| C. Allan Turner |
The major premise is that true cost-containment cannot be achieved by superficial procedural changes, but rather must address the underlying behavior of the organization. It is simply not enough to talk about cost-containment, to rearrange boxes on an organization chart, or to implement new procedures. Although these actions may help, they only treat the symptom and not the disease. To achieve lasting cost-containment, the leader/manager's attention must be directed deeper into the soul of the organization. There must be a change in the behavior of the organization. Providing the leadership necessary to change the behavior of an organization is a major challenge in an environment where the behavior of organization members is dictated by a strong, well-entrenched culture. The conclusion of the article is that change required to achieve cost-containment can only occur if the leader/manager understands the culture and context of his or her organization and provides appropriate leadership which motivates organization members to change.
One of the major issues facing public administrators during the late 1990's is cost-containment. Unless economic conditions reverse drastically, cost-containment will likely dominate the framework of public management for the next twenty years. Economic conditions in the United States for the past several years have resulted in a steady decline in government revenues. However, at the same time, there has been a rapid rise in the cost of government at all levels. As a result, public managers are being forced to find ways to hold costs within available revenues.
The federal government is one of the most glaring examples of revenues not being able to keep pace with rising expenditures. During the past few decades the federal budget deficit has grown to astounding proportions as expenditures exceeded revenues. As the economy has weakened and the deficit has grown, the public has become more militant in demanding that spending be controlled and those running government be held accountable. The extent of the discontent of the public has become more and more obvious during recent elections. Politicians, particularly at the national level, have responded by initiating a host of policy initiatives to limit government spending. It is apparent to all, but the most casual observer that public managers, particularly those at the federal level, must stop attempting to solve problems by throwing money at them. The public manager no longer has the luxury of doing more with more. He or she must be realistic about doing less with less or perhaps doing more with less (Khademian, 1995).
Cost-containment in any organization is a formidable challenge. It is especially difficult in the public sector because public organizations are not driven by the profit motive. Traditionally, most public managers and public employees have not been concerned with the bottom line on their balance sheet. They spend the money in the budget and if that is not enough they ask for more. Sometimes, as is the case of many federal agencies, they spend whether they have the money or not. Needless to say, this mind set is beginning to change as resources available to public managers continue to decline.
Unfortunately, many public managers when faced with cutting or containing costs address the issue by developing and implementing more efficient operational procedures. The focus is on improved efficiency. Yet, after changes are made the manager discovers to his or her dismay there is no effect on costs, or after a brief period of reduction, costs return to previous levels or actually increase. The manager is then faced with one overriding question: Why were the changes not effective?
Although much has been written about organizational change, there is very little in the literature devoted to cost-containment and the leadership types essential to overcoming cultural resistence to cost-containment efforts. The purpose of this article is to provide insight into the cost-containment dilemma faced by managers in government by applying some current theories on organizational culture and leadership.
The major premise is that true cost-containment can not be achieved by superficial procedural changes, but rather must address the underlying behavior of the organization. It is simply not enough to talk about cost-containment, to rearrange boxes on an organization chart, or to implement new procedures. Although these actions may help, they only treat the symptom and not the disease. To achieve lasting cost-containment, the leader/manager's attention must be directed deeper into the soul of the organization. There must be a change in the behavior of the organization. Providing the leadership necessary to change the behavior of an organization is a major challenge in an environment where the behavior of organization members is dictated by a strong, well-entrenched culture. Change can only occur if the leader/manager understands the culture of his or her organization and provides appropriate leadership which motivates organization members to change.
Numerous definitions and descriptions of organizational culture can be found in the literature. Schein (1985) describes culture as a set of shared assumptions about the world and the way it works; values about what is right and wrong; beliefs about what or should be the consequences of these values; and norms about expected behavior. According to Schein behavior is the only action observable. All the rest are inferred.
Schwartz (1981) sees culture as a pattern of beliefs and expectations shared by organization members. These beliefs and expectations produce norms that powerfully shape the behavior of individuals and groups or organizations.
Organizations can have a dominant culture and numerous subcultures (Robbins, 1988). A dominant culture expresses values that are shared by the majority of the organization's members.
One consistent theme found throughout the literature is that organizations have cultures which govern how members behave. This concept is especially evident in correctional organizations.
The cost of incarceration in the United States has skyrocketed during the past two decades. The U.S. Department of Justice (1992) reported between 1979 and 1990 State government expenditures for prison construction increased 612% while spending to operate correctional institutions rose 328%. Total spending in State and Federal prisons in fiscal 1990 was nearly 11.5 billion dollars.
The cost of corrections has become a major economic burden for government at all levels in the United States. The increase in correctional spending for some states in recent years has been twice that for general fund increases and even larger than in education (Claiborne and Thomas, 1994). Corrections has reached such significance that it is described as "a truly big business" (Allen and Simonsen, 1989). The public, politicians, and correctional administrators recognize that the current growth in correctional expenditures cannot be sustained. Correctional administrators like other public managers must implement cost-containment measures. Like leaders of other private and public sector organizations, prison wardens are expected to operate efficient and economical institutions. Unlike most leaders of other organizations, it is also well documented that prison wardens lead institutions that can be dangerous and very difficult to manage (Useem and Kimbell, 1989; DiIulio, 1987).
Researchers have developed a rich body of literature concerning prison culture. Due to their closed nature, prisons develop strong organizational cultures. In fact, many correctional facilities have powerful guard unions which can reinforce or destroy almost any correctional program (DiIulio, 1987). Prison cultures are extremely resistant to change and are a major force which will impact any change effort such as cost-containment. This can best be illustrated by an analysis of cost-containment efforts at one federal penitentiary.
The United States Penitentiary Marion, Illinois is typical of most government organizations. It is a major operational entity within the Federal Bureau of Prisons. It employs 400 people who work in a wide variety of occupational specialties. However, due to the security mission of the facility the largest number of employees (225) are employed as correctional officers.
In FY 91, overtime costs for security at the facility far exceeded budget allocations. A closer study indicated that overtime costs had exceeded budget constantly for a number of years.
Due to funding limitations throughout the Federal Bureau of Prisons each institution, including U.S.P. Marion, was directed to reduce overtime costs by 10% in FY92. The management of the facility immediately implemented measures to reduce overtime costs. Rosters assigning correctional officers to various jobs were adjusted and additional officers were made available to cover overtime needs. Several areas of the institution were reorganized to better utilize manpower to assist in security responsibilities. Responsibility was assigned to line supervisors to monitor daily correctional officer assignments. Progress was tracked closely at budget meetings. As expected, overtime costs declined. However, to management's dismay, after only a brief period of time, overtime costs returned to previous levels.
Operationally there was no explanation for the return to previous levels of overtime costs. Everything had been covered. There was sufficient staff and proper organization. Follow up and responsibility mechanisms were in place. However, if we view the situation through the cultural lens advocated by Schein (1985) and Schwartz (1981) the results become more understandable.
Correctional officers comprise the largest segment of the workforce at U.S.P. Marion. The actions of this group can have a profound effect on operations of the institution. There are certain beliefs and values strongly held by the correctional officers at U.S.P. Marion. In fact, the frequency and intensity of these beliefs among officers are consistent with Robbins' (1988) description of a dominant culture.
One dominant belief among officers is that they have a right to overtime pay. In their view, overtime pay should only be limited by their physical ability to work the additional hours. The belief is so entrenched that most correctional officers arrange their personal budgets around the extra income associated with overtime. An observable behavior pattern is for an officer who has worked overtime for several hours during a week to call in sick on his normal shift. This gives one of his friends the opportunity to earn overtime for the shift vacated by the officer who calls in sick. Overtime is a shared resource among the correctional officers. Sick leave usage is the vehicle through which allocation of this resource is made. In effect, the correctional officer behavior is regulated by the informal culture and acts as a substitute for the rules and regulations of the formal organization. Regardless of government regulations, the officers see nothing wrong with inappropriately using sick leave. As a means of comparison, the average sick leave use per individual throughout the Bureau of Prisons was 42 hours per year. U.S.P. Marion has many officers who exceeded 112 hours of sick leave use in a year.
Another very clear example of the impact of cultural values occurred during April of FY92. During this period, overtime costs shot up to alarming levels. Annual training for correctional officers was in progress during this period and manpower to cover all security posts was extremely limited. Management was at a loss to explain the situation. All operational issues had been addressed during the planning for annual training. However, after some study the real problem became apparent. April is the start of fishing season in Southern Illinois where U.S.P. Marion is located. Many correctional officers value fishing very highly and plan their schedules to go fishing frequently during the season. If they can not get a day off when requested they will simply call in sick. The fact that annual training was in progress made it difficult for supervisors to schedule days off when requested. Therefore, sick leave usage for officers increased, making the manpower situation worse. The result was increased overtime costs since security posts have to be covered at all times. Fishing season, annual training and the culture of the institution combined to wreck any attempts to control overtime costs.
In this case, management was alert to the contextual cultural aspects of leadership. Top managers realized the impact culture was having on the environment and exerted the leadership appropriate to address the situation. Management could not take immediate action to change the culture of the institution so that work is valued more than fishing. However, management could change the schedule for annual training. In FY93, annual training was held in January and February which are non-fishing months. The result was less overtime usage.
In addition to schedule changes, the leadership of the institution implemented procedures to challenge inappropriate sick leave use. Doctors excuses were requested in any questionable sick leave use situation. This met with strong opposition from the union which is primarily composed of correctional officers. At the same time, information was received by management that a group of correctional officers were going to conduct an organized series of absences due to sickness. This would demonstrate to management the folly of attempting to control absences through the curtailment of use of sick leave.
The real issue was not the sick leave excuse request, but rather that the action by management to limit overtime represented a move to change a basic aspect of institutional culture.
The values and beliefs found in the culture of U.S.P. Marion present a formidable obstacle to containing overtime costs. According to Ehrenberg and Stupak (1992), efforts to make cultural change will meet with resistance. Robbins (1988) indicates that it takes a long time for a culture to form and once established it becomes entranced. Under favorable conditions cultural changes have to be measured in years not weeks or months. Significant change will take a long time. Therefore, the culture of an organization should be treated as an important influence on employee behavior and something over which management has little short term influence, while at the same time being responsible for introducing long-term strategic foundations for change.
The cultural norms of the U.S.P. Marion staff are not unlike those found at other federal prisons. In fact, they are probably consistent with those found throughout government at all levels. In this example, management has made an important first step in trying to identify and understand the culture of the institution. Ehrenberg and Stupak (1992) indicate that this understanding is essential to successful change. Overtime pay expectations have become such a predominant part of the culture of U.S.P. Marion that any attempts to reduce overtime costs without addressing these beliefs will be futile.
Identifying and understanding the culture of an organization such as U.S.P. Marion is a difficult task requiring analytical skills, understanding of the organization, and knowledge of organizational theory combined with a great deal of effort. However, it is an even more difficult task to overcome cultural resistance while trying to contain costs.
Effective leadership is essential to successful efforts at cost-containment. As exemplified by the U.S.P. Marion example, skilled leadership is necessary to successfully deal with the difficult issue of achieving cost-containment.
More has been written about leadership than perhaps any other topic in organizational behavior. The literature is extensive and often inconsistent. Robbins (1988) summarizes the vast amount of leadership literature into three different approaches to explaining what makes an effective leader. According to Robbins, these are trait theories, behavioral theories and contingency theories. Both Hitt (1988) and Robbins (1988) succinctly point out the shortcomings in each of the different approaches to describing the essence of leadership.
Burns (1978) describes two types of leadership. He defines the first as transactional and the second as transformational. According to Burns, transactional is the most common type of leadership and involves the exchanging of one thing for another. There is a clear transaction between the leader and those he or she leads. An example is a performance appraisal system which rewards in proportion to performance. The transactional approach achieves performance, but cannot produce outstanding performance. The second type of leadership, transformational, looks for potential motives in followers and seeks to satisfy higher needs.
Hitt (1988) says that "the transforming leader gets us to transcend our self-interests by constantly focusing our attention on the mission and goals of the larger organization."
Bass (Winter, 1985) states that transforming leaders motivate followers by raising their level of consciousness, getting them to transcend their self interests, and raising their need level on Abraham Maslow's hierarchy. Hitt (1988) implies that the transforming leader is the type of leader who is best able to get things done.
Bennis and Nanus (1984) describe effective leadership as giving an organization its vision and having the ability to translate that vision into reality. They conclude that effective leaders are results oriented and have a vision which transforms purpose into action.
Applying the conclusions of Burns (1978), Hitt (1988), Bass (Winter, 1985), and Bennis (1984), we may surmise that for the leader/manager to effectively implement cost-containment strategies he or she must have a clear vision of what needs to be done and the ability to translate that vision into reality. The translation of vision into reality requires transformational rather than transactional leadership. In other words, it is not sufficient for the leader/manager to trade rewards for performance. The leader/manager must convince the members of the organization to sacrifice self-interests for the good of the organization as a whole based on clearly articulated values, norms, and assumptions. Ultimately, the goal is to more effectively integrate personal interests with organizational interests in a framework of mutual reinforcement.
If we relate this rationale to U.S.P. Marion, the obstacles faced by the warden become readily apparent. There was a strong culture, especially among the correctional oficers, which has taken years to develop and will take years to change. However, the warden had to implement major cost-containment measures within the fiscal year.
The warden established procedures to address the excessive use of sick leave. Disciplinary action was taken against guards identified as sick leave abusers. Incentive awards programs were implemented to reward work attendance. The efforts had some immediate effect. However, the approach was a transactional leader-follower relationship which could not be expected to achieve long lasting results.
There were indications that the more complex transformational leadership approach necessary to achieve cultural change was beginning to form. There were several staff meetings and other attempts to motivate staff by raising their level of understanding of the far reaching purpose of the efforts at cost control. In addition, there was a continuous effort to get the officers to transcend their self-interests by constantly focusing attention on the importance of cost-control to the overall mission and goals of the institution. A consistent theme was the critical role played by U.S.P. Marion as the only institution in the Federal Bureau of Prisons capable of managing the most dangerous, escape prone inmates: and by holding down overtime, officers could ensure limited budget resources would be available to carry out the mission. According to Bass (1985), both are ways in which the transforming leader motivates followers. It was apparent the leadership at U.S.P. Marion would not stop with the transactional leader-follower relationship, but was on the path toward eventually moving into the transformational leader-follower relationship necessary to overcome cultural resistance to cost-containment efforts.
The economic and political realities of the 1990's are forcing public administrators to implement operational changes to cut or contain costs in their organizations. However, cost-containment is a difficult challenge in any organization. Often the changes necessary to control costs directly confront long standing organizational cultures. The magnitude of the problem has been exemplified by the examination of the attempts at one Federal Bureau of Prisons facility to control the single issue of overtime costs.
In order to successfully implement cost-containment, the successful leader/manager is required to function on two levels. On the first level the leader/manager acts on organizational elements that are on the surface and observable. This includes evaluating operations, implementing procedures, reducing staff, and reorganizing. This approach certainly will have an effect. However, the impact will not be long lasting. The problem is that most leader/managers stop their change efforts at this level.
To achieve effective change, the efforts must go beyond the obvious and move to a second, deeper level. At the second level, action is initiated to deal with the organizational cultures which govern how the members of the organization behave. The need for this effort was clearly demonstrated by the resistance of the officers at U.S.P. Marion to initiatives which they perceived as contrary to their beliefs and values. Cost-containment efforts (particularly those in correctional organizations) will likely require change in the organization's culture. These changes will meet resistance and significant change can only occur over a period of time that may be measured in years rather than months or weeks. Unfortunately, leader/managers are under pressure to achieve results in a short period, usually within a fiscal year. At the same time, the changes must be long lasting.
Under these circumstances, as the U.S.P. Marion example demonstrates. both transactional and transformational types of leadership are necessary. The leader/manager who relies on a transactional leader-follower relationship can achieve immediate results, but the results will rapidly disappear. The leader/manager who relies on a transformational leader-follower relationship will achieve results, but the results will be difficult or impossible to obtain during a short time period such as within a budget cycle. The successful leader/manager will initially rely heavily on a transactional style while setting the foundations for implementing the more effective transformational style.
Motivating staff by raising their level of understanding of the far reaching purpose of the efforts at cost control and a continuous effort to get the officers to transcend their self-interests by constantly focusing attention on the importance of cost-control to the overall mission and goals of the institution are essential elements of transactional leadership. This requires a continuous effort and open communications. According to Bennis (1989) getting the message across at every level is an absolute key to getting results.
In order for any cost-containment strategy to be successful there must be commitment from all members of the organization. Commitment to cost-containment cannot be limited to the leadership of the organization and it cannot be forced on members of an organization. Stupak (1989) points out that commitment not authority makes a plan work. People have to buy into it.
The leadership of Emerson Electric, a company which has generated improved earnings for 34 consecutive years, attribute their success to the commitment of their employees. Emerson employees are committed to continuous cost reduction because they have ownership and involvement (Knight: 1992). Transformational leadership is essential to obtaining the level of employee commitment necessary to change entrenched organizational culture.
The United States Penitentiary Marion case demonstrates the proposition that organizational culture should be treated as an important influence on employee behavior. True cost-containment cannot be achieved by superficial procedural changes. It requires the changing of the underlying behavior of the organization. This change can only occur if the leader/manager understands the culture and context of his or her organization and provides appropriate leadership which motivates organization members to change.