• 
• 
• 

You are here: Agriculture » About Agriculture » Publications and Resources » Policy and Strategy » Organisational Relationships And The Implementation Of Natural Resource Policy

Organisational Relationships and the Implementation of Natural Resource Policy

Our Rural Landscape

ISBN 978-1-74199-377-6
June 2007

Authors
Geoff Kaine

Brigette Keeble

Published by the Victorian Government Department of Primary Industries
Tatura, June 2007

Acknowledgments:
We gratefully acknowledge the assistance of Dr James Hunter and our colleagues in Practice Change Research.
This paper is part of a larger project Linking Policy and Practice funded by the Victorian Government’s Our Rural Landscapes Initiative.

Table of Contents

1. Introduction
   • Background
   • Purpose of the paper
   • Structure of the paper
2. Institutional Context and Natural Resource Policy
   • Institutional context
   • Policy development and implementation
   • Organisational relationships and outsourcing
3. A multidisciplinary approach to outsourcing
   • Transaction Cost Theory
   • • Introduction
     • Transaction attributes
     • Governance Structures
     • Implications
   • Strategy Theory
   • • Introduction
     • Organisational strategy theory
   • Human Resource and Behavioural Theory
   • • Introduction
     • Human resource management style
     • Flexible firm model
     • Psychological contract
     • Individual performance equation
4. Conclusion
5. References

1.Introduction

Background

This project was supported by Our Rural Landscape - a major Initiative of the Victorian Government. The Government’s objectives for this Initiative were to assist primary producers and communities develop a sustainable future. The Initiative consisted of a number of programs that were responsible for administering projects. These were:

• assisting better natural resource management,
• increasing farm efficiency and profitability; and
• encouraging innovative solutions and stronger communities.

This project was administered under ORL Program 5.1, “Linking Policy to Practice”.  One of the objectives for ORL Program 5.1 was the development of new models that help the Department of Primary Industries to operate more effectively when working with stakeholders who assist primary producers and communities to meet sustainable policy objectives.

Research supported through Program 5.1 (Petris 2004) showed that responsibility for policy making and implementation has become increasingly fragmented among public, private and community organisations and, correspondingly, new forms of public governance have emerged. The design and implementation of natural resource policy is now occurring in circumstances where organisations jointly share formal and informal responsibilities. These organisations often have different priorities in relation to policy objectives due to their respective organisational responsibilities. Such circumstances present a host of challenges, particularly in regard to maintaining effective collaborations between organisations to ensure policy objectives are realised.

In this project we consider the potential for the organisational behaviour literature in regard to outsourcing to provide strategies and tactics that would improve collaboration between organisations that are jointly responsible for developing and implementing natural resource policy.

Purpose of the paper

Legislative and institutional conventions distribute authority and responsibility for the implementation of natural resource policy among a range of government and community organisations. Consequently, the development and implementation of policies to deal with natural resource issues usually involves sustained and coordinated action across these organisations. Each of these organisations will, rightly, have specific interests and agendas that reflect their respective, particular responsibilities. Naturally, tensions will arise between the specific interests and agendas of different organisations. Tensions will also arise from differences in the degree to which the particular responsibilities of organisations align with their collective responsibility for the development and implementation of natural resource policy. These tensions will inevitably create relational problems between organisations and may hinder the effective implementation of natural resource policies.

The distribution of authority, responsibility and resources for the implementation of natural resource policy among different organisations creates relationships between organisations with characteristics that, in our opinion, are similar to those that arise between organisations that engage in outsourcing. Outsourcing involves contracting with a supplier from outside an organisation for the provision of goods and services that typically have been provided internally by the organisation. Such contracts create dependencies between the organisations that are parties to them in the sense that the achievement of the objectives of one organisation influences the achievement of the objectives of the other organisations that are involved. These dependencies in organisational performance parallel the dependencies in organisational performance that are created by legislative and institutional conventions which distribute authority and responsibility for the implementation of natural resource policy across organisations. There is though, a critical difference in that the dependencies created through an outsourcing contract are voluntary whereas the dependencies created through legislative and institutional conventions are generally obligatory.

To the degree that the objectives and strategies of the organisations that are parties to an outsourcing contract differ, and these differences result in different expectations about the outcomes of outsourcing, tensions can arise between the organisations. Such tensions in relation to contractual obligations created through outsourcing may parallel the tensions that arise from differences in the expectations of organisations concerning their particular and collective responsibility for the development and implementation of natural resource policy. Given these considerations, we expect that the organisational behaviour literature in regard to outsourcing should provide insights into the management of relations between organisations with a collective responsibility for the development and implementation of natural resource policy.

Our aim in this paper is assess the potential of the outsourcing literature to provide insights that could be used to improve collaboration between organisations that are jointly responsible for developing and implementing natural resource policy. We draw on Hunter’s (2004) multi-disciplinary approach for outsourcing to make this assessment.

Structure of the paper

In the next section we describe the institutional¹ context of natural resource policy. The role of legislative and institutional conventions in distributing authority and responsibility for developing and implementing natural resource policy is highlighted. This joint sharing of authority and responsibility among a range of organisations creates a situation where the achievement of the objectives of any one organisation depends on the performance of the other organisations. In short, the division of power and responsibilities among organisations creates a set of complex relationships between them. We argue these complex relationships parallel the complex relationships that arise with outsourcing. This suggests that an appreciation of the relationship issues that arise with outsourcing could provide insights into the relationship issues that might arise between organisations involved in developing and implementing natural resource policy.

Hunter (2004) proposes that a range of economic, strategic and human resource factors influence the success of outsourcing. Hence, a proper understanding of these factors, and their interactions, is required for a complete appreciation of the complexities inherent in outsourcing. In section three we present the theoretical frameworks which constitute Hunter’s (2004) multi-disciplinary approach to outsourcing.

The frameworks employed by Hunter (2004) provide a set of economic, strategic and human resource criteria for critically assessing outsourcing prospects. In the final section of the report we consider the potential to use these criteria as a checklist for identifying the intra-organisational and inter-organisational issues that may be expected to emerge among organisations responsible for the development and implementation of natural resource policy.

2 Institutional context and natural resource policy

Institutional context

Natural resource policy is developed and implemented within a complex institutional context. Policy is developed and enacted by governments in conjunction with political parties and bureaucracies (Considine 2005). In the Australian system of government the authority to govern is distributed between national, state and local governments. This sharing of authority prescribes in varying degrees the responsibilities, roles and functions of each of these tiers of government and the various public sector organisations that have been established to develop and implement government policy. Each tier of government sets and ratifies policy issues, proposals, bills and expenditure that are then actioned by appropriate government, semi-government and private organisations. The allocation of public funds to programs and organisations at each tier of government is approved by, and reflects the policy priorities and commitments of, that tier of government (Considine 2005).

The three tiered government system in Australia creates overlapping responsibilities, roles and control over resources, which generates complicated inter-governmental relations. These effect policy development and implementation in natural resource policy particularly because natural resource issues often cross federal, state and local government jurisdictional boundaries.

The institutional context within which government policy is enacted produces a situation where the development and implementation of natural resource policy in Victoria necessarily requires action across all three tiers of government and the relevant public, semi-public and private organisations associated with each tier. On the one hand, this means successful action on a policy issue requires coordinated action across a multiplicity of organisations because each of these organisations has different, though overlapping, responsibilities, roles and control over resources. On the other, because each organisation has different responsibilities and roles, and controls different resources, each organisation is likely to pursue different organisational objectives when taking action in relation to the policy issue.

Policy development and implementation

Generally speaking, the bills and policy initiatives that are ratified by government provide direction for, but not detail on, policy development and implementation. This means the bulk of the decision making about actions to implement policies is left to the relevant actioning organisations. These organisations have to interpret the policy and devise responses in terms of choosing policy instruments and approaches to deploy those instruments that will meet the prescribed policy objectives.

In the case of natural resource policy an organisation, such as the Department for Sustainability and the Environment (DSE), may be the pivotal actioning organisation that engages other relevant government departments and organisations such as Catchment Management Authorities (CMA’s) to develop and deliver a program² to achieve a policy objective. Naturally, the way in which each organisation engages with the others is influenced by their specific agendas in relation to their understanding of the policy context. Hence, tensions arise within and between organisations around the need to coordinate so as to take action and the desire to pursue organisational objectives that only partly align with the policy objective. As a result policy making is inherently difficult, frustrating and only partly effective.

In short, the development and implementation of natural resource policy is an unpredictable, contentious, sometimes unstable process. Within this process tensions will arise between the specific interests and agendas of the different organisations that have collective responsibility for the development and implementation of natural resource policy. These tensions will inevitably create relational problems between these organisations and hinder the effective implementation of natural resource policies.

Organisational relationships and outsourcing

The sharing of authority, responsibility and resources for the implementation of natural resource policy among different organisations creates a web of dependencies between them. In short, the success of any one organisation in meeting their responsibilities depends, albeit in different ways and to varying degrees, on the success the other organisations have in meeting their responsibilities. Consequently, the achievement of the objectives of each organisation depends on, and influences, the achievement of the objectives of the other organisations that are involved. Such interdependence between organisations in the achievement of their organisational objectives is similar to that which occurs with outsourcing.

In simple terms, decisions about which goods and services an organisation should undertake to produce themselves, and which goods and services an organisation should acquire from others, are the subject matter of outsourcing (Beaumont 2004). Outsourcing involves contracting with a supplier from outside an organisation for the provision of goods and services that were previously provided internally by the organisation. For example, Hunter (2004, 1) defined outsourcing as:

When an organisation decides to contract another party to provide and undertake activities previously undertaken within the organisation.

Generally speaking, the adoption of outsourcing by organisations has been primarily motivated by economic considerations (Hunter 2004). However, outsourcing has also been adopted for other reasons such as skill acquisition, improved control over operations, and improved focus on core activities and strategic priorities (Bragg 2006, Industry Commission 1996).

Outsourcing contracts create dependencies between the supplier organisation and the contracting organisation with regard to the achievement of the contracting organisation’s objectives. These dependencies in organisational performance parallel the dependencies in organisational performance that are created by legislative and institutional conventions which distribute authority and responsibility for the implementation of natural resource policy across government, community  and private organisations. There is, however, one important difference the dependencies created through an outsourcing contract and those created through legislative and institutional convention. The former are entered into voluntarily and may be terminated by agreement between the parties. The latter are generally mandated and cannot be terminated by the parties themselves.

Outsourcing has become widespread in both the private and public sectors over the last two decades. Experience with outsourcing in both sectors suggests that success requires paying careful attention to the economic, strategic and human resource context within which outsourcing is embedded (Hunter 2004). In other words, a proper understanding of these factors, and their interactions, is required for a complete appreciation of the complexities inherent in outsourcing. This suggests that the successful management of the relationships that exist between organisations involved in developing and implementing natural resource policy requires a sound knowledge of the economic, strategic and human resource contexts within which shared responsibility for the achievement of policy objectives is embedded.

In the next section we present the economic, strategic and human resource frameworks which constitute Hunter’s (2004) multidisciplinary approach to outsourcing.  These frameworks provide a set of economic, strategic and human resource criteria for critically assessing outsourcing prospects. We believe these criteria could be used as a checklist for identifying the types of issues that could emerge among organisations that are jointly responsible for the development and implementation of natural resource policy.

3 A multidisciplinary approach to outsourcing

Transaction Cost Theory

Introduction

Transaction cost theory (TCT) provides the foundation for outsourcing in economic theory (Hunter 2004). Essentially, transaction cost theory provides a systematic framework for understanding how differences in the nature of transactions that involve the exchange of products and services influences the usefulness of different structures for governing the transaction.

Transaction cost theory is built on the insight of Coase (1937) that markets and firms co-exist because there are different costs associated with the operation of each. Coase (1937) argued that, in addition to production costs, there are transactions costs associated with the transfer of a product or service between a buyer and a seller. Transactions costs include all decisions and associated actions that are required to achieve a transaction or exchange. For example, managers in organisations make numerous decisions in relation to planning, adapting and monitoring completion of task before a transaction occurs - all of which accrue a cost to the organisation. Given the objective of a manager is to maximise efficiency, minimising transaction costs becomes an important determinant of managerial and organisational success (McIvor 2005).

Transaction attributes

To the degree that the transactions differ on attributes in ways that affect the costs of conducting them, then different structures are required in order to minimise these costs. Hence, as Williamson (1991, 277) states:

        .…transactions, which differ in their attributes, are aligned with governance structures, which differ in their costs and competencies in a discriminating (mainly, transaction-cost-economising) way.

Williamson (1996) asserted that there are three dimensions that characterise a transaction. These are transaction frequency, asset specificity and uncertainty. Transaction frequency refers to how often a transaction is repeated by an organisation. Williamson (1996) identified two common levels of frequency – occasional and recurrent (see table 1). The frequency of a transaction effects cost and the suitability of different governance structures. So the more frequent a transaction is, the more cost efficient it is to administer.

Asset specificity refers to the extent to which an organisation must invest in assets specifically to make a transaction possible (Williamson 1979). The degrees of asset specificity are non specific, mixed and idiosyncratic (see table 1). Williamson (1979) argued that the more customised the investment in assets a given transaction requires, the less likely those assets can be redeployed to alternative uses. Consequently, when an organisation makes asset specific investments in relation to a transaction they are exposed to financial risk in the form of sunk costs and the threat of opportunism from other parties to the transaction. Opportunism is founded on the principle that organisations will take advantage of other organisations when this will promote their self-interest. Hence, the potential for opportunistic behaviour arises when one party to a transaction has made transaction-specific investments while another has not (McIvor 2005).

The more customised the physical or human assets an organisation has to purchase in order to conduct a transaction, the greater the potential loss to the organisation should the transaction not proceed to completion. Hence, the greater the need for investments in asset specific capital to enable a transaction to proceed the greater the need for governance structures that allow the uncertainty and risks associated with the transaction to be managed by the parties to the transaction.

Table 1 Transaction frequency and asset specificity

FREQUENCY	Occasional	INVESTMENT CHARACTERISTICS
		Non specific	Mixed	idiosyncratic
		Purchasing standard equipment	Purchasing customised equipment	Constructing a plant
	Recurrent	Purchasing standard material	Purchasing customised material	Site specific transfer of intermediate product across successive stages

^{Source: Williamson 1979)}

 

Williamson (1996) describes two forms of uncertainty in regard to the likelihood a transaction will occur as anticipated by the organisational manager. The first type of uncertainty is that caused by random acts of nature and unpredictable circumstances such as unexpected changes in consumer preferences. The second type of uncertainty arises from a lack of knowledge on the part of the organisational manager.
Managers make choices about how to complete a transaction and organise assets and structures (including governance) accordingly. These choices will reflect their understanding of their organisation, the partners to the transaction and the environment based on past experience, information from partners, market signals and so on. The reliability and predictability of this information limits their capacity to achieve the most efficient transaction.

Williamson (1979, 1996) asserts that as the level of uncertainty associated with a transaction increases so does the potential for negative consequences for the organisation with respect to costs and inefficiencies. Hence, managers’ choices regarding processes or governance structures for managing highly uncertain transactions need careful consideration to ensure that they can adapt and absorb changing circumstances and avoid potentially damaging losses.

Governance Structures

Governance structures are the institutional arrangements which regulate the behaviour of parties to a transaction. Williamson (1979) proposes that there are three broad types of governance structures that relate to the transactions on the basis of transaction frequency and asset specificity. The first type of governance structure is the market. This is a classic type of market where buyers and seller use the market to exchange their goods and services. The market creates the equilibrium between the two parties by setting the price (Williamson 1979).

Non-specific transactions predominantly occur within a market structure (see table 2).

Market governance is based on classical contract law and provides the institutional framework for traditional market trading where buyers and sellers meet to exchange standardised products and services (Williamson 1979, 1991). The market price sends signals to both parties concerning the costs and benefits of these transactions.  Both parties independently decide whether to continue to trade or not on the basis of those signals. The specific identity of each party is not critical to the transaction and there is no reason for the parties to develop and maintain a relationship.  Both parties are protected from opportunism because of the standardised nature of the transaction (and the market price mechanism which acts as a regulation mechanism). Each party can go its own way at negligible cost to the other (Williamson 1991). The market operates as a legal framework providing protection for both parties through self-enforcing rules. Litigation is strictly for settling claims but disputes are settled formally (Williamson 1991).

The second type of governance structure is a trilateral structure. Semi-specific transactions that have occasional and mixed or idiosyncratic properties typically occur within a trilateral structure (see table 2). Trilateral governance is considered to be less rigid than market governance and is based on neoclassical contract law (Williamson 1991). Examples of trilateral governance structures include long-term contracting, reciprocal trading, regulation and franchising (Williamson 1991).

Under trilateral governance relationships are established between autonomous parties to a transaction as a contract for a period of time (usually longer periods) between the parties. A feature of this form of governance is that a third party³ such as a regulatory agency has a role in arbitration and disputes Williamson (1991). This feature allows for contracts to be adapted in unpredictable situations without incurring the costs of litigation⁴.

Table 2 Matching governance structures with commercial transactions

FREQUENCY	occasional	INVESTMENT CHARACTERISTICS
		Non specific	Mixed	idiosyncratic
		Market governance (classical contracting)	Trilateral governance (neoclassical contracting)
	Recurrent		Bilateral governance (relational contracting)	Unified governance (relational contracting)

^{(Source: Williamson 1979)}

 

Trilateral governance anticipates the possibility of unanticipated changes in circumstances, provides a tolerance zone within misalignments can be absorbed, requires information disclosure and substantiation if adaptation is proposed and provides arbitration if a voluntary agreement fails (Williamson 1991).  Hence, unlike market governance, contracts established under trilateral governance can be adapted if circumstances change. Consequently, these contracts are more flexible than those established under market governance. The benefits a trilateral structure affords are that parties can maintain autonomy but remain bilaterally dependent to a non-trivial degree. This facilitates continuity and promotes efficient adaptation (Williamson 1991).

Although the trilateral governance offers flexibility and reduced likelihood of litigation these benefits come at the price of higher bureaucratic costs. The main risks with trilateral governance are that transactions become maladapted⁵ to the environment during the bargaining interval (Williamson 1991).

The third and final type of governance structure is the transaction-specific structure of which there are two types, bilateral and unified. A bilateral governance structure arises where the contract to perform and exchange or contributing transaction makes the parties equally dependent on each other for the transaction to occur. A unified governance structure arises where an organisation completes a transaction internally rather than contracting with another organisation.  Hence, unified governance or vertical integration entails the removal of the transaction from the market. Transaction-specific governance is considered to be the most flexible form of governance and is based on relational contract law (Williamson 1991). Naturally, transaction specific governance becomes important when the relationships between the parties become critical to the success of the transaction.

The transaction types that are likely to require unified governance are recurring transactions of the mixed and highly idiosyncratic kinds (see table 2). These types of transactions require the organisation to make asset specific investments for the transaction to occur. These investments expose the organisation to the risk of damaging losses through sunk costs and the threat of opportunism. Consequently, governance structures that can provide a greater guarantee of cooperation among the partners to the transaction become more appealing. Furthermore, specialised governance is worthwhile for recurring transactions because the regularity of the transactions justifies the investment in administration costs. In short, the parties involved in recurring, highly idiosyncratic transactions have incentives to sustain their relationship with each other to ensure that transaction-specific economies are not lost.

Bilateral governance is selected over unified governance when the human and physical assets required for the transaction are extensively specialised and there are no cost efficiencies to be realised by supplying the product or service internally. For mixed transactions, the degree of asset specialisation is weaker and other organisations may be preferred as suppliers - especially if there are cost savings.

The more idiosyncratic the asset specificity of investments to supply a product or service the more appropriate unified governance becomes.When the expenses of adapting the contract to achieve transactions become prohibitive, organisations will choose unified hierarchical governance structures, particularly if it is not possible to minimise opportunism.

Implications

Williamson (1991) made some important observations in regard to the relative merits of the different governance structures for transactions and these have implications for the management of relationships between organisations that are jointly responsible for the development and implementation of natural resource policy.

The first of these was that as the nature of transactions become increasingly difficult to specify, a unified hierarchical governance structure becomes increasingly appropriate. Difficulty in describing the transaction creates a need for adaptability in the terms of the governance of the transaction and this creates potential for opportunistic behaviour. The incentive for such behaviour is reinforced to the degree that the transaction entails idiosyncratic investments.

Containing undefined, idiosyncratic transactions within the boundaries of the organisation increases the capacity for adaptability and reduces the threat of opportunism. Containing such transactions within the boundaries of the organisation means that any adaptation of the transaction to meet changing circumstance will require less documentation, disputes can be dealt with in-house, information regarding the impacts of changes in circumstances can be accessed more readily and the organisation has access to incentive instruments such as career reward and joint profit sharing to reward adaptive behaviour.

This suggests that organisations involved in natural resource policy will need to pay careful attention to building adaptability and counteract incentives for opportunistic behaviour in circumstances where transactions are idiosyncratic, recurrent and difficult to specify but unified hierarchical governance structures cannot be implemented.

The second observation made by Williamson (1991) was that as investments in physical and human capital associated with a transaction becomes increasingly asset specific the identity of, and state of relationships between, the organisations that are parties to a transaction become increasingly important. Similarly, bilateral dependency builds with increasing asset specificity. Consequently, with recurrent, mixed or idiosyncratic transactions market governance structures are inappropriate and bilateral governance structures are required as they facilitate coordination and flexibility thereby reducing the risk of damaging losses and opportunism.

This suggests that organisations involved in natural resource policy will need to pay careful attention to establishing either informal bilateral governance structures in circumstances where transactions are recurrent and require asset specific investments but formal bilateral governance structures are absent. Such structures are critical to facilitating coordination across organisations, maintaining flexibility in organisational responses to changing policy issues and counteracting incentives for opportunistic behaviour.

Strategy Theory

Introduction

Corporate strategy has implications for an organisation’s choices about activities, organisational structures and processes (Porter 1996). According to Hunter (2004) corporate strategy provides a framework for choosing and arranging organisational activities and processes so that they contribute as fully as possible to the creation of value for customers and thereby contribute to organisational objectives. Hence, the development of a corporate strategy entails the identification of activities and processes that are critical to the creation of value for customers and so critical to the achievement of organisational objectives. This suggests that the choice of a corporate strategy entails judgements about activities that are critical to organisational performance - and that decisions about outsourcing activities should be made with appropriate reference to those judgements.

Oganisational strategy theory

Put simply, when organisations develop their strategy, they are deliberately deciding what objectives they want to achieve and how to achieve them. Strategy requires an organisation to consider their objectives, and the achievement of them, in the context of their internal capabilities (resources, assets, funds etc) and their external environment (e.g. the market, competitors, substitutes etc). In short, organisational strategy is the product of the decisions organisations take about translating their objectives into coordinated action in the context of their capabilities (Sandall 2006). The resulting strategy creates a set of principles and rules for the way the activities, structures, processes and resources of an organisation are configured to achieve the organisation’s objectives.

The fundamental objective of organisations in the private sector is to produce profits. Hence, the purpose of strategy for organisations in the private sector is to direct organisational effort towards the creation of value for customers in order to produce profits (Porter 1985). Hence, the development of a strategy for organisations in the private sector requires managers to identify how they can consistently create value for their customers within the constraints of their internal resources and external environment, that is, create a competitive advantage. In other words, organisational strategy in the private sector is about seeking a competitive advantage in the creation of value for customers so as to maximise performance and secure survival (Hunter 2004).

Given the identification of the competitive advantage of an organisation, certain activities will become critical to the pursuit of that advantage. According to Hunter (2004), activities that are critical to the pursuit of that advantage are those which are valuable, rare, or difficult to imitate and provide the basis for the creation of value for the customer. That is, critical activities include those activities that are the source of the organisation’s competitive advantage. Critical activities also include those activities that are essential to the conduct of activities that are the basis for the creation of value for the customer. Hence, critical activities include those that are essential to the pursuit of competitive advantage but are not themselves the source of that advantage (Hitt, Ireland and Hoskisson 1996). In addition, responsiveness to external signals is vital if organisations are to retain their competitive advantage. Consequently, activities that are central to the gathering of intelligence on customers and relevant dimensions of the environment may also be considered critical (Wishart, Elam and Robey 1996).

Since organisational strategy in the private sector is about seeking a competitive advantage in the creation of value for customers to secure survival then strategy theory suggests that the conduct of activities that are critical to competitive advantage should be the focus of organisations efforts. Given their critical importance to the organisation, these core activities should be internal to the organisation. Hence, organisations should only contemplate outsourcing non-core activities.

Hunter (2004) also observed that the set of activities that are strategically critical or core can change over time. This suggests that regular review of the environment and adaptation to change in the environment is important in situations where the environment is dynamic. Perceptions of the value of organisations in the public sector can change rapidly because of either a shift in the perception of value on the part of clients or because of a change in perceptions about the causal relationships underpinning the contribution of the activity to policy objectives (Johnson 2007).  As Sandall (2006) notes, the effectiveness of managers in achieving strategic priorities in dynamic environments relies on their ability to read the environment and make the right decisions about how to realise organisational objectives. This suggests that frameworks for understanding the nature of unpredictability and uncertainty such as that proposed by Kurtz and Snowden (2003) may be essential for managers in public sector organisations.

Hunter (2004) lists the following concerns with outsourcing critical or core activities:

• If core activities are outsourced, the organisation is sharing their competitive advantage. This may create an opportunity for the supplying organisation to take the lead in the rare or difficult activity and become a rival.
• Internal capabilities may be reduced if activities are outsourced. By contracting specialist skills the purchasing organisation may deskill their own staff resulting in reduced capacity to pursue their competitive advantage.
• It is essential for organisations that outsource important non-core activities to ensure the supplying organisation is capable of delivering to the desired standard, consistency and timeliness.
• The supplying organisation may have different strategic priorities with respect to the activity. These differences need to be considered as they may affect the standard, consistency and timeliness of the product or service and the relative importance of these attributes to the supplying organisation.
• Given the importance of collecting intelligence on changes in the environment and customers, if outsourcing an activity results in loss of access to this intelligence then they will need to ensure processes are negotiated for the transfer of this intelligence within the contract arrangements.

In summary, strategy theory suggests there are dangers to outsourcing core activities, that is, those activities that are critical to the pursuit of competitive advantage. Outsourcing of core activities can lead to the loss of competitive advantage, loss of internal capability, loss of access to vital market intelligence and reductions in the consistency, quality and timeliness of products and services required by the organisation. These findings may have important implications for relationships between organisations that are jointly responsible for the development and implementation of natural resource policy.

The fundamental objective of organisations in the public sector is to create public value. Hence, the development of a strategy for organisations in the public sector concerns how they can create public value by creating value for their customers within the limits of their internal resources and the constraints of their external environment. However, there are two crucial differences between the environment of public sector organisations and the environment of private sector organisations.

First, organisations in the public sector have only one customer - the government - and the creation of value for the government arises from the creation of value for clients of the organisation (Johnson 2007). Consequently, there is a separation of client and customer for public organisations.

Second, the objectives of organisations in the public sector are largely defined by the assignment of responsibility for achieving particular policy outcomes by government.  This responsibility places a constraint on the range of strategies for creating public value that can be considered by any particular public organisation. Hence, the development of a strategy for organisations in the public sector concerns how they can create value for the government by creating value for their clients within the constraints of their government assigned organisational objectives, internal resources and external environment. In other words, organisational strategy in the public sector is about consistently creating value for clients so as to maximise performance and secure survival by creating public value for the government within the domain established by government assigned responsibilities.

Given the identification of the domain established by government assigned responsibilities for a public organisation, certain activities will become critical to the creation of value for clients. Hence, adapting Porter (1996), activities that are valuable, rare, or difficult to imitate and provide the basis for the creation of value for the client will be critical activities for organisations in the public sector. Critical activities also include those activities that are essential to the conduct of activities that are the basis for the creation of value for the client. Consequently, critical or core activities for public sector organisations include those activities that provide the basis for creating value for clients, and those activities that are essential to the creation of value for clients but are not themselves the source of that value.

Given the distribution by government of responsibilities, activities and capabilities among organisations involved in natural resource policy, public sector organisations that are jointly responsible for developing and implementing natural resource policy may well find themselves in a position where at least some core activities are undertaken externally. The following implications arise from such arrangements:

• Given that internal capabilities may be reduced if core activities are conducted externally then joint staffing of projects may be required if retention of specialist skills is a priority for the purchasing organisation.
• Governance arrangements that ensure the supplying organisation is capable of delivering products and services to a desired standard, consistency and timeliness are essential. The more idiosyncratic and recurrent the transactions around these products and services the greater will be the need for flexible, relational based governance arrangements for the responsible organisations.
• The supplying organisation may have different strategic priorities with respect to the activity. These differences need to be considered as they may affect the standard, consistency and timeliness of the product or service and the relative importance of these attributes to the supplying organisation.
• Given the importance of monitoring for changes in dynamic environments that influence which activities are core, then the establishment of processes for the transfer of intelligence on clients and customer perceptions of value may be a vital to consistently creating public value.

In summary, strategy theory suggests that problems can arise with the distribution of critical activities among organisations that are jointly responsible for developing and implementing natural resource policy. The spreading of core activities across organisations can lead to loss of internal capability, loss of access to vital market intelligence and problems in the consistency, quality and timeliness of policy programs and activities. These problems may create risks for public sector organisations in terms of consistently creating value for clients and achieving policy outcomes as embodied in their organisational objectives.

Human Resource and Behavioural Theory

Introduction

Hunter (2004) identified human resource management as the third factor that was influential in the success of outsourcing. Hunter (2004) argued that changing organisational structures can be disruptive for the staff and the responses of staff to such disruptions can profoundly affect the organisation’s ability to achieve its objectives. Barney (1986, 656) states:

Firms with sustained superior financial performance typically are characterized by a strong set of core managerial values that define the way they conduct business. It is these core values (about how to treat employees, customers, suppliers and others) that foster innovativeness and flexibility in firms; when they are linked with management control, they are thought to lead to sustained superior financial performance.

This suggests there is a causal relationship between the approaches organisations take to human resources management and their ability realise their organisational objectives.

To begin with organisations have cultures. The culture of an organisational influences the choices managers make about their staff and also influences how staff of the organisation responds to their managers, thereby influencing organisational performance. As Barney (1986, 657) observes:

Organisational culture is typically defined as a complex set of values, beliefs and assumptions, and symbols that define the way in which a firm conducts its business…culture has pervasive effects on a firm as the culture not only defines who its relevant employees, customers and suppliers are, but also how the firm will interact with these key actors.

In addition, the knowledge and skills needed for an activity determine the type of employee that is required to achieve organisational success. For example, O’Donohue et al (2007, 75) characterised knowledge workers as follows:

Knowledge work is the acquisition, creation and packaging or application of knowledge – it is characterised by variety and exception rather than routine, and is performed by professional workers with a high level of expertise.’

O’Donohue et al(2007) found this type of worker expects to be treated as an asset to the organisation. Consequently, approaches to human resource management that do not satisfy such expectations can have damaging effects on staff morale and performance. Given the presence of a causal relationship between the approaches organisations take to human resources management and their ability realise their organisational objectives, organisations need to consciously choose their approach to human resource management.

In short, human resource systems should be logically consistent with and supportive of organisational objectives (Legge 2005). There is a variety of approaches to managing the staff of an organisation. Some of these are described below.

Human resource management style

Organisations have different styles for managing human resources. Legge (2005) describes a human resource management style as a guiding set of principles which delineate the boundaries and direction of acceptable management actions in dealing with employees. Generally, the management of human resources follows one of two styles - hard or soft. If an organisation uses a hard style there is close integration of human resource policies, systems, and activities with the strategy of the organisation. In hard the style human resources are viewed largely as a factor of production that is rationally managed. Legge (2005) notes that the hard style treats human resources as passive with a focus on searching for labour with the appropriate skills at the right price. This style can be useful for routine production focused activities.

In contrast, the soft style treats employees as valuable assets of the organisation who are a source of competitive advantage through their commitment, adaptability and high quality (Legge 2005). The soft style advocates participation, motivation and leadership which are believed to result in human development and better economic performance. The contrasting styles are compared in Figure 1. Legge (2005) points out these styles are by no means mutually exclusive; in principle organisations can have a blend when this is appropriate.

The challenge for organisations is to ensure the style of human resource management they choose is consistent with the expectations of the staff they need to achieve their organisational objectives.

The hard style of human resource management is often a key influence on outsourcing decisions (Hunter 2004). Organisations that view staff as a factor of production often perceive outsourcing as a mechanism for reducing labour costs and increasing efficiency. There are numerous instances where such decisions have created expensive, time consuming industrial relations issues for organisations where the hard style of human resource management was not consistent with the expectations of staff (Industry Commission 1996).

The choice of human resource management style has two important implications for organisations that are jointly responsible for the development and implementation of natural resource policy. First, there is the potential for the achievement of organisational and policy objectives to be hindered by a clash in human resource management styles when managers and staff from different organisations attempt to work in partnership.

Second, there may be a propensity to regard the staff of other organisations simply as suppliers of a product or service and, as a consequence, an inclination to believe the hard style of human resource management is the most appropriate style for these staff. Such propensities must be carefully examined to ensure the style is consistent with the expectations of these staff, particularly if they are highly skilled. Otherwise there is a strong possibility that the use of the hard style will trigger expensive, time consuming industrial relations issues.

Figure 1 Story’s model of mapping HRM meanings

^{Source: Legge (2005)}

Flexible firm model

Labour flexibility has been a theme in human resource management for nearly three decades. Labour flexibility was promoted as a way for organisations to build adaptive capacity to cope with the constantly changing demands resulting from a more complex and competitive market environments (Volberda 1998). Labour flexibility was expected to improve international competitiveness and boost organisational performance (Hunter 2004). The use of external labour is promoted in this model to reduce costs and respond to fluctuations in labour demand. As a result, this model suggests that hierarchical organisational structures should be replaced with more decentralised organisational structures (Legge 2005).

Atkinson (1984) defined three types of labour flexibility:

• Functional flexibility - the organisation’s ability to redeploy employees between activities and tasks to match changing workloads, production methods or technology using techniques such as multi-skilling;
• Numerical flexibility – the organisation’s capacity to adjust labour inputs in response to fluctuations in output using arrangements such as outsourcing;
• Financial flexibility - the organisation’s ability to adjust employment costs to reflect the state of supply and demand in the external labour market using arrangements such as reward systems based on individual performance.

Figure 2 Flexible firm Model

 ^{Source: Atkinson 1984}

In the flexible firm model managers in organisations are encouraged to pursue strategies that support a balance of the three types of flexibility by grouping the workforce into core and peripheral groups (see figure 2). The core group are those in the workforce that perform critical specific, continuous activities that are specific to the organisation. The core group is rewarded with job security and career development in return for contributing to functional flexibility through multi-skilling. Peripheral groups are used to create numerical flexibility in undertaking routine tasks on short term contracts (Legge 2005).

The organisation’s workforce can then be divided into four classes according to relative level of skill and type of group as follows:

• Primary internal labour market;
• Secondary internal labour market (unskilled);
• Primary external labour market (highly specialised non-firm skills);
• Secondary external labour market (unskilled tasks of a non-firm specific nature).

Typically, different contractual arrangements and rules of engagement are employed with each class in the workforce.

There are real challenges for organisations managing these different workforce classes equitably (Hunter 2004). Discriminatory practices can arise due to different perceptions among management and staff of the value of the contribution each class makes to organisational objectives. This can give rise to tensions among management, unions and the different classes in the workforce. These tensions have the potential to hamper the achievement of organisational objectives (Hunter 2004).

The flexible firm model has the following implication for organisations involved in natural resource policy. The sharing of authority, functions and capabilities in relation to natural resource policy across organisations means that they will inevitably operate with a workforce that is implicitly differentiated into classes.  Consequently, the management of a differentiated workforce will be a critical task for managers in these organisations. Such a task will be particularly challenging because the external workforce of each organisation is spread across a range of other organisations, each with their own cultures. The difficulty of this challenge is further compounded when, as Legge (2005) warns, what qualifies as core and what qualifies as peripheral can change quickly in uncertain and dynamic environments.

Pychological contract

An important dimension of the staff in an organisation is the individual’s perspective on the employment relationship and the bearing this has on their motivation to contribute to organisational objectives. The psychological contract model provides insights into how staff perceives organisational change and the effects such change may have on their behaviour (Hunter 2004).

Rousseau’s (1990) model of the psychological contract proposes that the relationship between an employer and employee has dimensions beyond the legal or written contract. Rousseau’s (2004, 121) defines psychological contracts as the employee’s perception of the obligations between them and their employer:

A psychological contract creates an enduring mental model of the employment relationship. This mental model provides a stable understanding of what to expect in the future

The psychological contract recognises that in reality the rights and duties between employers and employees emerge through the interpersonal relationships formed in the work place over time (O’Donohue 2007). According to the model employers and employees develop beliefs about the obligations that exist between them. These beliefs shape their expectations of each other. Over time employees negotiate the duties they must perform to satisfy their side of the bargain, and the nature of the rewards they can expect in return. Hence, reciprocity is the underpinning principle of employment contracts in the psychological contract model. The negotiation between employer and employee can be explicit, as in appraisal or performance review sessions, but more often takes the form of behavioral action and reaction through which the boundaries of mutual expectation are explored and established. The psychological contract is therefore voluntary, dynamic and informal (O’Donohue 2007).

Rousseau (1990) suggests the psychological contract may take two forms - transactional and relational. According to O’Donohue (2007) the transactional contract is explicit, short term and economic in nature. The transactional contract assumes the pursuit of rational and self interest and that the relationship between the employer and employee does not result in continuing interdependence. Relational contracts are characterised by broader agreements that seek to create and sustain a long term relationship between the employer and employee. In relational contracts obligations of loyalty and commitment on the part of employees are matched by obligations to provide training, career opportunities and job security on the part of the employer (Hunter 2004). As a rule employees tend to be less flexible than employers with regard to altering the content of their contract over time.  Staff can be anywhere along a continuum between purely transactional and purely relational contracts. Understanding employee perceptions of where they are on this continuum allows employers to anticipate the expectations of employees and to determine whether any planned changes to work practices are likely to be seen as reneging on their obligations to employees.

The model of the psychological contract suggests that organisations will experience problems with staff if they deliberately or inadvertently breach the conditions of the contract. Given many of the conditions of psychological contracts are often implicit and dynamic when the contract is of the relational form, unforeseen breaches of the contract may easily arise.  The contravention of perceived obligations can result in a change in employees’ perceptions of the relational obligations of employers, with a corresponding change in their loyalty to the organisation. For example, employees may believe they need to take personal responsibility for career development, commitment to their occupation and security of employment (Marks 2001). However, the assumption of personal responsibility in these areas may be accompanied by a correspondingly greater willingness on the part of employees to consider alternative offers of employment or seek higher wages and improved conditions.

Pate (2006) presents a framework for classifying breaches of the psychological contract. Breaches arise when organisations fail to meet their obligations regarding distributive, procedural and interactional aspects of justice. A distributive breach arises when outcomes, for example financial rewards, are perceived to be unfairly distributed. A procedural breach refers to the perception of the unfair application of procedures such as promotion. Interactional breaches are linked to employees’ perceptions of trust of supervisors and the organisation as a whole. Breaches may take the form of retrenchment of staff, changes in organisational structure, processes, standards and norms.

According to Pate (2006) the impacts of a breach of the psychological contract will depend on the circumstances of the breach, the consequences for employees and the strength of interpersonal relations between employees and the employer. Where the relationship between employees and the employer is sufficiently strong this relationship and the psychological contract may remain unchanged (relationship restoration). Alternatively, the psychological contract may remain intact but be altered and the relationship between employees and the employer becomes more transactional (relationship recalibration). Finally, the breach may provoke strong feelings of perceived violation and trigger significant changes in the nature of the relationship between employees and the employer (Pate 2006).

The violation of the psychological contract can initiate a number of attitudinal or behavioural responses including reduced organisational commitment and job satisfaction, cynicism or a belief that the organisation lacks integrity (Pate 2006). Employees may be more likely to display negative emotions towards the organisation and they will tend to be critical of their organisation. Relationship rupture may engender behavioural changes in terms of reduced effort and citizenship in the workplace. Clearly in this case there are implications for the employee and organisational performance.

According to Hunter (2004) breaches can occur in the psychological contract if structural changes in the organisation such as outsourcing are imposed on employees. These breaches can trigger feelings in staff varying from disappointment to a strong sense of wrong doing. These may be accompanied by behavioural changes such as increased cynicism, decreased commitment, reduced job satisfaction and diminished trust in the organisation.

The psychological contract model has some interesting implications for managers in organisations that are jointly responsible for the development and implementation of natural resource policy. First, the psychological contracts in these organisations are likely to be strongly oriented to the relational form because a high proportion of employees have high levels of expertise and prefer autonomy and responsibility for their performance. Consequently, many of the conditions of these psychological contracts will be implicit and dynamic. Hence, inadvertent and unforeseen breaches of these contracts may easily arise.

Second, inadvertent and unforeseen breaches of the relational form of psychological contracts will be an especial concern where the achievement of an organisation’s objectives is critically dependent on peripheral work groups with highly specialised skills. The attitudes and behaviour of peripheral employees towards the contracting organisation will be an important consideration in the management given their dual commitment to their own organisation. Differences in organisational cultures, norms standards and processes may easily give rise to distributive, procedural and interactional breaches of psychological contracts that are entirely unintended and accidental.

Third, Marks (2001) has noted that individual employees often have multiple psychological contracts as the result of arrangements such as decentralisation, contracting, outsourcing and the rise of work teams. As a result these individuals tend to have an increased attachment to the organizational entities that they interact with most regularly, such work groups, and a diminished sense of attachment to their own organisation. Hence, the establishment of cross-organisational entities such as working groups and task forces to deal with issues in natural resource policy that span organisational boundaries may undermine the loyalty, attachment and commitment of employees to their organisation. This may be beneficial in terms of the objectives of the cross-organisational entity but potentially damaging for the organisations themselves.

Finally, the potential for arrangements such as contracting, outsourcing and inter-organisational work to undermine the commitment of employees to their organisation may be increased where employees perceive those arrangements are as responsible for their experience of positive emotions.  Marks (2001) has suggested that if the psychological contract represents affective states of trust and fair treatment, then those organisational entities that are perceived by employees as being responsible for positive feelings such as comfort or safety will be seen as having the most impact on any collective psychological contract. For organisations that are jointly responsible for natural resource policy this means there is a risk that their employees may become less committed to their organisation, and more committed to other organisations, when employees’ experiences of working in other organisations are positive.

Hence, a paradoxical tension arises from employees’ positive experiences of arrangements such as outsourcing, contracting, secondments, inter-organisational working groups and task forces. On the one hand, positive experiences of these arrangements will encourage employees to participate in such arrangements and so contribute to joint organisational objectives. On the other hand, positive experiences of these arrangements may encourage employees to reconsider their commitment to their own organisation. This suggests managers in organisations that are jointly responsible for natural resource policy need to anticipate, and be prepared for, such paradoxes.        
 

Individual performance equation

The final approach to human resource management we will consider is the individual performance equation (Blumberg and Pringle 1982). This approach is based on the proposition that there is an interaction between an individual’s performance and the organisation’s performance (Hunter 2004). According to Blumberg and Pringle (1982) the performance of employees is the product of factors across three key domains (see figure 3):

• Capacity – the individual’s physiological and cognitive attributes;
• Willingness - the psychological and emotional characteristics influence the efforts they make;
• Opportunity - the organisational support they receive.

The model highlights the possibility that the performance of employees depends partly on their skills and motivations and partly on the capacity of the organisation to provide an environment that facilitates the expression of those skills and motivations. Hence, problems with employee performance can be the results of complex interactions between any or all of these three domains and managers need to ensure that all three domains are recognised in their human resource management. From the perspective of managers in organisations that are jointly responsible for the development and implementation of natural resource policy this model highlights the importance of providing appropriate organisational support for staff that are involved in activities that that contribute to those joint responsibilities, especially when those responsibilities only partly align with the objectives of the organisation.

Figure 3 Domains of individual performance

Interaction of performance domains	Variables embedded in  each domain
	Individual attributes –  demographic, competency, personality, values, attitudes & perceptions Work effort – level  motivation (satisfaction, status, anxiety, legitimacy, involvement, perceived  experience) Organisational support – time, budget, equipment,  instructions, services from others, flexibility of process, design of work  environment.

^{Source: Hunter (2004)}

4  Conclusion

Legislative and institutional conventions distribute authority and responsibility for the implementation of natural resource policy among a range of government, semi-government and community organisations. The resulting spread of authority, responsibility and capability among organisations creates dependencies in organisational performance between them. Given that each of these organisations will have specific interests and agendas that reflect their respective responsibilities tensions will arise between them. Tensions will also arise from differences among organisations in the degree to which their particular responsibilities align with their collective responsibility for the development and implementation of natural resource policy. These tensions will inevitably create relational problems between organisations and may hinder the effective implementation of natural resource policies.

The dependencies in organisational performance that are created by collective responsibility for the implementation of natural resource policy parallel the dependencies in organisational performance that arise from outsourcing. Consequently, we expected that the literature on outsourcing might provide insights that could be used to improve collaboration between organisations that are jointly responsible for developing and implementing natural resource policy.

In this paper we have used Hunter’s (2004) multi-disciplinary approach to outsourcing to obtain insights into the management of relationships among organisations that are jointly responsible for natural resource policy. We found that Hunter’s (2004) approach provided insights into the types of governance arrangements that may be appropriate in dealing with complex, unpredictable and recurring interactions between organisations. The approach also provided insights into the nature of the strategic risks that the separation of responsibility from capability can create for public sector organisations. Finally, the approach provided insights into the potential tensions in human resource management that can arise from the de facto creation of differentiated workforce by the spread of responsibility, roles and capability for policy development and implementation across a range of organisations. This suggests that Hunter’s (2004) approach can offer vital insights into the management of relations between organisations with a collective responsibility for the development and implementation of natural resource policy and warrants further investigation.

5 References

Atkinson J (1984) Manpower strategies in flexible organisations Personnel Management vol 16, no 8 pp 28-31

Barney JB (1986) Organisational culture: can it be a source of sustained competitive advantage? Academy of Management Review vol 11, no 3 pp 656-665

Beaumont N, Sohal, A (2004) Outsourcing in Australia International Journal of Operations and Production Management vol 24, no 7 pp 688-700

Blumberg M, Pringle CD (1982) The missing opportunity in organisational research: some implications for a theory of work Academy of Management Review vol 7, no 4 pp 560-569

Bragg SM (2006) Outsourcing a guide to…selecting the correct business unit…negotiating the contract…maintaining the control of the process John Wiley & Sons Inc, New Jersey

Considine M (2005) Making public policy, Polity Press, Cambridge UK Coase RH (1937) The nature of the firm, Economica vol 4, pp 386-405

Davis G Wanna J Warhurst J Weller P. (1993) Public Policy in Australia, Allen & Unwin 2nd Edn

Hitt MA, Ireland RD and Hoskisson RE (1996) Strategic management: competitiveness and globalisation, 2nd Edn, West Publishing Company, New York

Hunter JD (2004) Investigating the complexity of outsourcing decisions: an interpretive approach, Thesis for Doctor of Philosophy of the University of New England

Industry Commission (1996) Competitive tendering and contracting by public sector agencies, Report no 48, Commonwealth of Australia Australian Government Publishing Service, Melbourne

Johnson F (2007) Outcomes that Matter Department of Primary Industries, Tatura, Victoria

Kurtz CF Snowden, DJ (2003) The new dynamics of strategy: sense-making in a complex and complicated world IBM Systems Journal vol 42, no 3 pp 462-483

Legge K (2005) Management work and organisations: human resource management, rhetoric’s and realities Anniversary Edition, Palgrave Macmillan, New York

Marks A (2001) Developing a multiple foci conceptualisation of the psychological contract Employee Relations vol 23, no 5 pp 454-467

McIvor, R (2005) Strategies for evaluation and management Cambridge University Press, New York

O’Donohue W, Sheehan C, Hecker R, Holland, P (2007) The psychological contract of knowledge workers Journal of Knowledge Management vol 11, no 2 pp 73-82

Pate, J (2006) The changing contours of the psychological contract: unpacking context and circumstances breach Journal of Industrial Training vol 30, no 1 pp 32-47

Petris, S (2004) Making sense of recent development of public sector governance, Department of Primary Industries, Victoria

Porter, ME (1985) Competitive advantage- creating and sustaining superior performance The Free Press, New York

Porter, ME (1996) ‘What is strategy? Harvard Business Review vol 74, no 6 pp 61-78

Rousseau, DM (1990) New hire perceptions of their own and their employer’s obligations: a study of psychological contracts, Journal of Organisational Behaviour, vol 11, no 5, pp 389-400

Rousseau, DM (2004) Psychological contracts in the workplace: understanding the ties that motivate Academy of Management Executivevol 18, no 1 pp 120-127

Sandall J (2006) Navigating paths through complex systems of interacting problems: strategic management of vegetation policy, Doctor of Philosophy Thesis, University of New England, Armidale, NSW

Volberda HW (1998) Building the flexible firm Oxford University Press, New York

Williamson OE (1979) Transaction cost economics: the governance of contractual relations The Journal of Law and Economics, vol 22, no 2 pp 233-261

Williamson OE (1991) Comparative economic organisation: the analysis of discrete structural alternatives. Administrative Science Quarterly vol36,  no 2 pp 269-96

Williamson OE (1996) The mechanisms of governance Oxford University Press, New York

Wishart NA, Elam JJ, Robey D (1996) Redrawing the portrait of a learning organisation: Inside Knight-Rider Inc Academy of Management Executive vol 10, no 1 pp 7-20

6 Footnotes

¹ By institutional we mean the organisational structures and processes established to action policy

² A program is a set of policy activities that are designed and implemented to achieve given policy objectives. For example the Victorian Government has policy objectives to reduce nutrients in Victoria’s catchments. The Government’s regional partners (e.g. CMAs) develop nutrient reduction programs. For example a farm program might consist of financial incentives for land holders to improve their farm technology to reduce nutrients, farm planning and extension activities to build landholder skills. These are policy activities.

³Third parties are termed fiats: an arbitrary order or sanction given by a person or group with the authority to enforce it.

⁴ This is known as forbearance: the act of not enforcing something that is due i.e. debt, right, obligation. It is mediated by the arbitrator first. Forbearance law assumes that parties internal to a dispute have deep knowledge both around the circumstances surrounding a dispute as well as the efficiency properties of alternative solutions. Such knowledge would be discovered at great cost through the courts. So internal disputes are permitted and can be appealed by courts where necessary to ensure integrity (Williamson 1991)

⁵ In this case maladapted means that a course of action to achieve an exchange is ill suited to realising the exchange.