities of research and design institutes addressing the major sub-problems. Final documents are then sent to GOSPLAN and other decision-making units. There are two examples particularly relevant to BITPC development. In the elaboration of the forecasts of the Angara-Yenisei region an interdepartmental commission was appointed in 1972. It was organized by the SCST. Its chairman was the head of KEPS and involved representatives of some ministries, departments, and party organs as well as scientists. The commission prepared forecasts for the development of that region. Its results were presented in a special conference in Moscow and passed on to the GOSPLAN.

There is also a special commission on the preparation of forecasts of scientific and research investigations for the Baikal Amur Railway (BAM) zone. The commission was appointed by the Academy of Sciences. Approximately forty research and design institutes participate in its work including, for example, the SOPS. The leading role is played by the Institute of Economics and Organization of Industrial Production in Novosibirsk. The nature of the interaction between planning organs and institutes who carry out preplanning research can vary. Sometimes the interactions are direct and quite close; sometimes interaction occurs through intermediary coordinating organizations or commissions. Additionally, a given institute may interact with a number of organizations in either of these modes. As an example we can observe the preplanning activity of the Central Economic Research Institute (CERI) of the GOSPLAN RSFSR with respect to the BAM project. Previously, the CERI was involved in the long-term preplanning for BAM. However, as the construction for the railroad commenced, it became involved in preplanning of annual plans for the project. Today, it is still involved in both. Of particular relevance for TPCs are the design institutes of the State Committee for Construction, PROMSTROI and GIPROGOR. Their design activities, mainly for industrial development and social infrastructure, are an important input for regional planning at the oblast level. These institutes have regional agencies supporting design in the localities, e.g. the PROMSTROI project in Irkutsk. The process of planning

As has been noted, the planning process considers three time horizons: long term, medium term, and short term. The primary objective of the long term plan (fifteen years) is to provide the parameters for the main directions of economic development. It provides a mechanism with which continuity of medium-term plans can be achieved. It is up-dated before each five-year plan in the form of new preplanning schemes, which do not have the status of plans. To the degree it is up-dated, however, each succeeding five-year segment of the long-term plan initiates a new fifteen-year planning outlook. However, by and large the most important planning activities are related to structuring the five-year plans. Thus, the following discussion focuses on this time horizon. The leading role for all the planning horizons is played by the GOSPLAN USSR. The GOSPLAN focuses its decision-making processes within the context of four groups of nation-wide balances: material balances, (physical balances of the major types of goods), manpower balances, financial balances (the state budget, the aggregate financial plan), and the national economic balance considering principally the intersectorial balance of production and assets. A fuller scheme of the balances used as criteria in this decision-making process are presented in Figure 8.5. The computer centre of the GOSPLAN supports the automization of the system of balances using input-output models.

I

w Material balances

National balance account

Balances of fixed and Circulatlng assets

I

Interindustry balances

Summary balance of labour resources

Balance of

Finonc~albalances

Balance of capacities

consumer goods

1-33

Manufacture goods

Technical crops

Livestock raw materials

Foods

Figure 8.5. A system of balances used in the development of the national economic plans of the USSR (from Knop, 1977)

Five-year plans are prepared within the framework set by the long-term plans. However, the most important input to this process is the factual information on the results of the p&ous planning period and the propositions of the many preplanning institutions at the time five-year plan preparation begins. The process, up to the moment the plan is approved, can be represented by three iterations. 'Planning organs', at aU levels, sup1 . Identification of alternatives ported by research and design institutes prepare propositions without restrictions for submission to the higher planning organs. Thus, propositions of a regional and sectorial nature are submitted to the GOSPLAN, where the first balancing occurs. The GOSPLAN then sets general parameters to the ministries and oblasts. It is at these latter levels that major disaggregation happens, providing the basis for the second and most important iteration. A new set of general proposals, now 2 . Definition of control figures constrained by the need for socioterritorial-economic balance, is prepared by the planning organs. Detailed elaboration is done at the GOSPLAN with the result of control figures which are provided to the ministries and oblasts. Thii implies basic decisions on the allocation of resources and targets of production, and provides the basis for the third and final iteration. This second iteration takes approximately two years before the definition of control figures is approved formally by the Council of Ministers. On the basis of control figures the planning 3. Approval of the plan organs prepare 'draft plans' which are consolidated and balanced in the GOSPLAN. The output of the GOSPLAN is the so-called 'draft directives' which are submitted after the approval of the government to the Congress of the Complunist Party. This Congress approves the 'directives'. On that basis the GOSPLAN prepares the 'draft plan' which is finally approved by the Supreme Soviet. At this stage the new five-year plan is law. To complete this stage takes about one year and is done in close collaboration with the preplanning organizations. Figure 8.6 summarizes all three iterations which together take no less than four years. The end result is one plan built up on the basis of more detailed plans elaborated by the different planning organs. A 'line' in the plan, i.e. a decision incorporated in the plan, is mandatory to the affected organizations. In discussions on the decisions related to the development of the BITPC it was noted that this complex has had a 'line' in the GOSPLAN USSR plan since the eighth five-year plan (1966 to 1970). This means that there is no explicit reference to BITPC in the plan approved by the Supreme Soviet according to the above procedure, but it does appear as an explicit line in the GOSPLAN USSR elaboration of that plan and was approved by the Council of Ministers. This 'line' is mandatory for the all-union ministries and territorial authorities. The plan prescribes some 250 to 300 key indicators or normatives of industrial output which account jointly for approximately 80 per cent of the total national productive capacity project to be available during the five-year

GOVERNMENT GOSPLAN

the f ~ r s t annual plon

organs

4 4 4 4 Preplonn~ngactlvltles Ident~flcatlonof olternatlves

Definltlon ofcontrol frgures

Approval of the plon

Figure 8.6. Iterations of the planning stage period. The remaining 20 per cent relate to what are considered to be less critical areas which can be properly defined at the level of the ministry and lower. The key indicators are transmitted to the ministries and republics. On the basis of these indicators, industrial combinats, enterprises, and oblasts receive their indicators for the next five-year period. These indicators are disaggregated on a yearly basis for control purposes and allow for corrections which might be necessary. Only about 5 per cent of output is discretionary at th enterprise level. However, incentives are provided both to individuals and groups at all levels to motivate production of high quality and in excess of planned levels. Various contingency factors and cushions are built into plans, and plans are often exceeded by significant amounts. The five-year plan is the framework for annual plans. In theory the year's plan should be as close to the reference defined by the five-year plan as possible. Unsubstantiated deviations violate law. The trend initiated with the 1965 reforms has been to reduce the number of these indicators for agglomerations and enterprises and to move towards their operation as profit centres. The detailed plans prepared on the basis of the indicators are submitted to the ministries who can approve them or make changes. Combinats and enterprises have the right to appeal to the GOSPLAN and to the Council of Ministers. The basic indicators provided by the ministries are: 1. Production-volume of sales at fixed prices. This indicator is given according to an industrial nomenclature, and it may contain hundreds of items for an enterprise. 2. Profit and rentability, including the contribution of the enterprise to the State Budget.

3. Wages fund (maximum level), including indicators of productivity. 4. Capital investment, defined in accordance with the mechanisms described earlier (preplanning stage). Decision on territorial variables like social infrastructure and local services, e.g. housing, medical, civic, social, and recreational services, schooling, and transportation, are taken at the oblast level; they are incorporated into oblast plans. For this purpose sectorial organizations also submit their plans to oblast authorities. Unresolved conflicts between interests at this level may be referred as high as to the Council of Ministers of the USSR for resolution. An additional output of the five-year planning process is the 'annual plan' for the first year of the considered period. This decision is taken in the second of the already mentioned iterations for the five-year plan. All the other oneyear plans follow iterations similar to the latter plan, and their approval is gained from the highest governmental levels.

The comprehensive elaboration of plans poses important organization and information problems. The complex network supporting this process is simultaneously, throughout its hierarchical structure, taking decisions at many levels. Problems of policy at different planning levels, discretion and consistency among them, are important to understand. However, as was noted, there was no intent to undertake a com~rehensiveassessment of these issues here. This description of the system has provided only a sense of the design of the planning process and did not attempt a critical discussion of the way it actually works. In the analytic part of this report there will be an assessmer' of its implications for TPCs. The following section presents the nature of the planning specific to the BITPC. The structure of this section parallels that d the preceding section. 8.3 BITPC as an object of planning

The treatment of the BITPC by the planning system is of particular importance to an understanding of the capability of the Soviet system to meet the challenges of planning for other TPCs in the future. It is important to reiterate here the relationship between the strategy of TPC development and activity at Bratsk. In the early phases of Bratsk development the TPC as the concept is now understood was not the operative strategy. Most attention early on was focused on planning for sectorial objects located in Bratsk; most infrastructure was considered only in the context of direct support for these industrial objects. During the 1960s with the incorporation of planning for urban communities into the development strategy, the notion of the Bratsk TPC took on more meaning. It is this dual focus that defines planning for complex, TPC development rather than industrial

BITPC in preplanning Several different bodies elaborated long-term planning perspectives for Bratsk. In 1954 Gidroprojekt prepared detailed plans for the dam at Bratsk and defined the primary industrial consumers of the hydro-power, i.e. the main lines of sectorial specialization. SOPS, the coordinator of long-term preplanning research, was involved in preparation of a long-term prospectus for Bratsk at that time. During the period 1962 to 1970 the East Siberian Commission carried on this work. This commission was one of a nation-wide set of commissions created at this time and later disbanded[4]. More recently, an interdepartmental commission within the GOSPLAN was involved in planning for Bratsk. Appointed in 1972, its purview has been described as long-term planning for Angara-Yenisei with particular respect to the location of the natural resource, lignite, in that region. Members of this commission represented the State Committee on Science and Technology, the Academy of Sciences, Ministries, and BITPC management. Various planning bodies, with the participation of research and design institutes, worked out proposals for the complex development of the BITPC, covering various time frames. From descriptions of the planning process one develops a sense of the nature of the work of these various organizations and commissions. Understanding of the status of current TPC preplanning support has been increased by Bandman's publications (Bandman, 1976a,1976b), whose work on the spatial modelling of TPCs is well known: The main preplanning document is the general scheme of a TPC. . . .The general scheme will be . . a basis for designing the long-term (general) and five-year plans, and . . . an obligatory initial document for forecasting research carried out by the institutions concerned with the respective TPCs. Both functions of the general scheme seem to be of extreme importance, since it is only by keeping to them that continuity of the plans and mutual agreement in concepts of preplanning research . . . can be guaranteed. (Bandman, 1976a, pp. 9-10) Unfortunately, such a document exists for one of the large-scale TPCs of the country. (Bandman, 1976a, p. 10)

.

Bandman's criticism is directed to recent preplanning for new TPCs in Siberia. In fact, his comments reflect one side of on-going discussion in the Soviet Union. The discussion addresses the adequacy of schemes now being produced in the light of the complexity of TPC development as it is now understood. Although schemes are in preparation, it is our impression that they may be insufficiently comprehensive for the role of 'general scheme' in the light of the complexity of the development which will follow from them.

In the case of the BITPC, whose development activity began in 1954, preparation of a general schemeper se prior to development is a moot point. The Gidroprojekt plans appear to have served this purpose. However, in the context of generalizing the experience gained in the BITPC the necessity of a process which insures status at the earliest stages of planning so that a comprehensive policy framework can be prepared may be an important principle. In terms of future development of the BITPC there appear to be four instances which assure the inclusion of the complex in the preplanning phase as a unit for consideration. First, the BITPC is a key actor in the development of the Angara-Yenisei region as a whole. In particular, this is expressed in the development of the Boguchany node. Both the SOPS and KEPS, who are planning for this development, would include the BITPC in their consideration. The focus of these groups will be on linking the BITPC with other TPCs into a system of TPCs which will provide the basis for the exploitation of Siberian resources. Second, the BITPC is also a key element in the scheme for BAM development. In this context, both the commission for the long-term research plan for BAM (Academician Aganbegyan, Director) and the Central Economic Research Institute of the Russian Federation, which is one of the institutes preparing alternative investment schemes for BAM, will focus on the role of the BITPC. In this context, the development of a longterm policy framework appears to be well in hand. With regard to future internal development, two additional points arise. Third, there is some question of the definition of the Boguchany development as another node of the already defined BITPC or as a separate TPC. Fourth, we learned that discussion of construction of a chemical complex within the Bratsk node is yet unresolved. These two decisions will lead to specific focus on the future of the BITPC internal development. Unlike the first two instances, however, the forum in which discussions will occur and/or decisions will be taken is not clear. While the first two instances involve national needs and will be included in national planning for BAM and Angara-Yenisei, the same cannot be so clearly predicted for these internal considerations. Five-year planning The preplanning and planning processes involve organizations at all levels throughout the Soviet administration system. Figure 8.6 summarizes that group of organizationswhich have been involved in current five-year planning for this TPC. The left portion of the scheme refers to the preplanning phase. The right portion presents the five-year process in the third iteration (see Figure 8.6) when propositions are being forwarded upwards in preparation for their consolidation into the Draft Plan. (The GOSPLAN forwarded this through the government to the Party Congress for consideration and the Supreme Soviet for approval.) Research support for units involved in planning for the BITPC are indicated; their role will be explained in a later section.

re-p~bnnin~

J

Five-year planning

Figure 8.7. The five-year planning process related to the BITPC

As has been described, the five-year plan is the major planning document in the Soviet Union. Inclusion as a specific item in the plan accords a project official status and specific commitments. In the case of Bratsk, first the East Siberian region and then the BITPC appeared as Lines in the eighth (1966 to 1970) and nineth (1971 to 1975) five-year . plans res~ectiveh.These 'lines in the plan' usually signify mandatory attention by ministries and republics[5]. Based on interview data and the comments by Bandman, our interpretation is that in the eighth plan there was an explicit-mention of investments to be carried out by sectorial ministries in Bratsk. That is, the indicators of the plan went beyond the usual global definition of investment and location. Although mandatory for the affected ministries, it represented planning for industries and did not focus on the TPC dimensions of the project. This era in the development thus attended to industrial development and in that context identified Bratsk as the location of development of nation-wide importance. Sectorial administrative structures still largely handle the planning for industrial development in Bratsk. The far right flow in Figure 8.7 illustrates this process. However, in addition, both infrastructure development and the synchronization of infrastructure construction with industrial construction are now important aspects of the Bratsk development. It is this evolution which presently defines the BITPC. Irkutsk oblast has major responsibility for reviewing enterprise and agglomeration plans in terms of infrastructure such as environmental matters. In this process the oblast has several research resources. It may call upon the GIPROGOR or PROMSTROI (which prepared plans for Bratsk in an early preplanning cycle) or the Irkutsk Branch of the Institute of Economy

and Organization of Industrial Production (IEOIP), which is part of the Siberian Branch of the Academy of Sciences and which collaborates with the OBPLAN in a more continuing mode. The OBPLAN has a department which consolidates figures in terms of the TPC as a unit for infrastructure planning purposes and which makes recommendations regarding industries of national specialization in the BITPC. In general, for questions of BITPC development, the Irkutsk OBPLAN coordinates its activity with the territorial departments of the GOSPLAN USSR and RSFSR. However, interview data indicates no parallel unit at the RSFSR level to that of the OBPLAN group for the BITPC. Approval of a clothing factory for the BITPC suggests that there might exist a body at that level which regards the BITPC as a unit; however, the GOSPLAN, RSFSR may simply have acted on the recommendation of the Irkutsk OBPLAN. The import of that clothing factory was as much the provision of employment opportunities for second and third family members as it was the manufacture of clothing, and thus would have interested the OBPLAN in the context of social infrastructure. Information with respect to the role of the GOSPLAN in this process yields no clear picture. There appears to be a department within the GOSPLAN whose responsibility is an overview of TPC development. A small section of the regional department oversees plan development for all TPCs in the East Siberian region. The level of staff or research support is unclear, aIthough we understand that the responsibility of the department is to consolidate sectorial data from the GOSPLAN branches. Within the ministries themselves there appears to be only one instance where the BITPC appears as a unit for consideration, in the planning of the Ministry of Power. The construction organization for the BITPC is formally subordinated to the Ministry of Power and in the process of handling the planning of this agglomeration the Ministry has an overview of construction activities in the complex. This overview, however, represents an input to the Ministry's own planning in resource allocation, rather than a responsibility for the BITPC plan development. From this examination of the planning process thus far it appears that with the exception of the Irkutsk oblast, whose responsibility is primarily infrastructure, it is only within the GOSPLAN USSR that an overview of both industrial development and social and technical infrastructure development is possible. Thus, the main responsibility for the BITPC as a complex appears to rest with the GOSPLAN USSR, in conjunction with the GOSPLAN RSFSR. There appear to be no other groups who have access to the complete set of data to support such an overview. For future TPCs an experiment is presently under way within the GOSPLAN USSR which shows promise of providing the overview so essential to appropriate commitment of resources over the time periods involved. For the 1977 plan the key TPCs have been divided into two groups and construction plans elaborated either (1)as a simple list of constructionprojects

or (2) as a complex specification of all activity. The BITPC preceded this experiment by a good many years, and members of the GOSPLAN confirmed that the ministries and local soviets elaborated its plans on the basis of the general lines of development for ministries.

Annual plans: plan implementation As was described in Section 8.2, the elaboration of the one-year plans are carried out within the sectorial administrative structures. This is also true in the case of the BITPC, and the implication is that there is one organization which considers the BITPC as a complete unit in this phase of planning. The Ministry of Power has responsibility for the major construction organization in the BITPC Bratskgesstroi and in this capacity approves construction activities for all sectorial projects and some infrastructure. The Irkutsk OBPLAN makes an input to this process. There are a number of organizationswhose focus is broader than enterprise activity and a number whose activities coincide with the boundaries of the BITPC. None of these, however, represents an overview of the TPC in its short-term planning. Thus, an overview of the activities within the complex and their interactions exist in no finer detail than that of the five-year and annual plans which are consolidated at the GOSPLAN USSR. The quantity of planning data with which the GOSPLAN must cope would seem to preclude a detailed and comprehensive consolidation of the interconnections of the various activities in the TPC. Within the three major spheres of activity, i.e. industrial activity, provision of technical infrastructure, and provision of social infrastructure, there are five organizations whose roles partially fulfil this function. Two of these deal with technical infrastructure--the Railway Board and the Airway Board. These are units of a nation-wide transport system whose jurisdiction happens to coincide with the region of the TPC. Angarstroi, the organization responsible for the construction of the railroad, is subordinate to the Ministry of Transport Construction. The other three organizations will be described in detail in Section 8.4: Bratskgesstroi, the Director of Housing for Bratsk city, and the Board of Directors. Bratskgesstroi was given responsibility for the management of construction for all enterprises within the BITPC by virtue of a ministerial decision early in the development of the TPC. Thus, within the planning process of Bratskgesstroi itself a minimum of operational overview is provided for much of the technical infrastructure. The Director of Housing, whose mandate is the collection of funds and supervision of housing design and construction, was created in the early 1960s. This office, in conjunction with Bratskgesstroi operations in housing construction, provides an overview of major segments of the social infrastructure. Within activities there are organizationswho consider the BITPC as a unit. Difficulties arise, however, as a result of the lack of planning interaction in the short term between major activities. In addition to management of technical

infrastructure, social infrastructure, and industry, there is a need for comprehensive short term consolidation of the activities which interface between these.

The role of research in planning Discussion of the preplanning and planning processes has highlighted the role of research in the definition of the BITPC as a unit. The significance of research is straightforward: without adequate economic and spatial models the potential of the TPC, as compared with industrial node development, cannot be realized. Insertion of research capacity into the planning process is important both for determination of the long term policy and for specification of a particular development strategy. Research support is needed to integrate long term ministerial planning, to elaborate corollary infrastructure development, and to specify the extent of resource commitment. On the basis of this logic one would expect to find research specifically directed at TPC unit development at the ministerial level, at the level of the GOSPLAN USSR, and within territorial administrative structures. To our satisfaction we have only been able to locate research support at the oblast level. In addition to the obvious substantive role of research in planning for the BITPC or other projects in the Soviet Union, one may note a function of research with respect to the power it conveys to an administrative unit to influence the planning process. The planning process involves a number of iterations both up and down, figuratively speaking, the administrative structures of both sectors and territories. The GOSPLAN is the key actor as consolidator of the outputs of these planning iterations in its role as coordinator of planning for the policy decisions of higher bodies. To the degree that it is unworkable for the GOSPLAN to maintain a staff which matches the complexity of the research and administrative units below it the GOSPLAN must accept draft plans from both ministries and territories as one important basis for its policy making. In this context, the ability of an administrative unit to elaborate project proposals is one factor in determining the capacity of that unit to influence the GOSPLAN and, thus. to control its own future. The quality of the research support available to a given administrative unit is thus an important factor in its ability to exert control. Such influence can only be exerted, however, on projects which have already received official status, via the Draft Plan. While the Siberian Branch of the Academy of Sciences (in Irkutsk) may be focusing on the BITPC and thereby generating the detailed research which might importantly influence planning, of the units discussed we can identify no administrative unit which might carry this influence forward.

Summary This summarizes the primary actors in the planning process and their interest6 in the BITPC. A consolidated view of the BITPC is taken only within a few

planning agencies. However, despite this, it is apparent that industrial development was synchronized. This can be attributed to the efforts of the respective ministries involved and members of the GOSPLAN for whom the BITPC was of particular concern.

8.4 Primary organizational actors and their roles in the management of B I T E There are three sets of actors involved in the management of the activities that define the BITPC: sectorial organizations, territorial organizations, and organizations whose creation or purview are related specifically to the TPC. These organizational actors and their interactions in the essential activities in the BITPC-industrial production and the provision of both technical and social infrastructure-are explained below. Industrial production includes activities which are of national importance and activities which represent 'completing', i.e. secondary and support, industrial activity. Technical infrastructure includes activities directly related to industrial complexes, such as the construction and maintenance of transport linkages and energy supply lines. Social infrastructure refers primarily to housing, schools, shops, and recreational facilities, but also includes such things as road construction and water supply for domestic use (Bandman, 1976a). Sectorial administrative structures at the national and republican levels interact in the management of industrial activities; sectorial and temtorial administrative structures at various levels interact in the planning and management of infrastructure.

Sectorial organizations The majority of sectorial organizations are involved in industrial activity and are of two types: all-union combinats and republican enterprises. All-union combinats are subordinated to ministries of the USSR, which control industrial activities of importance in meeting national economic development objectives. There are several administrative layers between the enterprise and the ministry, and the number of layers can vary. In general, from the bottom up the structure is: enterprise, combinat, department, ministry. Thus, the timber or cellulose complex in Bratsk is a combinat which reports to a department in Moscow that is subordinated to a sectorial ministry at the all-union level. The major implication of the difference between all-union and republican industries is the location of the highest level of authority in the administrative structure. For all-union ministries, the GOSPLAN USSR and Council of Ministers USSR represent the immediate highest level of authority. For republican ministries, whose administration parallels that of all-union ministries in structure, the immediate highest level authority is the Council of Ministers of the particular republic involved. In the case of Bratsk, this is the Council of Ministers of the Russian Federation (RSFSR)[6]. Each of the ministries and, in many cases, many of the departments have

their own research capacities. These are at least in the form of design institutes and may include institutes, either affiliated or directly suboordinated, which do more basic research on longer term programs for the ministries. The role of these institutes was mentioned in Section 8.2 when the process of planning was described. It is the ministerial institutes which carry out the preparation of the long term plans, and it is these same institutes which prepare the draft plans for the ministries in the five-year cycle and in the one-year cycle. All-union industries

The industrial complexes which define the TPC are managed primarily through sectorial structures at the all-union level. In 1974, approximately 90 per cent of the gross industrial output of the TPC was produced by the industries of national specialization. Industries subordinated to all-union ministries, represented in the TPC, include: Hydro-power stations Timber procurement Wood chemistry Aluminium Timber production Heating equipment production *Construction *Rail and air transport All of these are concerned with industrial production of national importance. Note, the Construction Organization and the Rail and Airway Boards are also involved in the provision of infrastructure, both technical and social. While formally subordinated through all-union sectorial administrative structures, the focus of their activity is specific to the TPC; they, in particular the Construction Organization, Bratskgesstroi, are considered in Section 8.3. Figure 8.8 illustrates the administrative structures for all-union enterprises in the BITPC. The scheme portrays only lines of management authority and does not include planning interaction. Planning interactions will be indicated in a later diagram. It is interesting to note that lateral linkages among enterprises and industries do not appear directly on these diagrams. Linkages of these kinds are accomplished primarily through interaction at the ministerial level, between all-union ministries, and between republican and all-union ministries. At the present time there is an informal Board of Directors operating at the TPC level which provides some means of direct lateral communication. The role of the Board of Directors will be discussed more fully. The planning and preplanning processes for these complexes follows sectorial channels, with the exceptions that have been noted in earlier sections. In particular, the oblast authorities have a significant input in siting

COUNCIL OF MINISTERS GOSPLAN

Figure 8.8. All-union enterprises BITPC/administrative subordination decisions and in the amount of funds allocated for infrastructure development. Indicators for the complexes derive directly from the all-union ministries. Since the 1965 economic refom, the number and type of indicators shifted quite dramatically in many sectors. However, in the case of BITPC enterprises the level of control exerted through the ministries may have decreased to a lesser degree because of the importance of these particular industries to national development objectives. There are usually a total of nine main indicators which are part of the five-year plan. All of the nine, save one(*) are specified by ministries for enterprises for both five- and one-year plans. Below is a list of these nine indicators, which we will then compare briefly with those received by two of the main enterprises in the BITPC. Volume of sales, paid for by customers Level of profit, specified in roubles/units Level of profits, specified as a percentage of costs Size of wage fund, specified as maximum rouble amount Capital investment, specified as budget allocation for specific objects Number of different products, nomenclature: specified as a minimum product-mix figure (*one-year plans only) 7. Product innovation, specified for most important products only 8. Increase in labour productivity, specified as a percentage 9. Contribution of the complex to the State budget

1. 2. 3. 4. 5. 6.

The aluminium enterprise in Bratsk is one of the major industrial complexes of this sector in the country. Interviews indicated that planning is heavily topdown from the Aluminium Department in Moscow. The major

indicators for this enterprise include the level of capital investment, repair, volume of production in both tons and roubles, and the number of workers employed. The enterprise reports daily on a few indicators to the Department in Moscow, monthly on others, and has its primary reporting cycle on a quarterly basis. The Timber Combinat also falls into the category of primary industries in national economic development and receives its output indicators and customers from the ministry on a monthly basis. It, too, reports daily to the ministry computer centre on some indicators. The Bratsk hydroelectric power station, as another example, is part of a nation-wide power system. It interacts with other regional power stations and is subordinated to the Siberian power grid. Republican industries

These republican industries include clothing factories, agricultural enterprises, and other enterprises which contribute to a local economy designed to support the population of the region. These support or secondary industries are often referred to as 'completing' industries in the context of TPC formation and development. Planning and coordinating the set of industries for the BITPC which complement one another in terms of life support for the population and the provision of adequate employment for family members is a complex task. It is the responsibility of the oblast planning committee to carry out this task, in which it can be supported by planning institutes subordinated to the all-union State Committee for Construction, GOSSTROI. The Institute of Industrial Planning, PROMSTROI, and the Town Planning Institute GIPROGOR, both interacted with the OBPLAN in developing plans for Bratsk. At the same time, suggestions for new industries have been initiated at the oblast level and approved by the Russian Federation. This occurred, for example, in

Figure 8.9. Republican enterprises BITPCIadministrative subordination

the case of the clothing factory. The structure at the national level appears to have its parallel within the Russian Federation. Agriculture is managed by the Oblast Agricultural Department, as the output of agricultural production is consumed in a broader region than the BITPC. Interviews indicated that the oblast considers the BITPC as a unit and in its planning process sometimes directs production in other districts to support the consumption needs of the TPC. Figure 8.9 presents the administrative structure of the republican and local enterprises represented in the BITPC. Territorial organizational actors In addition to the sectorial actors, there are those who operate within the structure of territorial administration. In the case of the BITPC they involve the following: the Russian Federation (RSFSR), Irkutsk Oblast, the three districts which make up the BITF'C (Bratsk Ust-Ilimsk, and Nishne-Ilimsk), and the city of Bratsk.

Figure 8.10. Schematic of territorial authorities relevant for the

BITPC Oblast Executtue

dl Culture

dl Educatton

d

a Trode

Publ~c utlltt~es social servtces

5 0 staff Departments (4 to7 staff) of OBPLAN Industry Capltal investment Mater~alsupply Labour Cultureand medical care Perspective territorial planning Agr~culture

Figure 8.11. lrkutsk Oblastlinternal administrative structure

Of particular importance in this discussion are the Council of Ministers RSFSR, GOSPLAN RSFSR, and the Irkutsk Oblast whose internal structure is presented in Figure 8.11. The oblast administration is made up of an elected soviet which convenes three to four times a year. These soviet deputies then elect an executive committee which meets regularly and exercises administrative responsibility for the region of the oblast. The executive committee is supported by a staff and departments, the details of which were unavailable during fieldwork. There is a planning committee, the OBPLAN, which provides the the support to the executive committee in the planning process. The titles of departments within the OBPLAN are indicated in Figure 8.1 1. Each department has a staff of bemeen four and seven persons. The oblast soviet and its administrative structure is complemented by the Party organization. The members of the Party in the oblast elect an oblast Party committee, which interacts with the oblast soviet in the full spectrum of its activities. The role of the Party in oblast administration and planning has been described as quite important. It is likely that some members of the oblast soviet, or soviet executive committee are also members of the oblast level Party executive committee. There is a similar structure in the City of Bratsk. The city elects a soviet which then elects an executive committee, the head of which we refer to as the Mayor of Bratsk City. There is a good deal of overlap in the membership of the city soviet and the city Party committee, as well as with the oblast soviet. Thus a level of communication and informal interaction can be inferred which is more concentrated in individuals and which provides more direct linkages than the formal structure of these various soviets and Party committees might suggest. The Bratsk City Soviet has 350 deputies and 17 standing committees. The committees are problem oriented and, although under the supervision of the executive committee of the soviet, coordinate their work with the city soviet as a whole. Examples of the standing committees are: Budget, Planning, Industry, Construction, Park Commission, Education, Health, Culture, Sports, Environment, Services, Water, Transport, Communications, and Social. The planning commission parallels the work of the Irkutsk OBPLAN and works fairly closely with the OBPLAN. Indicators for planning come from the GOSPLAN RSFSR, through the Irkutsk OBPLAN. Figure 8.12 shows both the planning and management linkages for the activities in the BITPC, consolidating Figures 8.8,8.9, and 8.11. Details of the city soviet and of other organizations whose focus is specific to the BITPC are not included. Organizational actors specific to BITPC

There are five organizations whose activities are primarily concerned with the development and management of the TPC itself. Three of these represent organizational innovations designed to meet the special management requirements of TPC development in Bratsk: Bratskgesstroi (the construction

-

organizatioll), the Director of Housing for Bratsk, and the Board of Directors. The other two, the Rail and Airway Boards, are specific to the BITPC only because their respective purviews happen to coincide with the region of the TPC. Bratskgesstroi (BG) Bratskgesstroi is a construction agglomeration formally subordinate to the Ministry of Power. Originally responsible for the construction of the dam and hydro-power station at Bratsk, its responsibilities were formally extended to include the maioritv " .of construction of both technical and social infrastructure requirements in the BITPC. In this capacity, BG has been a major"integrating and coordinative factor in the develo~mentof the BITPC. This extension of responsibility represents one of several self-cdnscious innovations in managing the development of the complex. BG construction activities in the provision of technical infrastructure support all industries of the complex. At the present time BG projects are divided among the ministries with about 35 per cent of construction for the Ministry of Power and 65 per cent for other ministries and local bodies. Preparation of a composite plan for all these activities requires consolidation of many competing demands for construction resources. In dealing with Bratskgesstroi the Ministry of Power has the capacity to reconcile these demands during the planning cycle. In cases where there are difficulties, decisions are made by higher authorities. Planning for a given year begins six months prior to that year, with discussions between BG and its customer enterprises. After interacting, both BG and the customer enterprise send formal written suggestions to the Ministry of Power. In Bratsk, enterprises contract directly with BG and these contracts are approved at the ministerial level in the course of the planning process. Discrepancies between the two sets of recommendations are resolved at the ministerial level and a joint 'interboard' document is forwarded to the GOSPLAN USSR (see Figure 8.13). The GOSPLAN is the final authority with regard to conflicting requests for construction resources; however, it has the discretion to forward important questions to the Council of Ministers. An approved plan defines both output and a deviation margin. In general, the Ministry of Power sets indicators for BG in terms of volume, manpower, and resources. BG in turn sets these indicators for its subordinate enterurises. The yearly planning is consistent with the process of on-going relationships between BG and its customers. An example provided was the interaction , whom BG is presently between BG and the Ministry of Pulp and ~ a p k rfor constructing the Timber Combinat. The local complex director has a deputy for capital construction who is the liaison with BG for construction work. This deputy and the appropriate office within BG set output on a monthly basis and report formally to the national statistics networks and ministries involved.

Other Enterprises

Figure 8.13. Yearly planning process - Bratskgesstroi The level of operational discretion which BG exercises varies from project to project. General design specifications and finance are provided by the customer ministry. The ministry is responsible for the purchase of equipment to be installed in its complex and preparation of general specifications which are provided to the BG design office for elaboration. BG is responsible for the detailed specification, construction, and equipment installation; however, the level of discretion involved in this responsibility varies according to the importance of a particular project in the achievement of national objectives. In fact, the design process for projects of all-union importance are fairly closely controlled within the all-union ministries. For all projects, BG must operate within the standards set by the State Committee for Construction, GOSSTROI. In addition, for major projects like the Timber Combinat, ministry-subordinated design institutes often work out detailed specifications. In this case the Leningrad Design Office of the ministry worked out specifications. In the case of the Ust-Ilimsk hydro-power station planning and design occurred in several distinct phases and control is being maintained at the all-union level. A special decree of the Council of Ministers (USSR) requested that the Planning Commission for the East Siberia Region develop main guidelines for the development of cities and industries in comection with the construction of the Ust-Ilimsk hydro-power station. The Commission in turn engaged a number of research institutes to investigate major aspects of the construction activities, including environmental impacts. Once the design was completed the GOSPLAN USSR appointed an expert commission to review the design itself; once construction is completed a second commission will be appointed by the Council of Ministers (USSR) to investigate the implementation of the plans. After design questions are settled, distribution of implementation responsibility is at the discretion of the BG Head Office. The planning department

e Drafting

1

Bratskgesstroi head office ( see figure 8 1

I

h

l

Computer center

enterprises

Auxiliary and other services

Special offlces

sub-contract organizations Ust- l l ~ m s kHPS

Rood construction

Group enterprises

Motor transport

Usl - llimsk timber

Excovatlon

'~helezebeton'

RR transuort

Mlntstry of power and electrification

Ust - llimsk

Sanltary englneerlng

Tlmber Industry

T~mberprocurement

Mechan~calconstruct~on

San~tarvand techn~cal wares manufacturing

Hydro-techn~cal servlce

Morshunovo ore -dressing Brotsk Bratsk a l u m ~ n ~ u m

Chief powerengineer

Minlstry o f construction and ereetlon ministries

Motor repair

Wafer supply and sewage

Central mechanical repair

Material ond technical supply

Bratsk tlmber

Chief mechon~c/partsdepot

Industry and agriculture

Housing and municipal services

Powerlines and sub-stations

Communication design office

Copltal repalrs Figure 8.14. General organization structure - Bratskgesstroi (from Knop, 1977, and discussions a t Bratskgesstroi)

within the Head Office makes personnel and task assignments for the organizations which comprise BG for quarterly and yearly periods. These enterprises report monthly to BG departments. Distribution of resources and redistribution if there is a shortage of resources is also at the discretion of BG. In the event of the need for a trade-off among activities, priority is usually given to projects approaching completion. Should an enterprise director whose project was delayed disagree with the trade-off, the customer may complain to the ministry and seek a reallocation of resources. There have been cases where such enterprise appeals have been successful. BG is responsible to the customer ministry for its construction activity and also to a separate organization structure within the Soviet management system which monitors the fulfilment of plans. The People's Control Organization is an authority whose structure parallels the territorial organizational structure. On projects of all-union importance a group from this organization, which would report directly to the Council of Ministers USSR can review a situation and make recommendations. Figure 8.14 presents an overview of the general organization structure of BG. As can be seen from the diagram, the diversity of BG activities is quite dramatic. Discussion of the role of BG in social infrastructure follows shortly. The enterprises within BG cover the majority of infrastructure construction activities, many of which are organized on the basis of the temtorial nodes of the TPC itself, e.g. the offices for Ust-Ilimsk and Bratsk. There are approximately 70,000 employees in Bratskgesstroi. Figure 8.15 shows the structure of the Head Office of BG, with approximately 400 staff. In addition to providing technical infrastructure, BG plays a central role in the provision of social infrastructure. BG works with the Director of Housing in constructing social infrastructure such as housing, shops, and medical facilities. The implication of the 1960 decision on the infrastructure funding was that no new industry could be built on the territory without provision for the funding of social infrastructure. The oblast participates in setting the rate for infrastructure investment, which is of the order of 35 to 40 per cent for social infrastructure. Although the major portion of infrastructure funding is provided by the enterprises, some funds are allocated through the temtorial administrative structures also. For example, funding for housing at the oblast level comes from four sources: the State budget, the local oblast budget, enterprise funds, and capital funds from ministries. (A proportional breakdown of these funds was not made available.) In the early 1960s a special office for the Direction ofHousing Construction for Bratsk City was set up by the Council of Ministers RSFSR. The Director of Housing comprises an office of between 40 and 50 experts in housing construction who supervise housing design and construction in the area. The office collects infrastructure funds from the ministries, coordinates the work of the design institutes in preparing plans, and coordinates the construction of units, presumably through Bratskgesstroi. It is subordinated to the city soviet

5' Chief

Heod englneer (hrst deputy 1,

Deputy Brotsk, operat~onol

techn~calmanagement

Deputy material suppl~es

personnel,

!

I

Technical Departments Deportmsnts of Construction Materials

Calculations,

0

( These prepore design plans for construction jobs I___-

Source

:

Discussion in Brntsk with Head af Planning Deportment

-

Book keeping

----Close informal links

Figure 8.15. Head Office Bratskgesstroi (400 staff') (from discussions in Bratsk with the Head of Planning Department)

and the Department of Capital Construction of the Irkutsk Oblast Soviet. It is the second innovation specific to the BITPC. In populated regions housing is usually distributed by the local soviet, but in pioneering regions about 80 per cent of it is distributed through the ministerial structure. This implies that the industries on the region of the TPC distribute the housing among their workers themselves. In fact the distribution of housing for the BITIC is largely handled through BG. In much of the TPC, Bratskgesstroi handles most of what might be called 'landlord' functions for housing, e.g. distribution of housing, shop management, etc. There are a number of examples. After the hydro-power station in Bratsk was completed, the Head Office of BG was given landlord functions. This is true also for the housing in the central part of the city. In Ust-Ilimsk where the hydro-power station is now under construction BG is handling the housing on the left bank of the city, but housing on the right bank, which BG is building for the Ministry of Pulp and Paper, is being run by that ministry. In addition, BG has managed much of the trading infrastructure for the complex. As various industrial complexes were built, BG extended its management activities to handle the workers' shops which each ministry provides for workers in the various enterprises. Ordinarily the State Ministry of Trade establishes local offices to manage these worker supply shops; in this case BG took over the role of the local office for Bratsk. BG also manages water supply and sewage facilities. In the course of interviewing BG in the summer of 1976, it was learned that many of these funo tions would shortly be turned over to the local soviets. Until the summer of 1976, however, the major part of infrastructure management and construction has been carried out by the various sub-organizations within Bratskgesstroi. In the context of a TPC where infrastructure investment is a major defining characteristic of the TPC concept, the effect of BG's activities has been to have a major role in defining the boundaries and characteristics of the BITPC. Transportation Boards

The other major infrastructure component is the system of transportation. While BG has been handling road and automobile transport there is both a Railroad Board and an A w a y Board which operate on the geographic region of the TPC. These boards were not innovations specfic to the BITPC; however, their activities coincide with and support the activities of the TPC. The Railroad Board is part of a nation-wide structure for the management of railroads, and the region of the Board's responsibility is slightly larger than the area of the TPC itself. It was the construction organization of the Ministry of Transport Construction, Angarstroi, which builfihese facilities under thk supervision of the Board. Generally, a particular enterprise contracts directly with the Board for the time, route, and volume of its shipping. The Board then coordinates this

Ust-Ilimsk

Figure 8.16. Rail system

through the department above it. The railroads are the primary transport mode between Ust-Ilimsk, Zheleznogorsk, and Bratsk for transporting timber to the cellulose complex (see Figure 8.16). The Airway Board appears to operate in a similar manner. The Board of Directors The third organizational innovation specific to the BITPC is the Board of Directors. From previous .discussion, it is apparent that there are no formal mechanisms for coordinating industrial capacity management at the BITPC level. Lateral linkages among industries and reconciliation of competing demands, at least for construction resources, occur during the planning stage between ministries. In the period 1970 and 1971 an informal organization was created whose role was the facilitation of communication among the major industrial actors in the TPC. The Board of Directors has a membership of about forty persons: the heads of the major enterprises of the TPC, members of the oblast and city soviets, and members of the oblast and city Party committees. The Director of Bratskgesstroi serves as Chairman of the Board of Directors, which meets on a monthly basis. Although an informal organization, it appears to be functionally subordinate to the city soviet. The informal status of the Board of Directors tells us very little except that its membership appears to regard its functioning as necessary to the well-being of the TPC.Discussion focuses upon issues which are of concern to the participants, and although the Board has no formal decision-making authority, a number of members of the Board have noted that very few 'suggestions' from Board meetings have ever been ignored. As a forum for peer discussion and a source of peer influence, the Board appears quite powerful. An interesting dimension of the Board may be inferred from the composition of the Oblast Executive Committee. It was noted during the discussion that there was a good deal of overlap in membership between oblast and

Party executive committees at that level. Such would also appear true in the case of the Board of Directors for the BITPC. Most enterprise directors tend to be members of the Party, and most members of the city soviet are likely to be members of the Party. Thus, a Board made up of enterprise, Soviet, and Party representatives is likely to have all three represented in one individual in a number of cases. The degree of influence which it is alleged the Board of Directors can exert on management at various organizational levels in the BITPC most likely derives from this overlap in peer group membership. Summary

There are a number of different groups involved in the management of the BITPC: all-union agglomerations, republican enterprises, oblast and city authorities, and the Party. By and large industrial capacity is managed through the administrative units of the all-union and republican ministries. A majority of infrastructure is managed through Bratskgesstroi, which, by virtue of the contracts it handles, manages a large segment of TPC activity. It is through Bratskgesstroi that coordination of infrastructure development, both social and technical was achieved at the implementation stage. The Director of Housing for Bratsk City, as an organ of the Soviet, plays an important role in social infrastructure coordination, together with Bratskgesstroi. These two organizations provide the major formal communication links among infrastructure activities. Finally, it is the Board of Directors which play a primary informal coordinative role in the complex. Created out of a need for lateral communication among a variety of actors involved in the TPC, the Board of Directors influences TPC management through informal peer pressure. There is an important role for the Party in this context; however, formal consideration of Party activities was beyond the scope of this study. As the activity in the BITPC continues to increase and become more complex it is presently an open question whether the management structure functioning on the TPC is adequate to manage the activities. A number of proposals for TPC-focused management bodies have been forwarded at various administrative levels and are presently being considered for adoption. Before turning to a consideration of these proposals the planning and management processes governing the BITPC will be examined from the perspective of the framework.

8.5 Notes 1 . The following agencies are referred to by their initials throughout Chapter 8:

TPC terrotorial production complex BITPC Bratsk-Ilimsk territorial production complex SCST State Committee for Science and Technology SOPS Council for Study of Production Forces

KEPS Committee of Production Forces and Natural Resources BAM Baikal-Amur Railway CERI Central Economic Research Lnstitute IEOIP Institute of Economy and Organization of Industrial Production BG Bratskgesstroi CPSU Communist Party of the Soviet Union

2. In the terminology we will use throughout this chapter, all industry can be included in one of two categories. Specialization industry is industry located in the territory to satisfy national economic objectives. Completing industry is all industry which is not 'specialization industry'. Republican industry covers a large part of this class, but other types may also be contained within it. 3. Thcre are some other structural complexities omitted for the sake of simplicity. 4. A nation-wide set of regional commissions was created in 1962 with the purpose of preparing long-term preplanning forecasts. These were short lived and many of their functions were transferred to temtorial bodies. 5. In general, in addition to the GOSPLAN, the USSR Council of Ministers, after commissioning particular research to the State Committee for Science and Technology and the Academy of Sciences, might decide to develop a particular line in the plan for high-priority programs. At present there are around 200 such programs, one of them being the territorial development of the area affected by the Baikal-Amur Railway. 6. The Council of Ministers USSR is the ultimate level authority for anyone (excluding the Supreme Soviet); any dispute may be pushed up the administrative chain to them. Hence, the term 'immediate' highest level authority indicates substantive authority to usual cases, e.g, the Council of Ministers RSFSR approves republican ministry draft plans and forwards them to the GOSPLAN USSR.

CHAPTER 9

Bratsk-Ilimsk Territorial Production Complex: Framework App lication Structure of the analysis In planning and implementing the TPC strategy the Soviet system is recognizing an environment of increased complexity. The analysis will be concerned with the strategy for responding to this, i.e. at what levels capacity was increased. The adequacy of the response will be examined so that implications can be drawn for future TPC management. Within this general aim the analysis will have several elements. The first element is to examine the distribution of management in usual activity outside the TPC context. Of course, this cannot be done in absolute terms. Rather, a standard must be devised with which the new needs of, and responses to, the TPC can be compared. Therefore, a discussion of the units which support the various functions of the general system level in its usual operation precedes the discussion of the BITPC. The second element is an examination of the ways in which the BITPC development, and more generally the TPC, add complexity to the system environment. This complexity has to be met somewhere in the system and the third part of the analysis looks at the response in the particular case of the Bratsk-Ilimsk development. This will involve looking at the response at two levels: (1) the response at the general system level and (2) the capacity of the program system, i.e. the system level concerned solely with the BITPC. The main purpose of this section is to provide a springboard from which consideration of future management needs can be made. 9.1 A systemic view of sectorial management structure

A primary theme of this chapter is that the creation of a TPC makes new demands on the Soviet planning and management systems which differ from the demands that the system must meet in the course of its sectorial operations. An analysis of this proposition must begin by enquiring into what is regarded as normal operation. We take this to be a primary division of economic investment along sectorial lines, with sectors rather than the centre bearing the main load of elaboration of particular projects and responsibility for their implementation. While it is true that throughout Soviet history par-

Policy intelligence control

General system level

Sector sub- systems

Figure 9.1. System representation of sectors

titularly important projects (be they concerned with regional development or quite different objectives, e.g. electrification)have attracted concern from the centre, it appears to be the case that the bulk of investment in the modem Soviet economy is correctly described as managed through sectorial strue tures. In the language used for analysis, the sectors are sub-systems of the general system. The general system level sets objectives to the sectors. These take the form of control figures to be achieved. But the task of elaborating these objectives and choosing between different ways of achieving them rests with the sectorial ministries. In addition to these sectorial sub-systems, the Soviet system has other sub-systems concerned with territorial management. However, for the moment the sectors are the subject for attention. Referring to the five functions, the setting of sectorial objectives is the policy function of the general system level. The policy function is supported by an intelligence function which explores the possible alternatives. Having set the sectorial objectives, the general system level will need a control funo tion to provide resources to the sectors on the basis of these objectives and to monitor the performance of the sectors against objectives. It will need to provide a means by which the sectors can coordinate their activities. And, finally, from the point of view of the general system level the sectors are the means of implementation of the objectives (see Figure 9.1).

Functions within the general system level In this section there is an assessment of the distribution of the functions of the general system level among the various organizational units which comprise that system level. The term 'general system level' denotes the level at which trade-offs are made between alternative ways of achieving national objectives and where decisions are taken which provide the objectives to sub-systems,

such as national ministries. These decisions, of course, take into account views and proposals which the general level receives from lower levels, and in this sense many organizations at different levels of the system can be thought of as contributing to these decisions. However, the responsibility for decisions on issues of this kind lies at the general system level. A comprehensive account of functional capacity at the general system level is beyond the intent of this presentation. The scope of the study did not permit familiarization with all of the units operating at this level. Any list would, thus, be incomplete. Also there is little correspondence between organization units and system functions. Instead, particular units, e.g. the GOSPLAN, provide the system, to some extent, with a range of functions-policy, intelligence, control, and coordination. A comprehensive description would have to take this into account. Despite these limitations there is value in providing an overview of the institutions with an apparently major role in providing the general system level with capacity for the various functions. In this manner some additional insight is gained with respect to the meaning of each of the organization functions in the Soviet context. Policy capacity at the general system level, i.e. the authority to take decisions which set objectives to the sub-systems, resides mainly with the Supreme Soviet, the Central Committee of the Communist Party of the Soviet Union (CPSU), and the Council of Ministers. When the GOSPLAN is involved in determining ministerial objectives at a greater level of detail than that ratified by these three higher bodies it, too, is exercising a policy function. The provision of an intelligence function which provides support for policy decisions is a major role of the GOSPLAN. Without the schemes and draft plans that the GOSPLAN prepares it would be difficult for the higher bodies to take decisions. In turn, the GOSPLAN is supported in its task by a range of research and design agencies subordinated to different bodies. The process of preplanning, described in the previous chapter, is making a major contribution to the intelligence function at this level. The control function of the national system is concerned with providing resources to the sub-systems so that they can achieve their objectives and monitoring sub-system performance against objectives. The Council of Ministers and the Central Committee of the CPSU play some role, although in quite different modes, and perhaps also the GOSPLAN. There are also nonsectorial ministries whose major function may be control. The Ministry of Finance is likely a particularly important example of this. Also, the People's Control Organization provide control capacity in connection with particular projects. Finally, state committees are included which exercise control over specific areas. For example, the GOSNAB is concerned with distribution, GOSBANK with money flows, and GOSTROI with construction and some other standards. Moving on to the coordination function one may again identify the council of Ministers, the Central Committee of the CPSU, and GOSPLAN in their

respective roles. In coordination these bodies are supported by a multiplicity of special commissions, some of long standing and some created for a specific purpose and thus short Lived. In addition, the Central Statistical Office must be taken into account which, through collection and distribution of statistics, play a coordinative role. These comments give sometidea of the complexity of the general system level; however, it is emphasized again that this is not the main focus of the study. These comments are not intended to be comprehensive.

Capacity of the general system level According to the framework the requisite capacity of the general system level is determined bv the level of detail of the objectives it sets to its sub-systems. For example, if objectives are set in very general terms the main responsibility of elaboration of objectives and detailed control falls onto the sub-systems. If, for example, a sectorial objective were set only in terms of a single output figure, say tons of steel, the intelligence function of the general system level would not need to be involved in questions of where that steel should be produced or what should be the mix of steel products. It would also not become involved in detailed national balances for steel products, but only a balance at the level of bulk steel demand. Also, in a case where the objectives were set in a few parameters, reviewing performance against objectives would be reduced. Further, because a general objective would allow a sector many possibilities of responding to changes in its own environment, in general the control function of the general system level would be less involved in dealing with sectorial deviations from objectives. Thus the executive component of the control function requires less capacity, although the need for non-executive monitoring is increased. In the converse situation, if sectorial objectives were set in specific terms essentially opposite comments would apply. It should also be noted that as objectives become more specific, the demands on the general system level grow very rapidly. This occurs because that system level would deal not only with increased detail for each sector but also with the multiplicative increase in intersectorial interactions that this higher level of detail engenders. In general sectorial objectives appear to be set in general terms for sectorial operations. Consequently, demands on the general system level for intelligence and control are relatively limited in comparison with the demands set up by the concept of the TPC. Throughout this chapter the term 'control function' refers only to the executive component of that function; see Section 4.2. This view must be carefuily interpreted. On an absolute scale and relative to other economic systems, the demands on the system are high. The term 'relative', therefore, is referring to the case of the TPC which is discussed in the following sections. The relatively limited demands on the general system level arise from three particular conditions. First, for the general run of industrial investment the emphasis is on the

creation of somewhat separately justified new constructions, so consideration of complex effects of one investment upon another are limited. Hence, the investment environment is straightforward. Second, there are a variety of advanced sectorial mathematical models which assist management in meeting the complexity of this planning task. Third, in meeting the complexity that does exist, the centre can depend upon the capacity of the ministries, which have large planning and control capacities. While general objectives to sectors reduces the need for intelligence and control capacity in the general system level it can imply a high need for direct coordination between the sectors. The requirements for coordination will depend upon the perceived interdependence of the activities for which separate sectors are responsible. While there is little data on mechanisms or the quality of coordination between sectors, interviews suggested it is an area which is occasionally problematic. This must be viewed in a context of the legality of objectives (provided by the plan) to the sectors and the focusing of control through sectors. It it quite natural that sectors might try to get under their direct control all factors affecting achievement of objectives rather than depend upon the actions of other sectors. This is because the result of coordination may not generally be an outcome favourable to objective achievement by a particular sector. For example, a slowing down of dam construction to allow an electricity-using aluminium producer to be ready at dam completion offers no benefits to the electric power sector. If the dam is, as a result, finished after the planned date, clear dis-benefits to the sector may be perceived. Also, the size of the sectors and the fact that managers in sectors receive their training and generally spend their whole careers with the sector may be instrumental in creating a 'sector mentality'. Whiie coordination benefits the economy as a whole, in the context of sectorial objectives individual projects take priority. While discussing coordination one might also observe that in the context of the Soviet system it may prove more natural, and easier, to increase the system control function rather than coordination. The plan is a very specific and powerful legal mechanism for setting objectives to a sub-system, and no problems in principle arise in creating bodies which distribute physical resources according to the plan a& monitor programs against it. No parallel mechanisms seem to exist with equivalent influence to achieve coordination. In conclusion the capacity of the general system level appears to have evolved to meet the needs of the normal investment patterns in the Soviet economy. In this context the need for intelligence and control capacity of the national system is moderated because objectives are set at a general level to the sectorial ministries. Our impression is that the largest part of the complekity is then managed within the sectors which are themselves very substantial organizations. Their capacity need only be focused within sector objectives rather than the whole range of national economic possibilities. Only in meeting the need for coordination is there an indication of strain on the system, but this falls short of conclusive indication of a system problem.

9.2 The complexity introduced by TPC

In the language of the framework the management challenges of a TPC represent an increased environmental complexity that has to be met somewhere within the management system. Just as one can identify different challenges so can one point to different aspects of the task which gives rise to increased complexity. In Chapter 8 five such management challenges were described. For purposes here, they have been consolidated into three: choice of industry of national specialization, definition of infrastructure and completing industry, and the synchronization of implementation. Complexity generated by defining specialized industries

The usual investment projects can be separately justified using norms for capital efficiency indicators. In such cases the total cost of a project can easily be computed. Even incremental infrastructure which is associated with a new plant can be identified with some degree of certainty, and in many cases for already developed settings that secondary part of the cost is small. With TPCs in Siberia the proportion of infrastructure costs is considerably higher and is more dificult to allocate piece by piece to particular industrial projects. Within a TPC, a project-by-project assessment of proposals is almost antithetic to the TPC concept, which embodies direct consideration of how each project supports and is supported by all the others. Only in the initial foundation objects, e.g. in the BITPC, the Bratsk hydro-power station (HPS), is the decision to build likely to be justified on its own. For the rest, management can no longer depend on fairly simple formulae to handle the complexity of this class of investment. The powerful mathematical models that are necessary are being developed but are not yet in use by policy makers. The type of decisions that are required to meet this new complexity are not, by their nature, ones that are made every day. In the context of the Soviet planning system they are choices to be made in the preplanning stages. Although in the course of TPC development new objects of specialization might be added, it is expected that the substantial part of these decisions will be taken at the early stages of (or even prior to) formation. Definition of infrastructure and completing industry needs

Unlike normal investment in national industries in developed regions where the existence of social infrastructure and the secondary industrial activities to meet community needs can be assumed, in the TPC such objects are created alongside the objects of specialization. The new symbiosis between these two types of activity adds complexity to planning social infrastructures and completing industry. Towns have to be created rather than simple local settlements and the supply of social infrastructure has to match the needs presented by the national specialization objects. Completing industry, as well as satisfy-

ing the need for particular products, has to contribute to producing a balanced, complex community by, for example, providing jobs for second and third members of families. While, in a sense, these needs are determined from the moment objects of specialization are conceived, their implementation must take place as the specialization objects are implemented. Hence complexity arises in planning for the various kinds of objects as the TPC is created. In the Soviet system this complexity might be met through the planning cycle as well as the preplanning procedures. So unlike the case just considered it is not a complexity arising primarily at the very early stages of (or prior to) complex formation. Rather, it is a constant source of complexity, perhaps increasing in the middle stages of formation when many activities are on-going. Complexity arising from the need for synchronization

The time dimension acquires a particular importance in TPC formation. Not only, for example, must the right amount of infrastructure be provided but it must also be provided at the time when it is needed. With sectorial objects, too, in the formation stages of a TPC a need for synchronization arises which is not characteristic of constructions in a developed setting. A primary example from the BITPC was the need to clear the reservoir site of timber before filling the hydro-power station reservoir. Once the hydro-power station is complete, however, no such close interactions occur between timber felling and electricity production. Since many objects will be sharing the same construction resources, a careful phasing of the allocation of resources is necessary to prevent waste. Again, this demand for phasing is of a degree which is untypical in normal developments, and adds a considerable complexity to the management task. It is a complexity which increases through the early stages of TPC formation and reaches a peak at the height of construction activity and diversification. The planning process, particularly through the annual plans, can take account of some of this complexity. However, one might reasonably expect that management decisions between plans and perhaps of a day-to-day operational nature will be required. These, then, are the ways in which the TPC generates complexity and the need for a management response. In the particular case of the BITF'C it may be unreasonable to have expected all these to have been perceived. To an extent they reflect a current perspective of the TPC strategy. This differs from the way in which the multi-objective development around the Bratsk HPS was conceived in the late 1940s and early 1950s. Nevertheless, the analysis of system adaptation in meeting this development is instructive in identifying requisite adaptation implicit in the current TPC concept. 9.3 Systemic response to BITPC

The complexity engendered by the TPC strategy could have been managed in several modes consistent with usual management processes. Figure 9.2 pres-

(-Jq system level

Q

Notionol enterprise Infrastructures

Completing industry

Figure 9.2. Scheme of one possible sectorial response to the BITPC ents a simplified version of how a multi-objective scheme such as the BITPC would look if it had been managed in the usual mode described in the previous section. In fact, the TPC strategy differed from this mode in important ways. First, the national sectors no longer behave as a distinct system level. The rationale for generally thinking of the sectors as a separate system level is the policy discretion they have to choose between alternative ways of achieving their own objectives, set, as was noted, in fairly aggregated control figures. Research and planning capacity under the control of the ministries generally support these decisions. However, sectorial objects in the BITPC case are largely defined at the general system level. Thus, the non-ferrous metal industry is not simply asked to meet a set of control figures but rather to place an aluminium plant of specified dimensions in a particular location and with other parameters very likely already determined. So, for this particular plant, it seems most appropriate to regard the Non-ferrous Metal Ministry as providing an operational control capacity to the general system level to ensure that the specified national policy regarding aluminium is carried out. In determining the need for such a plant, the design institutes of the ministry will be involved. However, instead of supporting a ministry policy capacity to choose between different ways of achieving its objectives, they will be involved in supporting national policy on the specialization of the BITPC and in addressing much more than aluminium production. The example of aluminium is, of course, paralleled by all the other objects of national specialization. Second, when the republican bodies are considering the need for completing industries the emphasis appears to be on meeting the specific needs of the complex, rather than on considering the complex as one possible location among several for supplying particular goods required within the republic or

oblast. For example, local industry such as food production is largely geared to meet the needs of the TPC. And even where it supplies a wider area, as, for example, with the meat-processing plant, the justification for building the plant is in terms of the demand on BITPC territory. The clothes plant in the BITPC is an example of a completing industry which provides for a larger market. After production and siting considerations the construction of this plant was justified in terms of providing jobs for second and third family members, ia addition to supplying this larger market. Similarly, in considering infrastructure needs for the TPC, the oblast considers the BITPC as a unit. Because there are no trade-offs to be made between infrastructure on BITPC territory and infrastructure elsewhere, the oblast is not behaving as a separate level above the TPC. In these two cases, of infrastructure and completing industry, the agencies involved form part of a local system concerned solely with the BITPC. This is different from their more usual roles, when the competing interests of many parts of the republic are considered. To go one step further: the needs for this type of investment arise totally from the direct and indirect demands made through the decision to locate national specialization enterprise on the territory. In a sense the territories are elaborating implicit objectives or needs arising from national decisions on specialization in ways relevant to them. For this reason it is justifiable to consider the local system concerned with the BITPC as being directly embedded in the general system level. Again this is different from more usual cases when the oblast would have its direct embedding within the republican subsystem. These ideas are summarized in Figure 9.3, which differs significantly from Figure 9.2; this change represents a particular systemic response to the

system level

BlTPC Local system

Infmstructure

Completing industry

National objects

F'igure 9.3. Observed systematic response to the Bitpc

BITPC. There are now only two system levels: the general system level and a level local to the BITPC. The response to the environmental complexity of the BITPC will be distributed between these two levels. Response to BITPC at the general system level Since the BITPC is conceived as a strategy for meeting national economic goals, the need for defining objects of specialization lies with the general system level. In this section the ways in which intelligence and control capacities to meet this need were expanded are examined. The intelligence function at the general system level is carried out through the preplanning process and the production of the five-year plans. The intelligence response of the general system level must primarily meet the increased complexity arising out of defining objects of specialization. Since this need arises very largely in the early stages of TPC formation, it is unreasonable to expect the experience of development around Bratsk to provide a good model. However, it is clear that even twenty-five to thirty years ago very substantial research resources were directed at this develop ment. Supporting the general system level are the many scientific institutes coordinated by the SOPS, KEPS, and other organizations. These include sectorial institutes, and these latter institutes were also probably separately supporting some specific aspects of development. So although t h e task of definition is complex, there appear to be substantial resources available to the general system level. probably-nowhere else in the world could a more impressive array of research capacity be related to a national development problem. However, the extent to which this was focused on Bratsk-Ilimsk as a particular object is somewhat unclear. One example of a specific focus is a special commission headed by a senior member of the GOSPLAN which visited the territory in the 1960s to provide support for its policy on further develop ment. Other commissions or studies seem to be concerned with Bratsk-Ilimsk development only as part of a larger context-East Siberian development, Angara-Yenisei development, or BAM. While work that the SOPS coordinated in the late 1940s undoubtedly provided support for eventual development, the main objects of the Bratsk development seem to have received their most concrete expression through a scheme elaborated by the Gidroprojekt Institute in 1953 (see Gukov and Semionov, 1977, in the references relating to the Soviet case). The special commission of the 1960s referred to earlier reported to the department of the GOSPLAN concerned with power rather than with regional development, and this, too, suggests that the full resources available to the SOPS and fed into the GOSPLAN regional department may not have effectively been brought to bear on the BITPC as a complex unit. Moving to the present time, there are indications that BITPC further development is not fully supported by preplanning. At Boguchany a new dam is being built supported by BITPC resources. Hoever, although the construc-

tion phase has been started interviews indicated that it was as yet unclear whether or not a Boguchany node would eventually form part of the BITPC. The lack of obvious integration at the preplanning stage may make it more difficult for the BITPC to be considered as a whole within the State five-year plans. In the GOSPLAN documents there is a unified representation of the BITPC. This occurs in the Territorial Department of the GOSPLAN and includes totals for the volume of capital investments, amount of labour, and the volumes of production by the major sectors. However, these seem to be prepared primarily on the basis of the addition of separate sectorial and territorial lines. Interviews within the GOSPLAN suggest that there is no capacity to take a unified view of the BITPC prior to sectorial planning in a way which would provide a logic according to which sectorial activities of the BlTPC could be planned. In reviewing the intelligence capacity of the general system level to set specific objectives for BITPC development, there appears to be no lack of planning resources, but rather a lack of a framework through which these resources can be specifically focused on BITPC development. This lack seems to persist to the present. Moving on to look at the evolution of the control capacity of the general system level to meet BITPC demands, a capacity matched to control objects separately conceived rather than matched to control complex formation is observed. Because Bratskgesstroi is subordinated to the Ministry of Power, this ministry is exercising control over BITPC activities. However, other ministries also exercise control over their own particular objects. These ministries thus add to the control capacity of the general system level. However, the lack of an integrated statement for the BITPC in the five-year plans leaves these separate control agencies without an overall logic to meet complex effects. The new interdependencies between BITPC objects greatly increases demands for coordination between ministries. This relates not only to specialization objects but also to infrastructure which, although designed outside the general system level, is funded and largely controlled by the general system level. Altering the rates at which individual specialization objects proceed can undermine assumptions on which social infrastructure plans were based and lead to unbalanced development. Few new mechanisms seem to have been created which can provide a new unity at the level of annual plans. However, one mechanism should be mentioned which arose in interviews but which we have not been able to assess. The annual objectives of Bratskgesstroi are determined by the Ministry of Power and agreed by the GOSPLAN, but proposals are put to each of the other ministries involved for comment. Here is one way in which a coordination of control could be achieved at the annual level, at least between sectorial objects. It is more doubtful if the needs for social infrastructure could be adequately considered in this process. In summary, there appears to be a substantially unmet need to provide the general system level with a mechanism for coordinating its sectorial control

agencies and for meeting the extra complexity of TPC formation. Outside the ministries no unit appears to exhibit the potential for this control capacity. Thus it is a function which may have to be met through organizationalinnovation. The capacity of the BITPC sub-system In this section the extent to which a local management system has developed which can supplement the general system level in meeting the complexity of the implementation of the BITPC is reviewed. Here 'local management' is used in the sense of management focused solely on issues related to the development of the complex, rather than on the consideration of these issues together with other national concerns. Because the objectives for the the TPC are set in terms of particular objects of national specialization, this limits the extent of policy discretion and the need for intelligence capacity which can exist locally. Although the view of the local system can influence specialization, the policy capacity that exists is related mainly to the complexity associated with the creation of balanced complex communities. This is reflected in infrastructure plans which meet local demand in an acceptable way and in initiatives for completing industry which meet other complex needs. The example of the clothing factory has already been noted. The creation of an agricultural base to sustain the BITPC population and the inclusion in Bratsk of a polytechnic institute to provide needed skills are further examples of this. For all of these issues the Irkutsk Oblast is the most important unit. It either has policy authority directly or indirectly through influence at the republican level where the policy authority resides. Only within the oblast was there consideration of the BITPC as a whole. Although the planning and intelligence capacity of the Oblast Planning Committee is limited in these issues it receives support from other units. In the design of the towns it receives support from Giprogor. The support extends to issues which are outside the policy discretion of the local system, but allow the local system to express views which may influence national decisions. For example, suggestions for the inclusion of a chemical complex on the territory seems to have been initiated locally. While the general system level does not as yet have the data to justify the efficiency of this specialization industry, it is now being discussed at the national level and may be included in future plans. The local system appears to have meaningful policy capacity to deal with some aspects of BITPC complexity. Because many of these activities are funded through the national sectors and the construction agency is controlled by the general system level, possibilities for realizing local policy objectives may be more limited. It is interesting to consider the control and coordination functions of the local system in this context. Although shorter-term plans provide the major means for operational control, these are generally produced within sectors. In considering complex

effects a more relevant instrument for operational control is the one-year plan. For the construction activities on BITPC territory the relevant one-year plan is that of Bratskgesstroi. This is finally approved by the Ministry of Power; the Irkutsk OBPLAN must also approve environmental and urban dimensions. The rate of infrastructure construction provided in the annual plans depends upon the rate of construction of the separate sectorial objects which provide the funding. The infrastructure plans are up-dated for each five-year period to provide a consistency over this period with the five-year sectorial plans. However, there is evidence that godg the five-year period the progress of sectorial development progressively diverges from the original assumptions and is adjusted in the annual plans for sectors. This gives rise to a progressive divergence between infrastructure which have a five-year period and infrastructure funding which cannot be resolved in drawing up the annual plans. (The re-working of infrastructure plans on a two-rather than five-year basis has been suggested as a possible solution to this.) Where deviations occur within one-year plans necessary control may be initiated by the general system level through short-term plans or by the local system (mainly through Bratskgesstroi). In fact there did not appear to be a comprehensive capacity in the TPC to so define priorities among activities. In constructing sectorial objects Bratskgesstroi is dealing with local enterprises which themselves are characterized by strong vertical links to the ministries. Thus, changes to the rate of construction of the aluminium plant would have to be approved by the aluminium department in Moscow. Sectors which disagree with any reallocation made by Bratskgesstroi appeal to the Council of Ministers, thus reducing the effective application of discretion by Bratskgesstroi. The direct subordination of this agency to the Ministry of Power has also lead to suggestions that it may favour power interests over other interests. Nevertheless, there have been clear examples where local priorities have been defined by Bratskgesstroi, supported (in housing matters) by the Director of Housing. The creation of this multi-purpose construction agency appears to be the most significant innovation towards achieving an appropriate degree of local control and coordinative capacity. An indication of a limited control role at the local level can be found in the planning for the construction of the town of Bratsk. The town plans were drawn up on forecasts of population age structure which turned out to be incorrect. As a result not enough child care facilities were included in the initial plans. Over time these deficiencies were, of course, corrected but this involved a reallocation of funding by the ministries. While the local system were involved in perceiving the need for this correction it did not have the capacity to implement it without the approval of the general system level. A further innovation has more recently come about on the temtory: the creation of the Board of Directors. This Board has no formal powers, but has a strong capacity to influence operational decisions. It meets once a month and has been described as a first attempt to create a unified management for the BITPC. At the moment its primary role seems to be coordinative.

The Soviet system has an additional mechanism, not yet mentioned, to support the decision process. The organization of the Communist Party maps the already described management structure. The complexity of its organization is huge. The Communist Party at the City of Bratsk is supported by professionals and scientists spanning the different production activities and social aspects of the city. They will normally be aware of problems, opportunities, and challenges presumably will find their way both to support coordination and to report these aspects to higher levels. The Communist Party has always exercised its policy through decision-making bodies. In this way, the Party is not only providing a mechanism for local coordination but also providing a channel to the national level for information on complex formation effects which would otherwise not reach this level. Since these effects do not directly follow from the formal objectives set to other local organizations, they would not, therefore, be reported on by them. The Party may be viewed as strengthening the mechanism of management. No doubt the directives of the Twenty-fifth Congress of the Party to improve the management of TPC reflect in some way the effectiveness of the Party's territorial branches. In summary organizational innovation, supported by organic growth of local bodies, has provided the BITPC with a capacity for self-management. This is most seen in respect to policy for infrastructure and other aspects of complex community formation. However, the particular way in which these aspects are funded by national enterprises has limited the possibilities locally to ensure effective implementation. In addition, the close links between local enterprises and their parent (national) ministries and the specific way objectives are set may have inhibited the growth of local control capacity within Bratskgesstroi. Summary

It is inappropriate to make any assessment of the BITPC on the basis of this limited study. However, it is useful to compare the implications of this analysis with the very frank comments of Soviet sources. Some conclusions were reached on the response to the additional environmental complexity of the BITPC within the system. The complexity arising in the definition of BITPC specialization has been responded to entirely by the general system level. The second cause of complexity, that of meeting the need of complex community development, has been met by a local system as far as policy is concerned, but the implementation of this policy is largely controlled by the general system level through sectorial funding. The complexity of achieving synchronization has been responded to both within the general system level and the local system. Table 9.1 contains the main elements of these responses and indicates the processes which have been used to realize them. It is, of course, a somewhat simplified version of the fuller picture that has already been presented. The response to each of the management challenges is summarized below.

Table 9.1. Scheme of organizational resporwe Management challenge

System responding/functions Process

1. Defining specialization

General-Policy and planning functions

Preplanning stages State long-term and five-year plans

2. Defining complex community development (b) Completing industry and other

Local-

Policy and (oblast) planning functions

Local preplaming Drawing up of town plans Local five-year plans

3. Synchronization of

General--Control end coordination and Local--Control and coordination

Annual plans for BG from Ministry of Power Operative plans Operational decisions of Bratskgesstroi Director of Housing

construction (a) Between sectorial objects (b) Between sectorial and territorial objects

The definition of complex specialization places very great demands on the planning resources of the general system level. It is difficult to assess whether the demands could potentially be met; however, considerable resources through the many research institutes are available. It is probably true that as techniques improve, e.g. as more sophisticated mathematical models become available, there will be more confidence in the efficiency of the TPC development. For the present, however, the main problem with BITPC seems to be an insufficient focus of intelligence capacity on that particular object. In particular, there is no general scheme for the TPC which could provide a policy framework for later results of that focus. While the BITPC was largely defined over twenty years ago, current uncertainty regarding the efficiency of Boguchany HPS raises questions for the present. Turning to the second challenge, that of planning for complex effects of town construction, the oblast has been identified as playing the key role. Our analysis leads to no obvious inadequacies in this response; however, actual experience is mixed. Together with notable successes there exist questionable areas. This relates not only to the past but recently to Ust-Ilimsk. In the words of A. N Semenov, Head of Bratskgesstroi: Unfortunately, Bratsk's errors were repeated also in Ust-Ilimsk. In developing the technical economic basis for building a hydropower station, not a single department gave notice to its enterprises, and thus the draft plans did not provide for cooperation in building common produc-

tion facilities and engineering installations, and in building up a transportation network and the city. (Literayurna Gazeta, 1975, p.11) The final comment regarding draft plans for the city suggests that the role Irkust Oblast plays is not sufficient. This is possibly because the national concern for the key specialization objects and the concern of the ministries io minimize costs, or take a rather narrow view, prevail, despite laws defining its rights. However, it is with the third area of complexity, that of meeting synchronicity, that analysis is most suggestive of inadequate response. This complexity is dealt with both at the general level and at the local level. The influence of the local level is focused more on short-term considerations, i.e. within the annual plans. Definition of the annual plans is mainly a demand on the general system level. Here the only response appears to be in the procedure for agreeing Bratskgesstroi's annual plans, led by the Ministry of Power but involving other customer ministries, territorial bodies, and the GOSPLAN. It is not clear how well this works for phasing sectorial objects with one another, but there is evidence concerning social infrastructure. The rather rigid way infrastructure funding is allocated limits the flexibility of rates of infrastructure construction. No capacity exists to exercise independent control over this key factor. This appears to be the main explanation for such interview remarks as: 'For the present infrastructure is one of the bottlenecks in the process of assimilating the new areas' (Bandman, personal communication, Novisibusk, June 14, 1976). Within the local system elements exist which make a significant contribution to the management of aspects of the environmental complexity. Key among these is Bratskgesstroi; the Board of Directors and the Housing Office also make contributions. However, these contributions are limited because of the constraints in the objectives set by the general system level--explicitly in terms of specialization objects but also implicitly through these objects in terms of social infrastructure. Overall, analysis suggests that the general system level response is not quite sufficient to meet the needs following from these rather specific objectives. At the same time, these same objectives have had a somewhat inhibiting affect on the growth of capacity of a local system. A set of analytic conclusions is incomplete without emphasizing the magnitude of the achievement in the BITPC. Comments which relate to organizational problems cannot diminish this achievement, which is a solid reality. We have taken this for granted in the course of discussion and have proceeded in the spirit of the many Soviet scientists concerned with the TPC, with the aim of producing positive indications for future management development. Within the Soviet Union there is an awareness of many of the points discussed in the course of the analysis. This awareness has led to discussion in the press and withim scientific and management bodies on how TPC management

can be strengthened. In the following section several suggestions that have arisen in these Soviet discussions are examined briefly. 9.4 Future management alternatives for TPC

In the course of our study, both in discussions and in published material, there have been many suggestions from Soviet planners, managers, and scientists for strengthening TPC planning and management. The directives of the Twenty-fifth Congress of the CPSU relating to TPC management may be taken as a recognition of the level of challenge represented in the TPC strategy. Many possibilities exist. However, here attention is focused on three types of suggestion. These are representative both of the larger range of possibilities and of the most important ways of meeting TPC challenges through the different system levels. The three suaaestions are: 1. Acting only to strengthen preplanning and planning processes for TPCs. The supporters of this proposition do not think that the creation of a 'managemen; body' for each TPC is necessary. Rather, they emphasize an improvement in existing planning mechanisms. 2. Creating an 'operational management body' for TPCs. This body would be responsible for the solution of questions of capital construction and the formation of infrastructure. It would be subordinated to the Regional Executive Committee, i.e. oblast, and it would have the right to apply directly to the GOSPLANS USSR and RSFSR to solve various problems of sectorial specialization. 3. Creating a 'comprehensive management body' in the form of a Soviet of Working People's Deputies for each large TPC. It would have a .'pianning committee' responsible for arranging the whole process of preparing and creating the TPC. It would support the different sectors with additional information, coordinate the pre-planning process, control and implementation of plans, and be responsible for the economic development of sectorial and completing industries, social and technical infrastructure, and environmental protection. The challenges - that have to be met-the svnchronized im~lementationof sectorial programs with social and technical infrastructure, the preparation of plans and their substantiation-are continuous processes s u ~ m r t e dbv existing organizations. If the phasing of implementation is poor or the substantiation of plans and related decisions are considered inadequate, there are manv alternative strategies in principle to improve these processes. We have indi; cated in our atlalysis that these strategies correspond to different ways of distributing the response between system levels. However, in practice not all of these p6ssibiliti& may be equal& feasible. Among other tkngs structural (e.g. the country's administrative structure), informational (data availability), and technological (availability of computers and models) factors may all a k t o limit the possibility of a particular strategy to contribute to better TPC plan-

--

- -

..

A

.

ning and management. Such issues are addressed in examining the three strategies mentioned above. Strengtheningof preplanning and planning of TPCs in the general system level

The strategy implicit in this proposition is to meet the managerial and planning challenges by increasing the capacity of the general system level. As analysis has indicated, this would be a direct development of the strategy hitherto adopted. The emphasis here is on improving the process at this level which supports the plans for a TPC. This suggestion does not address the implementation of those plans. Strengtheningof preplanning and planning might actually suggest the preparation of 'general schemes', at least for the most important TPC. In any case it implies a strengthening of the intelligence function of the general system level. Since TPC schemes are essentially multi-sectorial and sectorial-territorial it is unlikely that they could be the output of sectorial ministries alone. Rather a role for the GOSPLAN is indicated. The strengthening of the intelligence capacity might, therefore, be within the territorial department of the GOSPLAN and its research institute, the SOPS. In practice, the problem of planning TPCs is so complex that the support of temtorial models may be required to justlfy coddence in the resulting plans. Case evidence suggests that tenitorial models are lagging behind sectorial models, thus this alternative implies an increase in research efforts before the territorial dimension can match the sectorial influence in the decision process. However, a trend in this direction and a more explicit consideration of the territorial complexity in the design of sectorial programs should represent a progress in the definition of territorial lines of specialization. Eventually, this should also have a positive impact in the design of technical and social infrastructure. Standard setting and approval would benefit from this better understanding of temtorial aspects at the centre. Since this suggestion does not relate itself to issues of implementation, it is assumed that control of implementation would continue according to present mechanisms. Hence, to the extent that problems are today observable in this area, if this alternative alone were followed these problems would remain. Creation of an operational management body for TPC

In this type of solution the main directions of specialization of a TPC would still be defined by the general system level, but the complexity arising from infrastructure balance and phasing considerations would be met by a local system. Because specialization is defined nationally the comments on the need for more focused preplanning and planning, made above, still apply. Here, however, problems arising in operational control are also explicitly considered. This solution involves the creation of some local body which has sufficient

decision discretion to deal with complex effects related to infrastructure and phasing. The prerequisite for achieving this is a de-linking of infrastructure funding from the actual rate at which sectorial objects are created. Effectively, a Soviet infrastructure fund would be created, subscribed to by the national ministries but controlled by the local body. Through this step, planning and control of social infrastructure would both be at the same system level. The strategy of this proposition is to increase the operational capacity of the TPC. The general system might at the same time improve its decision mechanisms relevant to TPC formation. Although this arrangement does not alter the logic of the system of planning it could create some problems in control of the general system level. To give the management body meaningful discretion in allocating resources on TPC territory, it might be necessary to loosen customer-ministry control over their objects while those objects are being constructed. Hence, the time for ministerial comment would be when the annual construction plans are being drawn up. The new management body might be the sensible authority to which an agency such as Bratskgesstroi is subordinated. It does not necessarily imply that it takes over the role of infrastructure planning from the oblast. However, its embedding in the oblast should support a more effective consideration of the TPC in this planning process. If the management body is going to exercise operational discretion, sometimes against the wishes of individual ministries, then it is clear that it must get its authority from a high level. The GOSPLAN seems to be the most appropriate agency. As a minimum the GOSPLAN would be involved in formulating the annual plans for the management body, and may be further involved if conflicts arise due to deviations occumng from those plans. Especially as the GOSPLAN may be dealing with several such bodies, for the major TPCs some strengthening of GOSPLAN capacity to meet the coordination and conflict resolution would need to occur. However, if this is feasible, this particular solution to the management of the TPC seems to pose no major problems. In summary, this proposition would result in the strengthening of the control and coordination functions in the TPC, thus permitting a more synchronized implementation of sectorial programs and infrastructure. Construction capacity and financial control over infrastructure development would he the basic mechanisms of the management body. The body itself would have limited policy and intelligence capacity both to consider problems of wmmunity formation and completing industries. The former still would be the role of the oblast and the latter of the Republic. The impact of this proposition in the general system level seems to be an increased need for operational control at the GOSPLAN level. Creation of a comprehensive management body for TPC

Decisions on the lines of specialization of a TPC are inherently of a national nature. There are, therefore, limitations on the extent to which any body

specific to the TPC can fully meet the challenges that the TPC poses. However, within these limitations, the third suggestion sets out to meet TPC complexity. So while policy decisions of sectorial specialization would be made at the centre, policies on territorial formation and completing industries would be supported by the creation of a planning and management body for major TPCs. Indirectly, this should permit the evolution of a local capacity to influence the selection and the substantiation of possible lines of TPC specialization. This body would have the capacity to coordinate the contract preplanning designs, in particular to support community and industrial formations. Eventually this increasing understanding of the TPC planning problems should permit this body to support central planning with local intelligence capacity. In addition, this body would have similar control and coordination mechanisms to those of the management body discussed above. Altogether a solution of this nature implies a policy and intelligence capacity as well as control, coordination, and implementation functions at the TPC level. While a policy and intelligence capacity would be primarily related to community formation and completing industries, over time it might evolve to influence the preplanning and planning processes of the general system level. The requirements for strengthening control and coordination capacities at the centre, which were implicit in the second suggestion, are also implicit here. However, in addition, the agency suggested here would, in effect, be a new planning and management level in the system of temtorial administration. Problems of consistency with the overall system of planning in the Soviet Union might, therefore, arise. Conclusion These suggestions are not mutually exclusive. On the contrary, the introduction of any of them may support the conditions in which another is viewed favourably. Or viewed simultaneously, two of the above may more realistically meet the complexity of the TPC than any one on its own. However, of one thing we can be confiden+the complexity of TPC is great enough to make illusory any final optimal solution.

CHAPTER 10

Insights porn Abstraction 10.1 Introduction The systemic framework developed in earlier chapters was used to different degrees in the case studies. In our research the theory was developed during the course of the two case studies. Thus it is not surprising that the overlapping between theory and practice is incomplete and even, in some cases, unsatisfactory. In this chapter the aim is to synthesize the framework and some of the results of our field-work activities. B y no means is the intention to rewrite the case studies; yet by illustrating different conceptual points it is hoped the reader will increase understanding - of the connections between the abstract model and its practical utilization. Following the conceptual framework three main areas are illustrated. First, the application of the organizational model implies a definition of the program system and its boundaries. This is a necessary condition to make possible the set of abstract operations of the framework. However, unless there is a clear understanding of the institutional set-up in which the program is being undertaken the definition of the system and its boundaries does not have a real meaning. Thus both the ideas of a system and its general system level are illustrated in this chapter. Second, the concept of the system's environment is central to program definition and implementation. Were it possible to define precisely the nature of this environment and its possible states the problem of program management would be very simple. However, it is clear that this is not the case and therefore it seems useful to review this concept both from the analyst and policy-maker point of view. The third and final concern is to reinforce the concept of organizational effectiveness, supported by the law of requisite variety. This law, though simple in its nature, is diicult to apply, simply because of its relativistic nature. Unless the references supporting its application are obtained correctly there wiIl be problems in finding out its usefulness. In the case studies we found several instances in which the organization lacked requisite variety, thus implying a priori a mismatching between possible and desirable behaviours. Some of these mis-matchings, though already reported, will be referred to again in this chapter. There is no intention to compare the case studies; however, illustrations are drawn from both the Soviet and Scottish programs to support this synthesis of concepts and practice. 204

10.2 A system and its boundaries Broadly speaking it can be said that the objective of the Soviet program is the integrated development, from the production and social point of view, of the natural resources of the Bratsk-Ilimsk Temtory in the context of Eastern Siberia. If it is agreed that this is the overall objective of the Bratsk-Ilimsk TPC, then it should be the reference against which the 'program system' unfolds its behaviour. Thus, it is assumed that because there is an explicit statement of an objective there is a 'program system' recognizing the objective and behaving accordingly. Though this is a useful abstract operation it does not imply by any means that the units actually behave as a system. In fact, the purpose of analysis was to study the organizational effectiveness of a system with that objective and, of course, one possible outcome of the analysis was that the system did not exist at all. The concept of TPCs is evolving in the Soviet Union and it is not surprising that there is a lag between the conception of the idea and its actual implementation. The reported ongoing discussions around the TPC management issue is evidence that this is the situation. To structure our hypothetical program system attention was paid to the institutional actors at the TPC level. The analysis of their functional roles supported the view that by and large these institutions, e.g. Bratskgesstroi, Aluminium and Timber complexes, were operating with reference to subobjectives of the general objective. Thus they are sub-systems and part of the implementation function. In particular, the unusual, for the Soviet context, comprehensive construction role of Bratskgesstroi led the analysis to a first level of unfolding of that institution, i.e. a study of its internal management. Though it was found that Bratskgesstroiplayed, to some degree, a coordinating role, neither this institution nor the other organizational innovations for the TPC, i.e. the Board of Directors and the Directorate of Housing, provided the overall capacity to integrate sub-objectives and define the overall development of the TPC. Consequently, the organizational analysis was extended to higher tiers of management in the Soviet Union in search for that capacity. In this way it achieved an overall picture of the institutional actors concerned with the Bratsk-Ilimsk program. The boundaries of the system that in theory should be derived from the recognition of the institutions or institutional parts concerned solely with the management of the TPC program became fuzzier, and they themselves became the focus of our organizational analysis. For the Scottish case study it was assumed that the rapid development of off-shore oil resources was a program of the United Kingdom government. In contrast to the Soviet study, in this case our purpose was not to study whether there was a 'program system' with effective managerial capacity to achieve this general objective, but to focus our attention in two dimensions that we assumed were relevant for policy makers in Scotland. In this context the two purposes of the analysis, the response in the short term to the impacts of oil development and the long-term oil-related economic development of Scot-

land, supported the definition of two different boundaries for the program system. Broadly speaking, for the first purpose it was enough to consider the governmental structure concerned with the oil-affected areas; however, for the second purpose, because of its generality, institutions concerned with economic, industrial, and environmental issues were considered part of the system. The impiicit level of resolution of the study in Scotland is that of subsystems of the program system. We did not intend to get into the organizational complexity of local authorities and the other institutions supporting the industrial program in Scotland. The analysis was focused mainly in the Scottish Office and its linkages with sub-systems. However, it might be difficult to perceive this while reading the case study. In fact to some degree we did provide evidence of the internal operations of local authorities; however, this was done with the aim of illustration and not as a systemic analysis of that level.

10.3 The general system level At different places throughout this book reference has been made to the fact that the relevant environmental complexity is responded to at different system levels. In particular, it has been suggested that part of the response is at the general system level. However, it is not sufficient to understand the way objectives are structured to find out the extent to which this system level exercises discretion in responding to its relevant environment, i.e. to the program environment. Certainty the higher is the functional capacity at the general system level supporting a particular statement of objectives the higher is its capacity to define and control more effectively these objectives. Yet it does not seem conceptually correct to equate this functional capacity with the degree of detail into which objectives are defined. In theory it is possible that the same objective defined at similar levels of detail in two different situations might imply completely different distributions of the response to management challenges. Decisions and control mechanisms in policy areas not directly related to the program objectives can change in one way or another the degrees of discretion of the program system. Unless there is a fairly good understanding of the setting in which the analysis is applied it is hardly possible to capture the real meaning of the way program objectives are defined. If the case is that the reader had the impression that it is possible to study program management without a highly developed model of the general system level, then we did not convey our approach correctly. In the Soviet Union, without an understanding of the preplanning and planning system it is not possible to give a meaning to TPC objectives. The concept of a line in the plan, the structural levels at which these lines are defined, the use of balances in plan preparations, or the organization of the research activities in general are but a few of the instances

supporting the understanding of the general system level relevant to the study of the management of TPCs. The discretion of Local Authorities in Scotland to respond to oil development impacts is difficult to understand unless attention is paid to the behaviour of the United Kingdom Departments of State defining standards and norms. This is an example of decisions outside the direct program concern which still very much define the program system discretion to respond to its relevant environment. For both studies models of the general system level were developed. The descriptive material supporting the cases are an expression of these models. Certainly we do recognize their limitations,particularly in capturing the richness of the real situation; however, we feel this to be a consequence of the limitations in the field study and not of the conceptual approach. 10.4 The system's environment

The general system level defines the limits within which the discretion of the program system can be exercised. The nature of the program objectives d e h e s the complexity of the environment that is the concern of the program system. Thus more complex objectives suggest more complex challenges for management, i.e. the program system has to respond to more environmental states in a given time if it wants to achieve its objectives. The perception of relevant environmental states is achieved through the organizational structure of the program system. It is essential to understand this if we do not want to confuse the states of the environment as perceived by the organizational analyst-that certainly implies a low variety model of the situation-and the states of the environment as perceived by the multiple members of the program system. To understand this distinction it is necessary to add that because there is progressive aggregation of the environmental complexity by the different management levels of the program, organizational analysts deal with the program at a given level of aggregation as expressed to them by the concerned policy makers. However, the analysts's logically deduced models of the environment could add to this highly filtered model of the environment other dimensions not necessarily perceived or considered by the policy makers in their decision processes. In doing this the analyst is studying the environment as defined by a particular understanding of the program objectives. This abstract process has particular relevance in studying the Soviet program. Management challenges were derived from a particular model of the TPC concept. If this model is not shared by policy makers there is little point in defining the challenges. Investment decisions of territorial specialization based on the benefits of complex interactions of already existing activities certainly implies a more complex program than that considering investment decisions without reference to others. Though it is easy to have a theoretical perception of this dimension in practice the degree to which it influences the

decision process depends on the complexity of the models actually supporting investment decisions. If there is an agreement that complex territorial f o m tions, i.e. investments based in complex interactions, are necessary ingredients for integrated regional development-the stated objective of this program-then it should be used as a reference to find out the necessary matching organizational complexity. This particular formulation of program objectives implies a level of environmental complexity that might not be presently recognized by TPC management, although being a desirable aim to achieve. As for objectives that are clearly recognized by the program system, it is their specificity that tells about the complexity of the environment. If the objective is to build up in five years an aluminium complex and its related social infrastructure, or alternatively to do it in seven years, we are talking about two different levels of environmental complexity. The case study did not address this level of objectives simply because the problem of synchronizing industrial and social projects had been pointed out by Soviet scientists as an area of management concern. Therefore it was assumed, supported by that evidence, that whatever the time frame was for the program, the problem of synchronization was a challenge. Thus the complexity of phasing different developments was one of the environmental dimensions under consideration. A higher disaggregation of this issue would have led the analysis to specific time frames and the need for more elaborated models of the environmental complexities confronting the implementation of objectives. In practice the models of the environment for the two studies were developed at different levels of disaggregation. In the Soviet case we obtained a more precise picture of the program and the conditions in which it was evolving. The managerial challenges were 'oughts' for the program if its objective was integrated regional development. In this context they defined a level of environmental complexity that had to be responded to if the program was going to have 'integrated development' as its objective. Different time frames would support a more accurate definition of this complexity but would not change its nature. For Scotland the aim of the study was illustrative, and not conclusive, of the relations between the organizational dimensions and policy making. The model of the program and therefore of its environment was fairly general, precluding any serious possibility to elaborate environmental complexity. In fact the management challenges were at the level of the purposes of the study. Had we been interested in a more precise analysis of complexity the challenge 'response to environmental impacts of oil development' could have given way to a complex model of the interactions between land use, infrastructure development, quality of life, and so on. The institutional response to changes in these dimensions, framed by a given target output of oil, could have been the platform to measure the environmental complexity related to the challenge. In the same way, a model of the Scottish economy and a more precise understanding of the degrees of freedom that in economic matters are

removed by the United Kingdom government'could have permitted the struo turing of more focused management challenges. More general management challenges certainly imply higher levels of aggregation, and therefore the more environmental states implicitly considered the more difficult it is to structure a useful model of that situation. In practice the level of aggregation should be defined by the concerns of the relevant policy makers. The role of systems analysis in structuring these models should be apparent from this exposition. Within the constraints imposed by the general system level the development of environmental models should give a reference to find out the organizational needs to fulfil objectives at alternative levels of performance. 10.5 Consistency between system levels

The general analysis of organizational effectiveness is by and large focused on the consistency between the way objectives are defined and controlled by the general system level. Definition of objectives in broad terms accompanied by very detailed interventions as they are implemented suggests an inconsistency. This behaviour might be the result of decisions both 'direct' or 'indirectly' related to the program system. The degree this behaviour frustrates the achievement of objectives, as stated, is an expression of this inconsistency. In the Scottish case study, as long as it is accepted that the creation of the Scottish Development Agency implies a decision to give some discretion to Scotland to decide its long-term economic development, inconsistencies of behaviour are found. The behaviour of the United Kingdom Departments of State for Industry and Energy make it difficult, if not impossible, to actualize this discretion at the program system level, i.e. the Scottish Office. For +stance, the sectorial definition of industrial policies makes it more relevant for the Scottish Development Agency to link with the Department of Industry than with the Scottish Office, its formal metasystem. For the short-term challenge the analysis is different. The pressures to cope on time with infrastructure development and oil-related planning applications have led to a redistribution of discretion between system levels. The removal of United Kingdom guide lines to support infrastructure undertakings and a general though explicit policy in relation to planning applications are supporting a higher discretion in the Scottish Office, more consistent with the demands implicit in the objective of rapid oil development. However, before these decisions were taken inconsistencies of the same nature as those explained for the long-term challenge did exist. The analysis for the program in the Soviet Union is more subtle. The industrial undertakings in the TPC are embedded, i.e. are sub-systems, in the all-union ministries. However, if territorial production complexes are going to be integrated regional programs there is a necessity for functional capacity supporting this integration. Structurally, because of the intersectorial nature

of TPCs, this capacity has to be at a higher level than that of all-union ministries. However it is recognized by the Soviet scientists that the managerial tools to support integrated regional development at the all-union level have yet to be adequately developed. In terms of the framework this means that mechanisms to support functional capacity at that level do not yet exist. If this is the case the functional capacity of the general system level to support integrated territorial development seems to be inconsistent with the definition of the objective. The propositions by Soviet practitioners and scientists to create TPC management bodies are, from the organizational viewpoint, propositions aimed at bringing consistency between system levels. This would be done by creating a new system level between the general level and the sub-systems. However, if these propositions or any other viable alternatives are not considered and the present behaviour is kept, it would imply an inconsistency between the stated objective and the overriding sectorial influence in practice. 10.6 Aspects of effectiveness

While the analysis of consistency is a general approach to study effectiveness, the full richness of the dynamic nature of systems is only captured once the study is focused in the details of the internal and external balances of the program system. By and large the case studies did not capture this second dimension. The study of functional capacity was either supporting the analysis of consistency between system levels or the internal characterization of each function. The comprehensive study of the filters of environmental complexity or the amplifiers of management variety necessary to draw conclusions on the effectiveness of the system-environment interactions was not done. The balance between the control and implementation functions was also not within the scope of the case studies. The comprehensive study of effectiveness would have implied the development of fairly complex models both of the program environment and the institutional resources. However, for both case studies the law of requisite variety was an important conceptual instrument. The nature of the analysis that can be done when supported by this law is illustrated in what follows. While studying the Soviet case, it was explained that in the Soviet Union investments, by and large, are carried out by all-union ministries. Industrial constructions, their related social and service infrastructure, as well as their funding, is under control. This strategy can be interpreted, from the viewpoint of managing complexity, as a tendency to minimize intersectional dependencies. This seems to be an appropriate strategy when there are limited resources to manage these interdependencies. However, at least for territories, this implies some costs in terms of not using the opportunities offered by complex formations. The development strategy of the BITPC, however, has been different. While Bratskgesstroi from the beginning has been an all-purpose construction enterprise, the Irkutsk Oblast has been in charge of town planning for the

TPC as a whole. However, the benefit of this integrated planning and implementation has been hindered by the nature of the mechanisms used to allocate financial resources. These mechanisms do not have the same level of integration, i.e. projects are sectorially funded, and therefore their variety to cope with the dimension of complex territorial formation is much lower. The lower variety of these financial mechanisms are in fact reducing the levels of performance that would be achieved if only planning and implementing capacities were relevant factors. The financial mechanisms, instruments to support the balance of the control-implementation functions, are lacking in * requisite variety to cope with the opportunities of integrated development. However, to increase their variety a managerial capacity . of an intersectorial nature would be necessary. The creation o i a management body for the TPC might provide this capacity, yet it would be necessary to increase the metasystem level of control over the program if the new discretion at the territorial level is going to support effective integration. This analysis is a consequence of the necessary balance between the control and implementation functions if the integration of sub-systems in the context of the whole is going to happen. For the Scottish case study the 'regional policy' il!ustrates the point of requisite variety. This policy was defined and implemented as a mechanism to amplify governmental capacity to induce development in areas with high unemployment. However, the way this policy was defined and the complexity of the implementing bodies precludes the possibility to discriminate effectively between depressed and non-depressed areas in Scotland. The policy has reinforced, at a high cost to the United Kingdom government, industrial undertakings in the North-East of Scotland. The centre of this area is Aberdeen, a natural pole of growth because oil development has benefited from this policy at the expense of the Strathclyde area, where unemployment is chronic. The policy lacks requisite variety to recognize the new economical conditions in the North-East of Scotland. This policy illustrates in particular the more general concept of mechanisms used in the Scottish case study. While the dimension of flexibility is related to the number of different states the mechanism can cope with, the dimension of influence is related to the model of the program environment. In general the 'regional policy' example illustrates the idea of flexibility; however, the lack of a well-developed model for the program environment precludes the possibility to assess the potential influence of this instrument in the achievement of program objectives. A

10.7 Conclusions

Supported by the information of the case studies, illustrations were elaborated on the use and meaning of the systemic concepts for approaching organizational analysis. In this context insights for program management were drawn from the abstract model. However, probably the most relevant insight does not come from these particular applications, but from the fact that the same model was used for two situations that certainly are very different.

A planned economy like the Soviet Union and a market-mixed economy like the United Kingdom do represent fundamentally different settings for program implementation, yet the model to study these organizational and managerial problems was exactly the same. The model is universal in the sense that springing out from the complexity of the situations there are fundamental invariants in the political, institutional, and economical dimensions of those settings. Complexity and the management of complexity do not discriminate between economical systems, degrees of development or political beliefs. In this sense the organization of program management in developed or developing, market-oriented or socialist countries is defined by the same problem: the management of complexity. The framework as developed paid particular attention to this dimension, and its unfolding was possible only after the underlying invariants regulating the complexity were unveiled. However, this insight, due to Norbert Wiener (Wiener, 1961), by no means diminishes the relevance of the particular characteristics of a setting. Based on the given illustrations, it should be apparent that models of the system, its meta-system, and the relevant environment demand a deep understanding of the particular setting. Thus the abstract framework does not by-pass the need to find out the particular characteristics that complexity adopts in each setting. However, it does help to structure effectively the organizational problems in program management. This is seen as an important contribution towards incorporating the organizational dimension in policy making. Finally, in case someone infers that because of the universal nature of the developed framework the role of the individual policy maker is diminished, let us remember that the analysis is meaningful only as long as it is done from the viewpoint of a particular 'observer'. Unless the analysis is done 'relative' to someone, e.g. the policymaker, that complexity cannot be perceived at all.

CHAPTER 11

From Abstraction to Policy The purpose of organizational analysis, be it this approach or another, is to improve the effectiveness of organizations. What does this mean? Analytic approaches of various types, including this one, often give the impression that it is possible, by tinkering long enough with the proper mechanisms, to reach some absolute level of effectiveness. In fact, this is an illusion. For human organizations, effectiveness will always be a relative concept. Effectiveness can be improved, but it can only be judged with relation to a particular reference level, either a set of objectives or prior behaviour. Managers are probably even more aware of the nature of this illusion than are researchers and theorists, for they are involved on a day-to-day basis in assessing the trade-offs implicit in choosing between alternative organizational strategies. Improving the effectiveness of human organizations is a complex business; improvements in performance along one dimension seem inevitably to impair the quality of performance along another. Thus, ultimate effectiveness becomes so much of an illusion as to be practically impossible. Within these limits, however, one can attempt to increase the effectiveness of these human systems. The approach presented in the book addresses effectiveness by providing a means to clanfy the nature and consequences of these trade-offs. Further, it seeks to produce understanding of these organizational issues in a way which lays the foundation for action to improve the capability of particular sets of institutions in the context of a defined set of objectives. To the degree that it provides this basis for action, it is offered as a research tool which can serve organizational policy. The difference between research which serves science and research which serves policy is that the former is intended to increase our understanding of the world while the latter aims to enable us to take actions on the basis of understanding. In each instance, understanding is the prerequisite. To serve science, the understanding must be communicated in a mode which is accessible to the relevant segments of the scientific community; to serve policy it must also be accessible to decision makers and policy makers. Ultimately, policy research should be able to provide decision makers with alternatives from which to choose solutions to their problems. In theory, one undertakes organizational policy research in order to enable managers to 'manage better'. Deriving such solutions is a complicated task. It is not simply a matter of taking the problem statement as formulated by the policy maker and finding 213

the answer. One of the many roles of policy research is to assure that problems are formulated in a manner which, when addressed, will permit the identification of 'next steps'. Problem formulation, i.e. the diagnosis of organizational problems, is as important as creating the solutions to those problems, for solutions must be based upon sound and comprehensive understanding of the dynamics of the situation at hand. In the case of a program, this description involves the nature of the program and of the institutional capacity for managing the program. The systemic approach presented here, with its concepts and analytic process, represents a new language whose purpose is to increase our ability to understand a world which is usually described in a different language. The concepts and the model are offered as an analytic device for surfacing the organizational dimensions of program management in an operational context. For the researcher, often trapped by the value-laden terminology of institutional description, the model is intended to provide a means to examine organizational dynamics in a context which is both free of and consistent with these institutional values. The formal presentation of the model (Chapters 6, 7, 8, 9, and 10) have illustrated the use of the conceptual framework as an analytic tool. Application of this framework is no simple undertaking; the concepts and process are themselves complex. However, it is this complexity which permits it to capture the complexity of non-conventional and multi-institutional programs. A few aspects of the framework were not discussed fully in earlier chapters, primarily because their significance becomes apparent only with a complete picture of the concepts and the analytic process. We will comment on five such points in this chapter: the nature of the diagnosis produced through the analysis, (2) functional capacity, (3) the process of generating and selecting institutional solutions, (4) the use of the framework to analyse institutional capability in a non-program context, and (5) the potential of the framework in the arena of organizational research in general and in international research in particular. 11.1 The diagnosis

Specific institutional strategies for program management are generated on the basis of the diagnosis provided by the analysis. In general, the diagnosis will always deal with inadequacies in terms of the consistency in objective formulation or of functional capacity. In any situation organizational problems may take the form of various combinations of inconsistency, and in each situation different institutional solutions will be most appropriate. Three examples illustrate the point. Situation 1

The environment perceived by the program system diiers from that defined by the program objectives. The system is operating effectively with respect to the narrower environment that it perceives.

Solutions There may be any one of several reasons for this type of system 'malfunction'. There are basically two alternative solutions: either program objectives can be changed thus leaving the apparently effective system undisturbed and assigning responsibility for the rest of the objectives elsewhere, or the capacity of the system can be increased so that it can perceive the entirety of the environment relevant to the accomplishment of the program objectives. There are trade-offs involved in both strategies. In the former there is a loss of integration in the management of the program, but the effectiveness of an on-going system is not impaired. In the second, the disruption of the system is traded off for the potential benefits of more integrated management. Situation 2

The distribution of discretion defined by the formulation of program objectives is inappropriate to wpe with the relevant environment defined by program objectives. The objectives set for a sub-system might define a relevant environment for that sub-system which is exceptionally turbulant, and at the same time the elaboration of the objectives restricts the flexibility of the sub-system to respond to the turbulence. Solutions There is a need to make the distribution of discretion consistent with the environment and to adjust functional capacity. A solution might entail enlarging the scope of authority of a sub-system. In this case, the intelligence capacity (as well as the capacity of other functions) should be adjusted to support the increased discretion; otherwise the sub-systems will either be unable to exercise the discretion or will exercise it poorly. The trade-offs in this case are basically between the degree of control maintained over sub-system behaviour and the ability of the system as a whole to be responsive to a turbulent environment. Situation 3

The distribution of discretion as formulated in the objectives appears appropriate to the relevant environment defined for system levels, but the functional capacity is inadequate to support the desired behaviour. In this case, the system perceives the full environment but is unable to discharge its full responsibilities. Solutions Reallocating or increasing functional capacity will improve effectivness. The trade-offs will involve choices between recipients and donors of resources.

11.2 Functional capacity

In one way or another all of the institutional solutions must address problems of functional capacity. What does capacity mean in institutional terms? It may mean many different things. In general, functional capacity is comprised of two sorts of ingredient: tangible resources and processes. The tangible resources include people, technology, capital, expertise (such as consultants), and other such 'obtainable' resources. The process ingredients include relationships among the tangible resources, organizational structure, attitudes, norms, and 'capabilities' such as the ability to learn and accumulate knowledge. The relationship between the ingredients and the level of capacity tends to be non-linear. In some cases, institutional capacity is a function of numbers of persons or qualified experts involved in carrying out certain functional roles. It might also be a function of the computer support available for persons carrying out a functional role. It includes linkages between persons or departments. For example, if there exist two research groups that could provide intelligence capacity for policy makers but which have no communication links with the policy makers, they, in fact, do not represent usable capacity. If they are each linked with the policy makers but not with each other, they may represent less capacity than if they were also linked. The intelligence capacity of that system could be increased by creating linkages of various sorts between these groups. For the policy maker who wants to know 'how much capacity is enough?' in exact quantitative terms, there is no adequate answer. Our response is that there is no need for such quantitative specification. 'Enough' is the ability to do the job and is a matter of judgement. Judgement can be based on the conventional wisdom of an industry or of management research, such as the management of information systems, or it can mean the personal judgement of a manager or analyst. While judgement does not appear 'quantitative' it involves estimation based on experience. It represents accumulated knowledge and forms the basis for much of management action. In the context of this book, where our subject is the management of nonconventional programs, the challenges inherent in managing the program will be of such a nature that direct transfer of conventional wisdom is likely to be inadequate. The situation will rather require a creative application of experience to new challenges. In such a situation, effective management supported by judgement will result from a learning process. The role of a framework for organizational analysis then becomes the facilitation of that learning, i.e. the systematization of the learning process. Therefore, it permits the more ready transfer of knowledge and managerial insight. 11.3 Institutional solutions The conceptual language provides a means to learn more about the dynamics of an organizational system. It permits fine and operational statements of the

( a ) Set of effective

Organizational strategies

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( c ) Policy maker selectse- f ~nstit~tional SOIutionS

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Institutional altsrnatives which -conditions of effectiveness and appropriateness

I ( b ) Sub-set of sffettive strategies, appropriate to v n l u ~and ~ tmditians of the setting

Figure 11.l. Selection criteria for institutional solution problems in a given situation and the concepts provide the criteria for generating effective organizational strategies. By itself, however, it does not yield specific institutional solutions for these problems. The process of generating and choosing solutions requires the involvement of policy makers and managers, for there are important decisions involved. The framework can aid in clarifying the nature of trade-offs resulting from these choices by assessing alternatives in the context of the systemic framework. Alternatives can thus be treated in what might loosely be described as a simulation, as they are passed through the transformation and analysis stages of the analytic process. The first step in creating solutions is to make the diagnosis accessible to policy makers in their own language. Then the policy maker, with the analyst can address the task of choosing an appropriate institutional alternative. The role of the analyst can be illustrated using a medical analogy. The analyst/ researcher increases his or her understanding of the world using whatever language is most effective for clarifying the dynamics of the system. However, to the degree that his or her knowledge remains in a form which is inaccessible to others he or she has increased only personal understanding. The medical doctor, who alone has expertise, may use his or her understanding to select remedies for the patient. However, in the organizational world, where the analyst and manager share expertise, the analyst alone cannot create solutions. Therefore the diagnosis must be made accessible so that the policy maker's understanding of the world, as well as the analysts', is increased. This requires a translation of the diagnosis from the conceptual language of the framework to the institutional terminology of the policy maker. In the process of creating and selecting specific institutional alternatives there are three identifiable sets of criteria which appear to be operative. The criteria serve as successively finer filters through which possible alternatives are passed. In practice, the criteria tend to permeate various stages of the

analytic process itself, and are thus applied to potential solutions in a synthetic manner. Understanding the nature of their application, it is still possible to distinguish three sets of criteria and to describe their effect in selecting alternatives. The criteria refer to three different aspects of a specific institutional alternative: (1) the effectiveness and (2) the appropriateness of its underlying organizational strategy, and (3) the feasibility of the institutional solution itself (see Figure 11.1). 1. The first operative set of criteria refers to the organizational strategy and is derived from the systemic formulation of the program system and its relevant environment. These criteria define effectiveness and are expressed in terms of the balance between the capacity of the system and the complexity of the relevant environment. They define a set of effective organizational strategies by identifying the issue which a particular strategy must address in order to improve the capacity of the system to respond to the environment. A strategy which does not address these issues would be excluded from the set of alternatives at this stage. The 'situations' described above are pertinent examples. 2. The second set of criteria refers to the appropriateness of a particular organizational strategy and is derived from the values and management traditions of the program setting. Appropriateness is defined in terms of the degree of congruence between an organizational strategy and the values and traditions of the setting. For example, the two case settings,, the Soviet Union and Scotland, have very different values and traditions which shape management practice and organization. Strategies which are incongruent with the values and traditions of the particular setting in which the program is being implemented are considered inappropriate and thus excluded as real alternatives by these criteria. It is interesting to explore this point a little further. Typically, one expects to find differences in institutional forms in different settings. These criteria identify differences at the strategic level which characterize strategies appropriate for different societal settings. In any setting, there will tend to be particular strategies which are natural and congruent with the social philosophy of the society. Organizational strategy may be distinguished according to two dimensions: the manner in which discretion is allocated, i.e. the manner in which objectives are defined for subsystem levels, and the nature of the mechanisms employed by the system to influence institutional actors key to the achievement of program objectives, i.e. the definition of system boundaries. The two cases provide illustration. In each setting there is a natural and preferred mode of allocating discretion which is expressed by the institutional patterns of management. In the Soviet Union, this Dattern is often referred to as the centralized system of planning and management. In practice, there is important variation in the way discretion is allocated in this setting. However, it is possible to identify thresholds beyond which certain allocations of -discretion, certain formulations of objectives are naturally inappropriate for the setting. Strategies for affecting key actors also differ between the two settings. In

the Soviet Union a major mechanism for affecting key actors is to enlarge the boundaries of the program management system and then to influence key actors within the context of their new system membership. This enlargement of system boundaries is accomplished through the system of planning which is the basis of Soviet management. Through this formalized system, the objectives of key actors may be redefined such that all actors pertinent to the accomplishment of program objectives become members of the program management system. The strategic choice is to use a redefinition of system boundaries as a mechanism. In Scotland, boundary redefinition is available as a mechanism for influence, but tradition restricts its use. It is possible in the Scottish context (in British management tradition) to nationalize industry or to create national industrial firms, such as the British National Oil Corporation, and thus to influence key actors for the program. Within the traditions of this setting, however, the enlargement of system boundaries in the manner available to the Soviet Union is not an option. Rather, in Scotland, the majority of mechanisms must be more indirect and the general strategy tends to influence key institutional actors through the medium of their relevant environment. Such indirect mechanisms include the passage of legislation and the creation of financial incentives. Indirect mechanisms are also available as an option in the Soviet management context. Thus, the set of strategies potentially available to policy makers may appear similar in both cases. In practice, however, the traditions and values of the program setting delimit the possibilities of using one or another. Over time, as social values change, the range of mechanisms available in a setting may increase. That is the appropriateness of various organizational strategies will change (slowly) over time. Often, a program will be conceived and implemented to encourage such changes in social values and traditions, and often a new program strategy will express the desire for such changes. As criteria for selecting specific alternatives, this set in particular is applied implicitly and explicity throughout the analytic process. We stress the criteria here to emphasize our view that specific institutional solutions must be tailor-made for each and every setting and that, to achieve this, there must be close and constant interaction with persons intimately familiar with the management traditions and values of the setting. The third operative set of criteria refers to the feasibility of institutional alternatives and involves first a strategic choice and then a more tactical set of considerations. These criteria will tend to be quite self-consciously applied and will reflect the judgement of policy makers. Rather than permeating the analysis in a subtle mode, strategic and tactical institutional decisions involve trade-offs which must be separately assessed in terms of the costs and benefits to program management. For any given organizational strategy, there are numerous institutional alternatives, which have already passed the filters of effectiveness and appropriateness, to ensure that these feasibility criteria are employed.

The strategic institutional question revolves primarily around whether to create new institutions, to modify existing structures, or to make no changes at all. Each of these choices has consequences: each has costs and each will provide benefits. There are times when radical institutional innovation will be the most effective means of organizing institutional resources into a form for program management. Often, radical innovation captures the imagination of those who might otherwise have such vested interests in their existing institutional bases that they would continue to give the objectives of their home institutions priority over program objectives. At other times, radical innovation might so disturb on-going processes that the most effective strategy is to modify existing institutional structures and relationships. Often astute modifications can capitalize upon existing processes and resources, thereby enabling the program to absorb important experience and expertise as part of the program management capability. Tactical and strategic institutional considerations are tightly interwoven. Assessments of the possibilities to implement tactical alternatives resulting from strategic choices should be important inputs to strategic considerations. In addition, once the strategic assessment is made, there are finer choices to be made relating to the nature of a new institution or the degree and form of modifications. These considerations are based upon feasibility criteria and the judgement of policy makers with respect to the practicability of specific institutional alternatives. Particularly important in the context of these last decisions regarding institutional strategy and tactics are considerations of the costs involved in instigating organizational changes. Implementation considerations presumAnalytic process

I

Transformation

Chonsepoce~S

I

*

"" r)

Implementalion

Figure 11.2. Relationship of analytic process and process of change management

ably will have played an important role in the policy maker's determination of the feasibility of a particular alternative. However, beyond this, once a choice is made, the institutional alternative will not implement itself. In this context, it might be said that the last stage of the analytic process, the generation of institutional solutions. is actuallv the first stage - of vet , another DrOceSS: that of managing the ensuing organizational change. As indicated in Figure 11.2, the implementation of the alternative. the management of the change.- will itself involve several stages: planning, implementation and evaluation of the effectiveness of the change process, and the institutional strategy. The difficulty andlor complexity of this process will depend upon the capacity of the setting and the willingness of affected managers to accept changes; these can be predicted only on a case-by-case basis. Modes of managing change are themselves the subject of much organizational research, and it is beyond the scope of this book to consider this problem in detail. (The interested reader is referred to Beckhard, 1969; Demb, 1978; Greiner, 1967; and Thomas and Bennis, 1972.) However, several -general points can usefullv be outlined. The first is already stated: that the change process, as much as the program itself, requires management. Second, the management requires the expenditure of resources in addition to those allocated for program-management. Third, it is quite possible that an organizational or institutional strategy for program management might imply more change than can readily be absorbed by the system. Sometimes-ofte-the full implications of a change will not be obvious until modifications are considered in the tight of the full range of social and political consequences which will follow from them. Fourth, all changes disrupt on-going activity, creating both stress and at least temporary inefficiency. The import of all these considerations cannot be underestimated. The costs of change are one dramatic example of the nature of the costs which inhere to every solution. A decision to make no change brings with it the inefficiency and incapacity of the existing system and costs whatever benefits might have been gained from improvement. Innovation brings particular costs and so does modification. Most solutions will tend to be a mix of these strategies. The value of the different benefits and their relationship to the costs of alternatives can only be determined by policy makers in the context of their own objectives and social values. The analyst cannot make these decisions. Analysis can help ensure, however, that the decisions are taken on the basis of real understanding of the consequences and implications of the trade-offs, and in this manner the research serves policy.

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11.4 Institutional capacity in a non-program context

The framework can be used to diagnose and devise solutions for programs of many different types. In the first chapter some examples of programs were mentioned, other than the regional development cases which were used to illustrate the application of the framework. In addition to the many formal

types of programs for which organizational issues can be addressed, the conceptual framework can also be used to address a more general question of institutional capability. There are many situations where formal program objectives are not defined but where a policy maker wishes to understand the capability of the institutions in the setting to handle a particular dimension of their activity without having to define formal program objectives. An example may be drawn from the field of environmental management. A policy maker, observing the activities occurring in a region where there are major physical resources, such as a river basin or forest, may wish to know if there exists a capacity among the institutions in the setting to address the problem of managing these physical resources. It is possible to use this conceptual framework in responding to the policy maker's concern. In such an example, the needs of the policy maker are defined as the purpose for the analysis. In this manner, his or her needs become the analytic objective and serve the same role as did the formal program objectives in earlier illustrations. A hypothetical program is formulated which captures his or her concern. In this case an objective such as managing the river basin could be postulated and an enquiry made into the capacity of the institutions to address this set of particular management objectives. It would not matter if the institutions were unaware of a formal policy concern, if there existed no formal program in the setting. The hypothetical objective could be disaggregated into sub-objectives, a system and environment defined, and a diagnosis undertaken to examine the capacity of the system with respect to this objective, just as in the other illustrations. Analysis of the situation would result in a description of the capacity of the institutions to plan, to set policy, and to control and implement activities relevant to the management of the river basin. The framework would provide a description of the current behaviour of the institutions. The outputs of such an analysis might provide guidelines to determine local policy with regard to regulations or taxes aimed at improving institutional behaviour. Alternatively, if the policy maker (the client) were a funding agent, the analysis might provide a guideline for selecting among research projects, by identifying those research questions which would provide useful input to the hypothetical system, thereby indirectly increasing its capacity. Thus, the framework can be used in the general context of determining institutional capability for managing with respect to any different set of objeo tives. The objectives which define the scope of the analysis and the system to be examined may be formal program objectives, such as the Soviet TPC in Bratsk, or they might simply address a particular policy concern. In this latter case, the only difference is the need to postulate a set of hypothetical objectives with which to bound and define system membership and the relevant environment. Thus, organizational analysis can usefully be undertaken in a variety of situations which include non-program contexts. In addition, analysis can provide insights at various stages in the life of a program or activity. While it can

be used to design organizations and institutional strategies for programs which are only in planning, it is equally possible to diagnose on-going activity with the intent of intervening to improve organizational effectiveness. Very few situation variables limit the applicability of a systems approach to organizational issues. In fact, the most serious limitations derive from other considerations. Two of the more important considerations are the nature of the expertise available to aid in analysis and the scale of the program being examined. As may already be implicit from discussions of the manner in which a program system can increase its capacity to respond to the relevant environnient, organizational structure is only a starting point for designing effective ihstitutional solutions. The mechanisms available to a system include structure and range from financial incentives to legal constraints to moral persuasion. To design and assess the full range of possible strategies policy makers and managers should draw upon financial, economic, legal, and sociological expertise in the same manner in which the expertise of the organizational analyst will have been exploited. Program management (and its effective organization) is a multidisciplinary undertaking. One might recommend that the capacity of the program management analysis team should be able to respond to the full complexity of the organizational issues represented in the context of the program. The composition of this team will most certainly impact the quality of the application and therefore the outputs of the conceptual framework. The last, and perhaps the more decisive consideration, refers to the scale of the program being undertaken. Implicit in any organizational strategy is a trade-off between integration of the efforts of these many institutional resources and the ability of the system to respond to situations through more separate initiatives. That is, to the degree that control is exerted over the activities of the institutions which comprise the system, a certain amount of flexibility is lost with respect to the ability of those institutions to capitalize upon opportunities which were not perceived at the time the program management system was designed. Thus, there is a threshold beyond which the very structure which enabled the system to respond to its relevant environment hinders the ability of the system to exploit that same environment. Put another way, it is possible that the program would require the reconciliation of such a large number of competing institutional objectives that the costs of reconciliation would outweigh the benefits from the integration which might be achieved through a program strategy. There might be said to be a 'centrifugal force' operating in such situations, which could only be overcome by organizational strategies which impose such severe constraints on sub-system behaviour that they are too costly in terms of flexibility and initiative. The identification of such limits to effective program management is rather a comment upon the ability of a person to conceive beyond his or her means to implement than upon the analytic capabilities of a particular framework for organizational analysis.

11.5 Potential of the framework

There are those who would argue that organizational analysis and managerial action which can be taken on the basis of analvsis is more art than science. Having observed the capacity of the concepts presented in this book in several national settings and tested them in two, the authors are in a position to both agree and disagree with this point of view. It is clear thaithe conceptual framework is not a formula where coefficient values can be changed according to the setting and appropriate institutional solutions can be generated. It is our opinion that the development of such a formula is both impractical and undesirable. At the same time, there is an important need td develop an approach that captures some of the qualities of the 'scientific method'. This approach appears to provide such a method and thus, more science than art. The method may be likened to a recipe, which specifies ingredients, steps, and method of cooking but which relies heavily upon the chef to adjust the ingredients so that the result is both delicious to the tastes of very different consumers and aesthetically pleasing as well. We thus take the position that in the sphere of organizational study, science must be coupled with art in order to produce effective management. Judgement is one of the most important ingredients in our conceptual approach. Equally important, however, is a method through which organizational issues can be formulated in a manner which highlights the dynamics of those issues and permits operational 'next steps' to be derived on the basis of analysis. Beyond the context of program management, the approach appears to us to have the potential to contribute significantly to the field of organization theory and research in general and to the arena of international organization research in particular. We speak in terms of a 'potential' because while this characteristic of the approach is apparent to us, time and other constraints make it impossible for us as a team to explore these aspects of the framework. Thus, the identification of this potential is a statement of belief and judgement based on our experience with the framework-its concepts and analytic process. The potential seems to fill important gaps in these areas and to offer exciting opportunities. We hope that it can and will be exploited by others who will come to share our point of view. The potential derives from the systemic concepts which are the foundation of the framework; it can best be characterized as the provision of a medium through which organizational researchers and theorists, managers, and policy makers can examine and communicate their experiences. The potential is to facilitate learning both within the field of organization study and within the sphere of management practice. The field of organization theory and research is far from unified and within it there can be found many different approaches and many competing schools of thought. All, in their own way, seek to improve the effectiveness of human organization by increasing our ability to comprehend the dynamics of these complex systems. For a variety of reasons, there is often very little communi-

cation between proponents of these different approaches. We believe this is unfortunate and has particularly ironic consequences in the field of organization studies, for it is probably evident to many researchers and to most managers that no one of these many approaches alone is sufficient to cope with the array of issues which arise in complex organizations. There is much to be gained from an active exploration of the relationships between approaches and an integration of the insights each has generated. While we would not advocate integration of organizational enquiry, we would suggest that this framework can provide a common language through which researchers might communicate with one another. It can provide a means with which to explore the relationships among these schools of thought and with which to share these valuable experiences. From the variety of existing approaches the field of organization study derives much of its richness. This richness could be enhanced significantly by examining these approaches in terms of their contributions to one another. In this way the framework can provide a sort of meta-logic with which to extend and amplify organizational research. Several examples can be used to illustrate this point. Five topics come easily to mind which are in themselves full-blown fields of inquiry: the relationships between organizational structure and organizational environments, organization behaviour, information systems, planning systems, and the modelling of complex systems such as energy. Each of these fields of enquiry has produced important insights into certain dimensions of human organizations and the activities they seek to manage. It would appear that even richer insights could be gained from coupling these separate insights if it were possible within a comprehensive framework which captured the nature of their relationships. This systemic framework appears to offer just that potential: to synthesize and exploit the learning from these separate and differently conceived enquiries in the context of the behaviour of human systems responding to complex environments. These fields of enquiry certainly amplify the approach presented here. Organization behaviour, for example, provides insights into the dynamics of interpersonal and interinstitutional behaviour which increases our understanding of the possibilities to build functional capacity. Information systems research is particularly pertinent in designing effective capacity for control and coordination; research into corporate planning offers insights with respect to the dynamics of an intelligence function. Efforts to model such complex systems as energy and trade provide the possibility to comprehend the dynamics of certain portions of the environment of an organizational system. The framework actually offers the counterpart to these modelling efforts; its role is precisely complementary in that it provides a means to model the dynamics of the management systems through which we control these environments. In the same way that these enquiries ampllfy and enrich this framework, the framework provides a medium through which they can be related to one another. In the field of international organizational research, this same potential for

communication leads us to several additional conclusions. As expressed in earlier chapters, it is our opinion that institutional solutions must be tailormade for the settings in which they are to be implemented. Because insti tutional forms and traditions mirror social philosophy, we see little point in trying to devise institutional strategies which are universally applicable or transferable. We view the goal of international organization study in quite different terms. The purpose of organizational research is to enable managers and policy makers to 'manage better'. However, they must also be able to devise solutions which are appropriate to their own management context. In this context, the purpose of organizational research is to define a method with which these managers can better understand the nature of their organizational problems and trade-offs inherent in their solutions. It is essential that such an approach consist of concepts which are neutral with respect to the biases inherent in national institutional terminologies and yet also permeable to these values, so that analysis undertaken in a given setting can incorporate these values into the process. By devising such a method, or conceptual framework, one also creates a means through which different nations can learn from the experiences of one another. The framework again provides the medium through which to communicate and learn. The intent is not to transfer a solution from one setting to another, but rather to transfer a capability for analysis. The point is to enable analysts to examine their own experiences as well as the experiences of o t h e ~ nations and thus to learn more about the principles which appear to govern complexity and organization regardless of setting. Poland, Scotland, the Soviet Union, the United States, and Venezuela all face problems of organization of regional development programs. Our point is to make it possible for these nations and others to understand the solutions each has chosen and thereby to facilitate the accumulation of knowledge. In this manner, we would hope that the conceptual framework could make some small contribution towards helping nations better manage the programs they have conceived to meet human needs.

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Katz, D., and R. L. Kahn (1966).The Social Psychology of Organ&ations, John Wiley, New York. Knop, H. (Ed.) (1977). The Bratsk-Illimsk Territorial Production Complex. In Pro-' ceedings of the Second IIASA Conference on Case Studies o f Large-Scale Planning Projects, International Institute for Applied Systems Analysis, Laxenburg, Austria, CP-77-3. Knop, H., et al. (1978). 'goals, strategies and variants o f BITPC'. Section 1 in H. Knop and A. Straszak (Eds.), Planning, Management and Organization of the Bratsk-Ilimsk Territorial Production Complex -A Field Study, International Institute for Applied Systems Analaysis, 'Laxenburg, Austria. R.R. 78 - 2. Lawrence, P. R., and J . W . Lorsch (1969). Organization and Environment, Richard D. Irwin, Homewood, nl. Literayurna Gazeta (197.5). No. 14, 2 April, p. 11. Mackay, D. I., and G. A. Mackay (1975). The Political Economy of North Sea Oil, Martin Robertson, London. Martin, C . E. (1976). Project Management: How to Make it Work, Amacom, New York. Maturana, H., and F. Varela (1975).Autopoieric Systems, Report 94, Biological Computer Laboratory, University o f Illinois. Morasky, R. L. (1977). 'Defining goals - a systems approach', Long Range Planning, 10 (2), 85-90. Planning Exchange (1974). The New Structure of Local Government in Scotland. Glasgow. Scottish Council (Development and Industry) (1975).A Catalyst for Industrial Growth in Scotland. Scottish Development Department (August 1974). North Sea Oil and Gas: Coastal Planning Guidelines, Scottish Office,Edinburgh. Scottish Economic Planning Department (1976). Scottish Development Agency, Draft Industrial Investment Guidelines, Scottish Office,Edinburgh. Scottish Office (December 1975). North Sea Oil Information Sheet. Edinburgh. Thomas, J., and W . Bennis (Eds.) (1972). Management of Change and Conflict, Penguin, Middlesex. Uden, J . (1976).Public Inquiries and the Planning Decision-making Process. Dicussion Paper No. 6, Department o f Town and Regional Planning, University o f Glasgow, Glasgow. Weiner, N. (1961). Cybernetics, The MIT Press, Cambridge, Mass.

Bibliography Relating to approach Ajifemki, M., and J. Boddewyn (1970). 'Culture and other explanatory variables in comparative management studies'. Academy of Management Journal, 13,153-163. Aldrich, H . (1 975). Tight versus Loose Coupling: Some Arguments and Model, International Institute of Management, Berlin. Aldrich, H., and M. Sloand (1975). The Measurement of Centrality in an Znterorganizational Network, International Institute of Management, Berlin. Ansoff, H. I., and R. G. Brandenburg (1971). 'A language for organization design-Parts I and 11'. Management Science (Application Series), 17, (12), B705-731. Ashby, W. (1956). Introduction to Cybernetics, Chapman and Hall, London. Beer, S. (1972). Brain of the Firm, Allan Lane, London. Bums, T., and G. M. Stalker (1961). Management ofZnnovation, Quadrangle Books, Chicaeo. Cleland, D., and W. King (1968). Systems Analaysis and Project Management, McGraw-Hill, New York. Cyert, A. M., and J. G. March (1963). A Behavioural Theory . o.f the Firm, PrenticeHall, Englewood Cliffs, N.J. Davies, C., A. Demb, R. Espejo, and R. Ostrowski (1976). A n Organizational Approach to Regional Development. In IIASA Conference 1976, Vol. 2, Intemational Institute for Applied Systems Analysis, Laxenburg, Austria. Davies, C., A. Demb, R. Espejo, and R. Ostrowski (1977). Multi-Organizational Strategies: A n Analytic Framework and Case Illustrations, International Institute for Applied Systems Analysis, Laxenburg, Austria, RM-77-4. Emery, F. E., and E. Triste (1965). 'The causal texture of organizational environments'. Human Relations, 18 (I), pp. 21-32. Espejo, R. (1976).A Cybernetic Paradigm for Organizational Assessment. In Proceedings of the Third European Meeting on Cybernetics and Systems Research, Vienna. Farmer, R. N. (1973). 'Further explorations in comparative management'. In A. Negandhi (Ed.), Modern Organization Theory, Kent State University Press, Kent, Ohio, Chap. 16. Farmer, R. N., and B. Richman (1964). 'A model for research in comparative management'. California Management Review, 7 , pp. 55-68. Friend, J., J. M. Power, and C. J. L. Yewlett (1974). Public Planning: The Zntercorporate Dimension, Tavistock, London. Galbraith, J. (1973). Designing Complex Organizations, Addison-Wesley, Reading, Mass. Goodman, L. J. (1976). Project Management: The Need for Innovation. Background Paper for Planning Workshop on Curriculum Development for Project Management, East-West Technology and Development Institute, Honolulu, Hawaii.

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Granick, D. (1972). Managerial Comparisons of Four Developed Countries: France, Britain, US and Russia, The MIT Press, Cambridge, Mass. Gvishiani, D. M. (1972). Organization and Management -A Sociological Analysis of Western Theories, Progress, Moscow. Jurkovich, R. (1974). 'A core typology -of organizational environments'. Administrative Science Quarterly, 19 (3), 350-394. Katz, D., and R. L. Kahn (1966). The Social Psychology of Organisations, John Wiey, New York. Kozlov, R., and V. Safronov (1977). 'Improving organizational structure and management methods' (in Russian), 'Ulutshenyie organizatsonnoi stmktury i metodov upravlenyie'. In Voprosy Ekonomiki, No. 1, Moscow. Lawrence, P. R., and J. W. Lorsch (1969). Organization and Environment, Richard D. Irwin, Homewood, Ill. Martin, C. C. (1976). Project Management: How to Make it Work, Amawm, New York. Morasky, R. L. (1977). 'Defining g o a l s a systems approach'. Long Range Planning, 10 (2), 85-90. Neghandi, A. (Ed.) (1969). Modem Organization Theory, Kent State University Press, Kent, Ohio. Shorin, V. G. (Ed.) (1975). Systems Analysis and Structures of Management (in Russian), Systemnyi Analys i Strutktu~yUpravlenyia, Znaniye, Moscow. Stinchecombe, A. L. (1974). Creating Efficient Industrial Management, Academic Press, New York. Tannenbaum, A. S., et al. (1974). Hierarchy in Organizations, Jossey-Bass Publishers, San Francisw. Wiener, N. (1961). Cybernetics, The MIT Press, Cambridge, Mass. Woodward, J. (1965). Industrial Organization, Theory and Practice, Oxford University Press, London.

Relating to general regional development Burghardt, A. F. (Ed.) (1975). Development Regions in the Soviet Union, Eastern Europe and Canada, Praeger, New York. Derthick, M. (1974). Between State and Nation: Regional Organizations of the United States, The Brookings Institution, Washington, D.C. Friedman, J. (1966). Regional Development Policy: A Case Study of Venezuela, The MIT Press, Cambridge, Mass. Friedman, J. (1975). 'Areas of potential research'. In J. Friedman and W. Alonso (Eds.), Regional Policy: Readings in Theory and Application, The MIT Press, Cambridge, Mass. Friedman, J., and W. Alonso (Eds.) (1975). Regional Policy Readings in Theory and Applications, The MIT Press, Cambridge, Mass. Hamilton, I. F. E. (1974). Spatial Perspectives on Industrial Organization and Decision-Making, John Wiley, London. Hansen, N. (1974). Public Policy and Regional Economic Development: The Experience of Nine Western Countries, Ballinger Publishing Company, New York. Kirschen, E. S. (Ed.) (1975). Economic Policies Compared, West and East, Vol 2. North Holland, Amsterdam. Krasovski, V. (1976). ' Efficiency of goal-oriented economic programs' ' (in Russian), 'Effektivnost tselevykh ekonomitcheskykh programm'. In Voprosy Ekonomiki, No. 1 1 L&.

mihailovic, K. (1972). Regional Development Experiences and Prospects in Eastern Europe, Vol. 4. United Nations Research Institute for Social Development, Geneva.

Pederson, P. 0. (1975). Urban-Regional Development in South America, Mouton and Company, The Hague. Stohr, W. (1975). Regional Development: Experiences and Prospects in Latin ~lmerica, United Nations Research Institute for Social Development, Geneva.

Relating to the Scottish case Baldwin, P. L., and M. F. Baldwin (1975). Onshore Planning for Ofihore Oil, Lessons from Scotland, The Conservation Foundation, Washington, D. C. Brown A. J. (1972). The Framework of-Regional Economics in the United Kingdom, Cambridge University Press, Cambridge. Department of Trade and Industry (1973).Zncentives for Industry in Areas for Expansion, HMSO, London. Drucker, H. M., and R. A. McAllister (Eds.) (1976). Our Changing Scottikh Democracy, Special Edition of the New Edinburgh Review, February. Fasham, D. R. (July 1975). Oil Related Development in the Highlands and Islands o f Scotland, Paper for the Royal Institute of Chartered Surveyors, Inverness. Finn, R. J. (1975). External Control and Regional Development: The Case of Scotland, Department of Social and Economic Research, University of Glasgow, Glasgow, June. Government Publications (1974). Scotland, Central Office of Information, Scottish Office, Edinburgh. Grampian Regional Council and Banff and Buchan District Council (1975). Consolidated ~ l a n n i Report n~ to the Joint Meeting o f Planning, Property and I)evelopment Committee, Aberdeen. Highlands and Islands Development Board (1975a). Ninth Report 1971, Inverness. Highland and Islands Development Board (1975b). The Developing Slxth, Inverness. Highland and Islands Development Board (1975). North 7, Issues 22 and 23, July and November. Highland and Islands Development Board (1976). OfFhore Directory, Inverness. Hutcheson, A. M., and A. Hogg (1975). Scotland and Oil, Oliver and Boyd, London. McDermott, J., and Co., Inc (1975). 'The story of oil and gas'. The Jaramac (Summer Issue). Mackay, D. I., and G. A. Mackay (1975). The Political Economy of Worth Sea Oil, Martin Robertson, London. North East of Scotland Development Association (1975). The NESDA Offshore Oil Directory, Grampian Regional Council, Aberdeen. North East of Scotland Joint Planning Advisory Committee (April 1975). Regional Report Summary, Aberdeen. Oil Development Council for Scotland (1976). Benefits of North Sea Oil, Scottish Office, Edinburgh. Owen, M. L., S. Dowers, and B. S. Duffield (1974). TRIP Series No. I Systems Description, Tourism and Recreation Research Unit, Research Report 11. University of Edinburgh, Edinburgh. Planning Exchange (1974). The New Structure of Local Governznent in Scotland, Glasgow. Planning Exchange (1975). Prospectus, Glasgow. Rodwin, L., et al. (1969). Planning Urban Growth and Regional 1)evelopment: The Experience of the Guayana Program of Venezuela, The MIT Press, Cambridge, Mass. Scottish Council (Development and Industry) (1973). A Future b r Scotland, Edinburgh. Scottish Council (Development and Industry) (1974). Devolution - the UK Solution, Howie and Seath, Edinburgh.

Scottish Council (Development and Industry) (1974175). Annual Repori. Scottish Council (Development and Industry) (1975).A Catalyst for Industrial Growlh in Scotland. Scottish Council Research Institute (SCRI) (June 1974). Economic Development and Devolution, Edinburgh. Scottish Council Research Institute (SCRI), Fraser d'AUandes Inst., IBM UK (1975) Scorrish Input-Output Project, The Scottish Council (Development and Industry), Edinburgh. Scottish Development Agency Act, 1975. HMSO, Edinburgh. Scottish Development Agency (1976). Into Action for Scotland, Services for Small Industries, and Details of Factories Available, Edinburgh. Scottish Development Department (May 1974). North Sea Oil and Gas, Pipelines, Landfills: A Discussion Paper, Scottish Office, Edinburgh. Scottish Development Department (August 1974). North Sea Oil and Gas: Coastal Planning Guidelines, Scottish Office, Edinburgh. Scottish Development Department (August 1975). North Sea Oil and Gas Developments in Scotland: A Physical Planning Resume, Scottish Office, Edinburgh. Scottish Development Department (December 1975). North Sea Oil and Gas Developments in Scotland, Oil Terminals: Implications for Planning, Scottish Office, Edinburgh. Scottish Economic Planning Department (1976). Sconish Development Agency, Draji Industrial Investment Guidelines, Scottish Office, Edinburgh. Scottish Information Office (1974). Scottish OfFce Brief on North Sea Oil, Scottish Office, Edinburgh. Scottish Information Office (1975). The Scottish Office, Scottish Office, Edinburgh. Scottish Information Office (1976). The Scottish Office and North Sea Oil and Gas. Scottish Office (March 1973). Scorrish Economic Bulletin, Special Issue on North Sea Oil. HMSO, Edinburgh. Scottish Office (December 1975). North Sea Oil Information Sheet, Edinburgh. Scottish Tourist Board (1975). Sixth Report, Edinburgh. Scottish Tourist Board (1975). Planning for Tourism in Scotland. Uden, J. (1976). Public Inquiries and the Planning Decision-Making Process, Discussion Paper No. 6. Department of Town and Regional Planning, University of Glasgow, Glasgow.

Relating to the Soviet case Aganbegyan, A. G. (1977). 'The role of the Bratsk-nimsk complex in developing the productive forces of Siberia'. In H. Knop (Ed.), The Bratsk-Ilimsk Territorial Production Complex, Proceedings of the Second IIASA Conference on Case Studies of Large-Scale Planning Projects, International Institute for Applied Systems Analysis, Laxenburg, Austria, CP-77-3, pp. 7-13. Aganbegyan, A. G., M. K. Bandman, and A. G. Granberg (1976). 'Programmeobjective approach and mathematical models in research of development perspectives for Siberia'. In Proceedings of the IGU Congress in Moscow, Vol. 7. Pergamon Press, Oxford. pp. 183-192. Bandman, M. K. (1976a). 'Content, succession, and tools of optimizing creation of TPCs in USSR Academy of Sciences'. In General Questions ofModelling Territorial Production Complexes, Institute of Economics and Industrial Engineering, Novosibirsk. pp. 5-100. Bandman, M. K. (1976b). 'Experience of optimizing productive and spatial structure of TPCs of Siberia'. In USSR Academy of Sciences, General Questions ofModelling Territorial Production Complexes, Institute of Economics and Industrial Engineering, Novosibirsk. pp. 137-167.

Berliner, J. S. (1957). Factory and Manager in the USSR, Harvard University Press, Cambridge, Mass. Berliner, J. S. (1976). The Innovation Decision in Soviet Industry, The MIT Press, Cambridge, Mass. Davies, C., A. Demb, and R. Espejo (1976). 'An organizational approach to the Bratsk-Illimsk temtorial production complex'. In H. Knop (Ed.), The Bratsk-Ilimsk Territorial Production Complex, Proceedings of the Second IIASA Conference on Case Studies of Large-Scale Planning Projects, International Institute for Applied Systems Analysis, Laxenburg, Austria, CP-77-3. Davies, C., A. Demb, R. Espejo, and R. Ostrowski (1978a). 'Planning and organization of the Bratsk-Ilimsk territorial production complex'. Section 2 in H. Knop and A. Straszak (Eds.), Planning, Management and Organization of the Bratsk-llimsk Territorial Production Complex -A Field Study, International Institute for Applied Systems Analysis, Laxenburg, Austria, RR-78-2. Diyakonov, F. V., L. I. Gramoteyeva, and T. M. Kalashnikova (1976). 'Regional economic complexes as the principal forms of planned solutions of spatial problems of organization of the socialist economy'. In Proceedings of the IGU Congress in Moscow, Vol. 7. Pergamon Press, Oxford. pp. 175-181. Gukov, V. P., and N. G. Perevalov (1977). 'Management of the Bratsk-Ilimsk territorial production complex'. In H. Knop (Ed.), The Bratsk-Ilimsk Territorial Production Complex, Proceedings of the Second IIASA Conference on Case Studies of LargeScale Planning hojects, International Institute for Applied Systems Analysis, Laxenburg, Austria, CP-77-3. pp. 95-109. Gukov, V. P., and A. N. Semionov (1977). 'Experience in the formation of the Bratsk-Ilimsk temtorial production complex'. In H. Knop (Ed.), The Bratsk-Zlimk Territorial Production Complex, International Institute for Applied Systems Analysis, Laxenburg, Austria, CP-77-3, pp. 43-60. Iemelianov, A. S. (Ed.) (1976). Improving Territorial Planning o f Union-Republic (with Ukrainian Republic ns an example) (in Russian), Sovyiershenstvovanyie Terytoryialnoyo Planirovanyia v Soyuznoy Respublike (na Primyere USSR), Ekonomika, Moscow. Knop, H., (Ed.) (1977). The Bratsk-nimk Territorial Production Complex, Proceedings of the Second IIASA Conference on Case Studies of Large-Scale Planning Projects, International Institute for Applied Systems Analysis, Laxenburg, Austria, CP-77-3. Knop, H., et al. (1978). 'Goals, strategies and variants of BITPC'. Section 1 in H. Knop and A. Straszak (Eds.), Planning, Management and Organization of the Bratsk-llimk Territorial Production Complex -A Field Study, International Institute for Applied Systems Analysis, Laxenburg, Austria, R.R. 7%2. Lemeshev, M. I., and A. I. Pantchenko (1973). Complex Programs in the Planning of National Economy (in Russian), Kompleshiye Programmy v Plannirovanyi Narodnogo Khozaystva, Ekonomika, Moscow. Milner, B. Z. (Ed.) (1975). Organizational Structures of Industrial Management (in Russian), Organizatsonnyie Struktury Upravlenyie Proizvodstrom, Ekonomika, Moscow. Novikov, I. D., and I. M. Samokhin (1976). Complex National Economic Program (in Russian), Kompleksnyie Narodno-KhozyaistviennyieProgrammy, Nanka, Moscow. Plotnikov, K. N. (Ed.) (1974). The Soviet Planned Economy, Progress, Moscow. Popov, G. (1977). 'Program-objective approach in management' (in Russian), 'Programmno-tselevoi podkhool v upravlenyi. In Voprory Ekonomiki, No. 2. Reisberg, V. A., I. P. Golubkov, and L. S. Pekarski (1975). Systems Approach in Perspective Planning (in Russian), Sistemnyi Podkhod v Perspektivnom Planirovanii, Ekonomika, Moscow. USSR, Academy of Sciences (1976a). General Questions of Modelling Territorial-

Production Complexes, Edited by M . K. Bandman, Institute of Economics and Industrial Engineering, Novosibirsk. USSR, Academy of Sciences (1976b). Applied Questiom of Using Optimization Models for Territorial Production Complexes, Edited by M . K. Bandman, Institute of Economics and Industrial Engineering, Novosibirsk. USSR, Academy of Sciences (1976~).Optimization Models for Forming TerritorialProduction Complexes, Edited by M . K. Bandman, Institute of Economics and Industrial Engineering, Novosibirsk. Zaimskikh, A. N., A. R. Leibkind, E. V. Rudneva, and B. L. Rudnik (1977). Problems of Forming and Functions of Inter-Indusm'al National-Economic Complexes, Proceedings of the USSR Academy of Sciences Eco~iomicSeries, No. 3, May-June, pp. 39-52.

Index Index to General Chapters Activities, 41, 54 network of, 41 program, 48, 49 Ashby, R. W., 87 ~ u t o n o m 80, ~ , 81 degree of, 41, 68, 79, 215 Balance, criteria, 61, 62-70 internal, 65, 67, 69, 210 principal of, 66 system-environment, 21, 22, 52, 77 Beckhard, R., 221 Beer, S., 74, 81, 87 Bennis, W., 221 Black box, 94

Criteria of effectiveness, 21, 22, 60, 61, 62. 62-70. 90-101. , 21 8 consistency between levels, 93-95, --

2no -*

consistency within system, 95-100 system-environment, 92-93 Cybernetics applied to management, 74 Cyert, A. M., 16 Demb, A., 221 Development programs, 1, 2, 3 Discretion, distribution of, 65, 94, 95, 207, 215 exercised, 65, 94

Effective alternatives, 8 Effectiveness, organizational, 2, 40, 50, 90-101, 204, 209, 210,213 Case studies, 8, 102, 149, 204 Environment, 16-21, 77-79, 204 Bratsk-Ilimsk TPC, 9, 10, 43, 48, complexity of, 19-20, 64, 75, 79, 80, 54-55,6667, 149,204-207, 81, 93, 96, 206, 207, 208 210,212 filters of, 100 introduction to, 8-1 1 models of, 64, 92 Scottish, 8, 49, 50, 102, 204-207, 210,212 perceived, 17, 53, 62 personal and organizational, 82 Centralization, decentralization, 96, 218 Communication between sub-systems, relevant, 16, 41, 50-56, 77, 219 32 stable, unstable, 95, 215 System in its, 21-24, 30, 38 Conceptual framework, 5, 6, 11, 40, 59, Espejo, R., 86 204, 212, 217, 222-226 Consistency, Functional capacity, 56-58, 209, 214, between levels, 93-95, 209 effectiveness, 9C-101 215,216 organizational, 92 Greiner, L. E., 221 within system, 95-100 Control function, 31, 67, 69, 83-84 Implementation function, 33, 69, 84-85 executive or command, 67, 69, 98 Institutional, monitoring, 67, 68, 69, 99 resources, 2, 7, 45-50, 71, 218 Coordination function, 31-32, 67, 68, 85,99 set-up, 204 235

structure of.. 224 Institutional alternatives, 5, 6, 8, 59, 71, 72, 73, 218, 220, 221 Intelligence function, 3CL31, 66, 83, 215 ~

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--

~

Kahn, R. L., 16 Katz, D., 16 Level of resolution, 94, 206 Linkages, 71

definition of, 89 elaboration of, 24-27 Observers, 76, 92 Organizational capacity, 40, 51, 52 functions, 29-33, 57, 81-85 strategies, 3, 4, 5, 6, 7, 29, 70-73, 80, 90, 213, 217, 218 structure, 207, 223, 225 theory and research, 224 trade-offs, 6, 29, 213, 215, 217, 226 Organizations and institutions, 2, 86-87

Management by exception, 32 Poland, 226 Management capacity, 40, 51, 52 Policy function, 29-30, 82-83 Management challenges, 3, 53-56, 64, discretion of, 41, 53, 65-66 71, 80,206,207, 208,209 Policy making, Management information systems, 51, organizational dimension, 61-62, 204, 216, 225 208.212 Management systems, 2, 40 Program management, 1, 5, 61, 70, March, J. G., 16 206, 223 Maturana, 76 organization of, 21 2 Measurement 51 system, 41 quantification and, 51 system approach to, 4, 14, 35, 74-87, Mechanisms, 214 concept of, 21 1 Program objectives, 2, 3, 4, 5, 15, 48, feedback, 94 63, 67, 77, 207, 208, 214 monitoring-control, 95-100 characteristics of, 75-76 organizational, 15, 49, 95 elaboration of, 24-27, 41 structural, 89-90 implementation of, 81 to cope with variety, 88 influence in definition of, 28 Model modification of, 73 complexity of, 208 monitoring of, 99 construction of, 37-40, 44, 52 reference level, 63, 75, 79, 90, 213 for policy support, 61 unfolding of, 76, 79-81 iterative process, 37-40, 41, 44, 62 Program setting, manipulation of, 35, 61 values and traditions, 3, 6, 37, 45, 59, of general system level, 207 72-73 of organization and environment, 35-36, 78-79,207, 212 Recursion, structural, 28, 33, 81, 84, 85 of system, 44, 50, 61 organizational, 204 Scotland, 226 structuring the, 44 Soviet Union, 226 transformation of institutional System, 14, 76 resources, 7, 8, 61, 86, 87 autonomy, 41, 95 Morasky, R. W., 87 boundaries, 15, 41, 77, 204, 205, Multi-institutional, 206, 218, 219 programs, 3, 4, 76, 86, 214 functions, 29-34 systems, 16 general, 85-86, 94, 96 system levels for, 27 general level, 41, 47, 48, 85, 206, 207

Non-conventional programs, 3, 45 Objectivcs, capacity to elaborate, 29

in its environment, 21-24, 30, 78, 210 levels, hierarchy, 25-27, 80 model, 44, 50, 61

objectives and purposes of, 76, 77 organization, 40-45 ~erformance.100. 21 1 program level, 41, 47 receiving, 75 structure, 24-29, 41-44, 78, 79 sub-system performance, 31 sub-systems, 25, 41, 79, 83, 84 Thomas, J., 221 Transformation, of institutional resources, 7, 8, 61, 86, 87 process of, 37-40, 71-73

United States, 226 Varela, F., 76 Variety, 87-90 amplifiers of, 89, 90, 210 control, 90 environmental, 89 filters of, 89, 90, 210 implementation, 90 law of requisite, 88, 204, 210, 211 of financial mechanisms, 21 1 proliferation of, 87, 88 system, 89 Wiener, N., 212

Index to Scottish Case Study

Aberdeen, 144, 211 Activity sub-systems, 126, 128, 131, 143-144 Baldwin, M. F., 132 Baldwin, P. L., 132 British National Oil Company (BNOC), 117, 143 Brown A. J., 110 Consistency within system, 148 Control, capacity, 127, 130 function, 139 Coordination, capacity, 128-129, 132, 140, 142-143 function, 137 Demands on program system, 138

Energy, Dept of, 111, 136, 209 policy, 107, 108 Environment, Dept of, 111 Environmental complexity, 125, 132, 133,134 Frazer Allander Institute, 142 General system level, 121, 126, 127, 128-129, 134, 137,207 Glasgow, 109, 143, 211 Grampian Region, 119, 144

Highlands and Islands Development Board (HIDB), 113, 143 Hogg, A,, 119 Hutchison A. M., 119 IBM 142 implementation, complexity of, 133, 137, 211 flexibility and influence, 116, 118, 133. 136. 137 mechanisms for, 115, 119, 124,211 Industrial, grants, 112, 136-137 location, 117, 124, 136 policy, 107, 108, 136, 211 Industry, Dept of, 111, 136, 137, 209 Input-output model, Scottish economy, 142 Intellegience capacity, 127, 130, 131, 132, 135, 137, 139, 141, 142 Local government, 109, 112-1 13, 127, 128, 130,131,141,143-144 Long-term challenge, 124, 133-144, 205

Machay, D. I., 109, 119 Mackay, G. A., 109, 119 Manaeement challenges. 123-125. 209 Mechanisms, organiiatibnal, 115, 117, 119, 124, 133, 134, 136-137 Model of the system, 123

-

National Enterprise Board (NEB), 114, 137

North-East Scotland Development Agency, 119, 144 North-East Scotland Joint Planning Advisory Committee, 144 Oil, companies, 114, 122 operations, 104-105 related activities, 108 related development, 104-107, 117, 131 Organizational capacity, 125, 131, 145 Planning applications, 113, 126, 128, 129.209 call in'of, 113, 127 control of, 126 Planning authorities, 107 Planning cycle, 127 Policy, capacity, 132, 135 function, 130, 134, 141 recommendations, 146-147 Policy discretion, 127, 134, 135, 138, 143 of local authorities, 207 Program management, 125 Program system, 122, 126, 127, 134, 138-143 boundaries of, 206 level. 130. 131 Public hquiiy, 113, 127, 128 Rapid exploitation of oil, 108, 123, 126

Regional development, 109, 133, 135, 136, 139, 147-148 Regional reports, 113, 130 Response, to long-term challenge, 135-138 to short-term challenge, 128-131 Scotland, region, 102-103 Scottish Assembly, 110, 134 Swttish Council, Development and Industry, 142 Research Institute, 142 Scottish development, 108, 124 Scottish Development Agency (SDA), 113, 114, 137, 139, 140, 141, 143, 209 Scottish Devlopment Dept, 112, 141 Scottish Economic Planning Dept, 112, 140, 141, 142 Scottish National Party, 110 Scottish Office, 112, 121, 122, 127, 142 planning, 127 setting objectives, 139 Swttish policy, 108 Secretary of State, 112, 113 Self-government, 109, 110 Shetland Islands, 131-132 Short-term challenge, 123, 126-132, 205. 209 Structure plans, 113 Uden, J., 120, 128 U.K. administration, 11I U.K. policy, 107-108

Index to Soviet Case Study

Academy of Sciences, 155, 156 Aganbegyan, Academician A,, 163 All-Union industries, 155, 170 Ail-Union ministries, 169 Angara-Yienesei river system, 149 Baikal Amur Railway, 157, 163, 193 Bandman, M. K., 162 Board of Directors, 166, 169, 175, 181 182, 196, 199, 205 Boguchany node, 163, 193 Bratsk, aluminium enterprise, 170, 205 city, 149, 150, 151, 161, 164, 172, 174, 181, 193 city soviet, 174

development plans, 171 director of housing, 175 hydropower station, 149, 171 planning for, 162 timber combinat, 168, 171, 205 Bratsk-Ilimsk TPC, 149, 150, 163, 164, 190, 193, 205 actors of, 153 all-Union enterprises, 169 as national strategy, 193 as planning object, 161, 193 construction organization, 165 development, 165, 184 districts, 172 in preplanning, 152, 162 local system of, 192

management of activities, 152, 168 organizational dimensions, 152 role of research, 167 specific objectives for, 194, 205 territow. 196 annual plans, 199 discretion of, 196 head office, 180 organization structure, 178 sewices, 180 Central Economic Research Institute of Russian Federation, 157, 163 Committee of Production Forces and National Resources (KEPS), 156, 163 Communist Party, 159, 163, 174, 182, 186,197,200 Control, capacity, 188, 195, 203 function, 185, 186, 187, 188, 196, 201,202,203 Coordination, 185, 186, 194, 202, 203 Council for Study of Production Forces (SOPS), 156, 157, 162, 163, 201 Council of Ministers, 159 Russian Federation (RSFSR), 168, 172. 174

Irkutsk branch, 164-165 Irkutsk Oblast (region), 154, 164, 172, 174, 179, 195, 199,210 Knop, H., 150, 177 Literaguma Gazeta, 199 Local soviets, 166, 174, 178, 180, 181 Local system, 192, 193, 197, 201 policy discretion, 195 Management challenges, 151, 187, 189, 200,201 response to, 197, 208 Mechanisms, 188, 194, 197, 21 1 Ministry of Power, 165, 166, 175 Monitoring performance, 185, 187 Organizational innovations, 174

People's Control Organization, 186 Perevalov, N. G., 173 Planning, cycle of, 190 directives, 159 draft plans and schemes, 163, 186, 199. 201 five-year plans, 154, 157, 159, 160, 164, 193 key indicators, 159, 160 line in plans, 159, 164, 194, 206 long-term, 153, 157, 159 Director of Housing, Bratsk City, 166, meEhanisrns for, 200 175, 178,196, 199, 205 one-year plans, 154, 157, 161, 166, Distribution of functions, 185 196 District and City Planning Commission, operative plans, 154 154 organs, 154 process of, 157, 190 Environmental complexity, 189 role of, 153, 154, 206 response to, 193, 197 system of balances. 154, 157 General system level, 185, 186, 188, Policy, capacity, 186 function, 185, 186 192, 193, 197, 198,201 Preplanning, 153, 154, 155, 156, 157, capacity of, 187, 188, 201 186, 189, 190, 194,201,203,206 complexity of, 187 control capacity of, 187, 193, 194 Regional Planning Committee response, 199 OBPLAN, 154 Gidroprojekt, 163, 193 OBPLAN Irkutsk, 165, 166, 171 Gukov, V. P., 173 Republican industries, 171 Implementation of objectives, 185, 201, Response, distribution between levels, 203 200 Intelligence, capacity, 188, 195, 203 function, 185, 186, 187 Sectorial, management, 152 Institute of Economics and Organization mathematical models, 188, 201 of Industrial Production, 157 ministries, 155

objectives, 187, 191, 199 organizations, 168 planning, 155 sectors, 185, 191 specialization, 199, 200 territorial management, 153 Semenov, A. N., 198 Special commissions, 156, 162, 163, 176, 193 State Committee for Construction (GOSTROI), 155, 157, 164, 171 standards set by, 176 State Committee for Science and Technology, 155, 156 State Planning Committee, Russian Federation (GOSPLAN RF), 154, 155, 157, 165, 174 State Planning Committee of Soviet Council of Ministries (GOSPLAN USSR), 155, 156, 159, 162, 167, 175, 186, 194, 200, 201, 202 Supreme Soviet, 159, 163 Synchronization, industrial development, 152,189, 190,200,208 infrastructure development, 164, 189, 190. 197

sectorial dimensions, 153 Temtorial Production Complex (TPC), concept of, 150, 151, 184, 189, 205,

Territorial, administration, 172 departments of GOSPLAN, 154, 165 formations, 151 mathematical models, 201 organizations, 168, 172 planned activity, 152

Ust-Iiimsk, hydropower station, 149, 176 industrial node, 150, 172, 180, 181, 198

207 -.

control and coordination functions, 202,203 current preplanning, 162 demands on planning, 184 development strategy, 151, 161, 190, 191 formation, 190 future, 165 general scheme of, 161, 198 infrastructure needs, 192 management challenges of, 189,200 management of, 150, 199, 200 management solutions for, 153, 200-203 need to improve management, 197, 206 objectives of, 195, 206 organizations related to, 168, 182 planning bodies for, 200, 202, 203, 210 Siberian, 189 specialization, 151, 201, 202 system of, 163, 209

Zheleznogorsk, 150, 181