The Role of Government

Starting in the early 1980s, many Organisations for Economic Cooperation and
Development (OECD) nations undertook a reassessment of the role of their public sectors.
The extent of government in the economy – its scale and scope – has traditionally been the
fundamental dividing line between the Right and the Left in ideological terms. In very broad
terms, the Left historically favours greater government spending and control of economic
activity, while the Right favours less of both.
Initially, public sector reform was seen as part of this great ideological debate about the role
of government. In the early stages, the trend towards market-based public sector reflected
concerns about the role of government of the bureaucratic model.
In the early years of the twenty-first century, government made something of a comeback,
but only for a short time. Corporate failures such as WorldCom and Enron reduced
confidence in the private sector and increased for government regulation of the activities of
business.
Societies do need to better appreciate the positive role of what are their own governments.
The public sector affects the entire economy and society. Without a legal framework to
enforce contracts, private business activity would not work. Regulations, taxes, permits,
infrastructure, standards and conditions of employment all affect decisions made in private
markets. The public sector is a large purchaser of goods and services from the private
sector. The public sector has a crucial role to play in determining real living standards, which
depend for most people on government services – the quality of schools, hospitals,
community care, the environment, public transport, law and order, town planning and welfare
services – at least as much as the quality of consumer goods and services. Government
can and does foster innovation in the private sector.

The need for a public sector

The public sector is defined by one author as “engaged in providing services (and in some
cases goods) whose scope and variety are determined not by the direct wishes of the
consumers, but by the decision of government bodies, that is, in a democracy, by the
representatives of the citizens”. The public sector is the result of public, political decision-
making, rather than involving market processes.
At base, governments are command-based – they can force people to comply – whereas
markets are voluntary. Also, every person in a society is subject to the state. Both these
points – universal membership and compulsion – make governments fundamentally
different from the private sector. Membership of a state is not usually a matter of choice, and
the fact that membership is compulsory gives the state a power of compulsion which other
organizations do not have.
The private sector does have ways of forcing compliance - with contracts, for example – but,
even there, in legal activities, the only allowable force to compel compliance is through the
system of laws provided by the government and backed, ultimately, by the police and the
army. Even privately provided mediation or arbitration relies, in the end, on the legal system
provided by government.
The modern capitalist economy is a thoroughly mixed system in which public and private
sector forces interact in an integral fashion and the economic system is neither public nor
private but involves a mix of both sectors. The private sector relies on governments for
infrastructure and the system of laws, notably the key requirements of property rights and
the enforcement of laws, both being necessary for markets to work. Governments rely on
the private sector for the production and supply of goods and services and for tax revenue,
and parts of the private sector actively lobby government to spend more in their direction.

Basic functions of government

 Providing economic infrastructure. Governments provide the basic institutions,
rules and arrangements necessary for the satisfactory operation of a modern
capitalist system. These include the definition and protection of property rights, the
enforcement of contracts, the provision of a standard currency, weights and
measures, corporate charters, bankruptcy, patents, copyright, the maintenance of
law and order and their tariff system.
 Provision of various collective goods and services. There are some public goods
which, while being valuable to the whole society, are difficult for individuals to pay for
according to the amount of good used. These include such items as national defence,
roads and bridges, aids to navigation, flood control, sewage disposal, traffic control
systems and other infrastructure.
 The resolution and adjustment of group conflicts.
 The maintenance of competition. Government action is often required to ensure
that businesses do complete. In the absence of suitable regulation, companies would
be able to form cartels, restrict access to their products and fix prices.
 Protection of natural resources.
 Minimum access by individuals to the goods and services of the economy.
 Stabilization of the economy. Budget, monetary policy or control over wages or
prices.

Public goods
A private good is enjoyed by whoever paid for it, and other potential users can be excluded.
Public goods are quite different as they benefit all users whether or not they have paid the
purchase price. They are “non-excludable”; that is, if provided to one, the goods are
available to all.
Merit goods are services, such as education and health care, that are socially desirable but
that markets may not provide optimally. The market could provide them in a technical sense
– they can be excludable – but there may be benefits to the whole society that can justify
some government involvement. And educated worker is generally able to perform more
complex tasks than an uneducated one. Health care funding is another difficult merit good
issue. While the delivery of health services by doctors and hospitals is broadly consistent
across developed countries, there are various mechanism of financing it, with some
countries seeing health care essentially as private good, other as a public good and others
as a mix of both.
Related to this is the concept of demerit goods, that is, goods where consumption has a
negative effect for the society and the individual who consumes them. Alcohol and tobacco
fall into this category, in that excessive consumption leads to societal problems. It is quite
common for governments to levy taxes on consumption of such goods, and these provide
for disincentives to consume, as well as handy revenues to defray the societal costs.
Externalities
Market transactions often have effects on third parties, or on the environment, that only
government can address. Environmental effects are usually seen as requiring some kind of
government action. There are market approaches to government action, such as tradable
pollution permits, a carbon tax or an emission trading scheme, but these still take place
firmly within a framework of government regulation.

Natural monopoly
There are some goods or services characterized by declining marginal cost, that is, when
supplied to one costumer, it becomes cheaper to provide it to the next. Such a circumstance
is referred to as a natural monopoly. This happens most often in utilities with networks, such
as telephones, electricity, gas and water; once a network is established, adding a new
subscriber would be at a lower cost than a competitor who would face the sunk cost of
establishing a rival network. There are examples, particularly in the United States, where
such utilities are privately owned but regulated by the government. In other words,
government involvement need not mean direct government provision or ownership; some
form of government regulation attached to their private ownership may effectively replace
these.

Imperfect information
A case can be made that poor information, or asymmetric information, is another example
of market failure. Consumer protection or packaging information might be example where,
through government action, information can be provided so that markets function better.
Information can even be seen as a public good. Regulations imposed on blatantly unsafe
products may be seen as providing information to those unable or unwilling to gather it for
themselves.

Instruments of government
An instrument is the method that government uses to intervene; the mechanism used for
government action. Most government intervention in the economy can occur through four
available instruments:
1. Provision. Direct provision by a government through its budget forms the major part
of its operations. The budget sector includes those areas of government funded by
taxation rather than user charges: that is, those that provide non-market goods and
services – such as roads, defence, education, health and some social welfare
schemes. Most government activities occur through direct provision and are set out
in the budget.
2. Subsidy. Subsidies are where the private sector provides a particular good or
service, but with some assistance from government. Subsidies vary widely: they can
include subsidies to farmers or industry, or to private bus companies or private
schools, trains, airlines or health insurance. While part of the funding is public, the
detailed administration takes place in the private sector, with governments mainly
involved in monitoring activities to ensure their money is being spent in approved
ways. The amount of subsidy appears in budget in the same way as provision.
3. Production. Unlike provision or subsidy, government production takes place outside
the government budget, and users are charged in the same way as if the items had
 been provided by the private sector. The government, usually though not always
through a public enterprise, sells a private good – for example, electricity supply – to
consumers, and use is precluded if consumers are unwilling to pay.
4. Regulation. Regulation is where a government uses its power to make laws to allow
or prohibit activities, usually in reference to the economy, though they may involve
other parts of society. Regulations can include setting tariffs on imports, granting
licences or permits to allow particular activities and regulating the labour market.
Regulations can be either economic or social, with the former being aimed at
encouraging business and other economic actors to undertake certain activities and
avoid others. Social regulation is usually seen as an attempt to protect the interests
of citizens and consumers, especially regarding quality standards, safety levels and
pollution controls.

Managing Government
There are privately owned organisations, to be sure, whether closely held by individuals or
widely held in the form of market-traded shares. And there are publicly owned organizations.
We as citizens no more control our public organizations directly than we as customers
control the private ones. But there are two other types of ownership that deserve equal
attention.
First, there are cooperatively owned organizations, whether controlled formally by their
suppliers (as in agricultural cooperatives), by their customers (as in mutual insurance
companies or cooperative retail chains), or by their employees.
Second, we have non-owned organizations, controlled by self-selecting and often very
diverse boards of directors. These not-for-profit organizations are often referred to as
nongovernment organizations (NGOs), but they are also non-business and noncooperative
organizations (NBOs and NCOs). Indeed, we are surrounded by non-owned organizations.
Among them are many of our universities, hospitals, charity organizations, and volunteer
and activist organizations (Red Cross and Greenpeace, for example).
From the point of view of structure, both private and state organizations are tightly and
directly controlled through hierarchies - one emanating from the owners, the other from state
authorities.

Customers, Clients, Citizens and Subjects

Customer, client, citizen, and subject: these are the four hats we all wear in society.
As customers and citizens, we enjoy a reciprocal, give-and-take relationship with
government. Government’s customers receive direct services at arm’s length; its citizens
benefit more indirectly from the public infrastructure it provides. But there is one major
difference between government’s customer-oriented activities and its citizens-oriented
activities: frequency of occurrence. Review public sector activities carefully and you will find
relatively little that fits the pure customer category. In contrast, under the citizen category
you will find an enormous amount of activity in the form of public infrastructure: social
infrastructure (such as museums), physical (such as roads and ports), economic (such as
monetary policy), meditative (such as civil courts), offshore (such as embassies), and the
government’s own support infrastructure (such as election machinery).
As subjects and clients, we have relationships with government that are more one-sided.
The question for us as subjects is what we must do for our governments in the form of
respecting state controls. In contrast, as clients who receive professional services, our
question is about what the state provides to us.
Of course, not all government activities fit neatly into one of the four categories. Our national
parks, for example, provide customer services (to tourists) and professional client services
(to tourists stranded on mountain faces). Parks are also part of the public infrastructure we
enjoy as citizens, and that fact requires us, as subjects, to respect the environment of the
park.
Customers are appropriately served by privately owned organizations, although
cooperatively owned ones - such as mutual insurance companies – can often do the job
effectively. Only in limited spheres is direct customer service a job for the state. When it
comes to citizen and subject activities, we should stray beyond the state-ownership model
only with a great deal of prudence. The trade-offs among conflicting interests in citizen
activities and the necessary use of authority in subject activities mandate a clear role for the
state.
The client relationship is perhaps more complicated. It is not clear those professional
services widely accepted as public – certain minimum levels of education and of health care,
for example – are particularly effective when offered directly by government, let alone by
private business. Neither one on its own can deliver all the nuanced requirements of
professional services.

Management view of management

Three assumptions underline the Management view of management.
 Particular activities can be isolated – both from one another and from direct
authority. The principle derives from the private sector, where many corporations
are divided into autonomous businesses, organized as divisions. Each unit has a
clear mission: to deliver its own set of products or services. If it satisfies the goals set
by the central headquarters, it is more or less left alone.
 Performance can be fully and properly evaluated by objective measures. The
goals that each activity must achieve can be expressed in quantitative terms: both
costs and benefits can be measured. That way, there can be “objective” assessment,
which is apolitical in nature. The system cannot afford a great deal of distracting
ambiguity or nuance.
 Activities can be entrusted to autonomous professional managers held
responsible for performance. “Let the managers manage”, people say. Many have
great faith in managers trained in the so-called profession of management. “Make
them accountable. If they perform according to plan, as indicated by measurement,
reward them. If they don’t, replace them”.

Models for managing government

Let’s consider five models. Each is marked by its own way of organising government’s
controlling authority, or superstructure, and the activities of its agencies, or microstructure.
1. The Government-as-Machine Model. Government here is viewed as a machine
dominated by rules, regulations, and standards of all kinds. This applies to the
superstructure no less than to each of the microstructures. Each agency controls its
people and its activities just as the agency itself is controlled by the central state
apparatus. Government thus takes on the form of a hologram. The machine model
developed as the major countervailing force to corruption and to the arbitrary use of
political influence. It offered consistency in policy and reliability in execution, but it
lacked flexibility and responsiveness to individual initiative, so now it has fallen out of
favour. In one form or another, however, the machine model continues to dominate
government.
2. The Government-as-Network Model. This is the opposite of the machine model:
loose instead of tight, free flowing instead of controlled, interactive instead of sharply
segmented. Government is viewed as one intertwined system, a complex network of
temporary relationships fashioned to work out problems as they arise and linked by
informal channels of communication. At the micro level, work is organized around
projects – for example, a project to develop a new policy on welfare or to plan for
construction of a new building.
3. The Performance-Control Model. Management finds its full realization in the
performance-control model. This model aims above all to make government more
like business. There is an assumption, not often made explicit, that the ideal is the
divisional structure that conglomerates have popularized. The overall organization is
split into businesses that are assigned performance targets for which their managers
are held accountable.
4. The Virtual-Government Model. Virtual government contains an assumption that
the best government is no government. Shed it all, we are told, or at least all that it is
remotely possible to shed. In virtual government’s perfect world, the microstructures
(the activities of agencies) would no longer exist within government. All that kind of
work would take place in the private sector. And the superstructure would exist only
to the extent needed to arrange for private organizations to provide public services.
5. The Normative-Control Model. None of the above models have succeeded in
structuring social authority adequately. Perhaps that is because social authority is
hardly about structures. There are five key elements that characterize the normative
model:
 Selection. People are chosen by values and attitudes rather than just credentials.
 Socialization. This element ensures a membership dedicated to an integrated
social system.
 Guidance. Guidance is accepted principles rather than by imposed plans, by
visions rather than by targets.
 Responsibility. All members share responsibility. They feel trusted and
supported by leaders who practice a craft style of management that is rooted in
experience. Inspiration thus replaces so-called empowerment.
 Judgement. Performance is judged by experienced people, including recipients
of the service, some of whom sit on representative oversight boards.
 From Government to Governance
“Governance” refers to a basically non-hierarchical mode of governing where non-state,
private corporate actors (formal organizations) participate in the formulation and
implementation of public policy.
The European Union is a system of multi-level governance, where networks rather than
hierarchical authority relations are the dominant structural feature – networks of member
state representatives, networks linking the national and the European levels of decision-
making, and networks linking public and private actors across policy sectors and political
levels.
In Western Europe, the crucial experience that triggered the movement from a more
interventionist state and hierarchical control to more cooperative forms of governance were
the failure of ambitious reform policies that had been pursued after the end of the Second
World War and the immediate post-war reconstruction period. Apparently, the isolated
national state alone was not able to assure constantly growing wealth. The disappointment
of the belief in the state as an affective political steering centre of society gave rise to the
search alternative modes of guiding socio-economic development.
One of these alternatives was deregulation and privatization, the turn from the state to the
market. Market principles became the backbone of the political ideology of neo-liberalism
and Thatcherism. Deregulation and privatization were believed to stimulate economic
growth and liberate forces of innovation in all areas of productive activity. Increasing
attention is given to the second alternative to the hierarchical state, the move from
government to governance, which means that the state authorities cooperate with private
corporate actors and that private organizations are involved in public policymaking.
The cooperation of state and civil society in public policy making takes place in different
forms. Most attention has been given to the direct collaboration of public authorities and
private corporate actors in policy development. The private corporate actors involved are
mainly organized interest groups, but sometimes also large enterprises. Collaboration can
occur in the form of so-called neo-corporatist arrangements, the institutionalized
negotiation between the state, organized business, and organized labour about issues of
macroeconomic policy. Such neo-corporatist structures exist in several Western European
countries, including for instance Sweden and Austria, but also Germany.
Mixed networks of public and private actors can also be found in several more narrowly
defined policy sectors, for instance in telecommunications, public health, or scientific
research. The emergence and growing importance of policy-networks is a particularly
important feature of modern governance. Where public policy is developed in policy
networks, government is no longer the steering centre of society. In policy networks, the
state and civil society are loosely coupled, and interaction within such networks produces a
negotiated consensus which facilitates the formation of a policy that meets with compliance
rather than resistance in the phase of implementation.
In addition to the direct cooperation of public and private actors in policy networks, certain
forms of societal self-regulation are also part of modern governance. Self-regulation
means that private organisations fulfil regulatory functions that are ultimately in the public
interest. One form of societal self-regulation are systems of negotiation between the
representatives of different or even opposed interests. An example is the German system
of institutionalized wage bargaining between capital and labour, in which the government
does not participate and where it is not supposed to interfere. A second type of societal self-
regulation are the so-called private governments. Private governments are organizations
that impose norms and standards on their members that do not only serve their own, but
also certain public interests.
At least within a nation-state, these different forms of social self-regulation exist “in the
shadow of hierarchy”: they are often established by the express delegation of functions from
the state to private organizations, and they are monitored by the state. If self-regulation
remains ineffective, the state can step in and regulate by direct intervention. Delegated self-
regulation is thus an indirect form of cooperation between state and civil society. But it needs
a sufficiently powerful state to motivate self-regulation which takes account of public
interests and does not only benefit the participating actors themselves.
Effective modern governance can only emerge in societies that meet certain institutional
and structural preconditions, both on the side of the political regime and on the side of civil
society. Political authorities must be powerful, but not omnipotent. They must be
democratically legitimated in such a way that the elected representatives reflect the interests
of all major socio-economic, ethnic or religious groups in society. Political authorities must,
in other words, be in a general way acceptable as guardians of public welfare. The second
essential precondition is the existence of a strong, functionally differentiated, and well-
organized civil society.
A civil society is a community of citizens, of individuals who enjoy legal equality and a set of
fundamental rights, and whose freedom to pursue their private goals is only restricted by the
same right of others and by the duties to the res publica that come with citizenship. The
development of a free-market economy is one consequence of this basic principle. But for
modern governance to emerge, there must also be corporate actors that represent different
functional as well as different socio-economic interests – organizations like labour unions,
business associations, organizations of health care providers, of scientists and scientific
research institutes, and organizations representing consumer interests or ecological values.
Productive and service organizations as well as voluntary associations should not be
politically controlled. To make negotiation with opposite interests and with state authorities
both necessary and meaningful, interest organizations must be sufficiently autonomous and
resourceful. Finally, there must exist among the different social groups and organizations at
least a minimal sense of identification with, and responsibility for, the greater whole, in short,
a common identity. The nation can be the frame of reference for this identity, but its basis
must be social and cultural integration. For effective governance to emerge, both public and
private corporate actors must themselves be effective in their respective spheres, and they
must cooperate in public policy making instead of simply fighting each other.
Governance refers to the solution of collective problems and the production of public welfare.
But there is no doubt that the danger of corruption is present wherever public and private
actors can enter into mutually profitable exchanges, which is more likely in horizontal than
in vertical relations. Problems also arise in decision-processes that do indeed aim to solve
public problems. If conflicting interests enter into negotiation with each other in the search
for agreement on a joint decision, the result is “antagonistic cooperation”.
Domestic firms as well as political authorities are losing in power and are becoming
dependent on forces that transcend national boundaries and are therefore also beyond the
scope of cooperative action of domestic actors. The potential effectiveness of modern
governance within a given nation-state is thus limited by developments on the international
level. Problems that manifest themselves domestically, but whose casual or genetic
structure transcends national boundaries, can only be solved by international action.
At the global level there is, aside from the United Nations, which have been established to
deal with issues of security, of war and peace, no international institution that could play the
role of a world government aiming at global welfare.

Corporate Citizenship
Although the literature on corporate citizenship is extensive and has many subtle distinctions
within it, one can divide this literature into four highly stylized models: 1) minimalist, 2)
philanthropic 3) encompassing, and 4) social activist conceptions of corporate citizenship.
These four models differ in terms of both the supposed beneficiaries of corporate action
(shareholders vs broader societal stakeholders) and the motivation behind these actions
(instrumental vs moral/ethical).
The more traditional or minimalist conception of corporate citizenship was perhaps best
articulated by Milton Friedman. According to Friedman, “the social responsibility of business
is to increase the wealth of its shareholders” the sole responsibility of business is to those
who have invested capital in the company. By maintaining a singular focus on wealth
creation, businesses will promote efficiency and achieve optimal economic performance,
which is the ultimate good that a business can do for society. Of course, corporations should
not violate laws or engage in any irregular activities that could harm the wealth of
shareholders, but any attempt to incorporate social goals into core business activities will,
according to his view, lead to inefficiencies. Moreover, given that most managers do not
have expertise in the area of social responsibility, engaging in these activities will simply
distract them from their primary and fiduciary responsibility, which is to protect and promote
shareholder wealth.
The philanthropic model is an extension of this traditional view. Although it, too, is
concerned primarily with the optimization of efficiency and shareholder wealth, it does
recognize that individual managers, shareholders, and sometimes even companies can, at
times, engage his various philanthropic activities. However, these activities are seen not as
important or even related to core business activities, but rather as motivated by various
moral or ethical reasons.
A more inclusive stakeholder view of the corporation underlies the third, more
encompassing model of corporate citizenship. According to this view, management is
responsible not solely to shareholders but also to other groups (employees, consumers,
creditors, suppliers, local communities) that may be affected by the company’s practices. As
a result of this potential impact, managers must take into consideration the interests of these
groups when making decisions. Others argue that the company engagement in broader
societal issues directly enhances company profitability and hence shareholder wealth. Thus,
according to this third model of corporate citizenship, corporate behaviour may be directed
toward a wider constellation of actors, but it is nonetheless instrumental, geared toward
maximizing benefits to this broader group.
The fourth, social activist model of corporate citizenship extends the boundaries of
supposed beneficiaries beyond those groups directly affected by company decision-making
and toward society at large. According to this view, corporations should act to enhance
broader societal goals and not merely to benefit a more restricted number of shareholders
and/or stakeholders. Corporations should act not merely out of instrumental concerns but
rather out of moral or even ethical considerations. In fact, because corporations are usually
powerful and wealthy actors in society, they have a moral obligation to act in such a way
that aids their less fortunate fellow citizens.
The goal of proactive stakeholder engagement translates into a portfolio of activities that
firms undertake to fulfil their perceived duties as members of society. Investment of
corporate resources (cash / time / in-kind contributions) in ESG (environmental, social and
governance) issues through:
 Pro bono work. Pro bono is short for the Latin phrase pro bone publico, which means
“for the public good”. The term generally refers to services that are rendered by a
professional either for free or at a significantly reduce cost to be recipient – that is, on
a pro bono basis. Professionals in many fields offer pro bono services to nonprofit
organizations such as hospitals, universities, national charities, churches, and
foundations or to individual clients who cannot afford to pay the regular fee.
 Corporate volunteerism. In corporate volunteerism, employees are given paid time
to volunteer for a nonprofit organization. A company will often partner with a nonprofit
organization to provide approved volunteer opportunities for its employees. The
amount of time given to employees varies by company, though they usually volunteer
time one day a month/ one day a quarter/ one day a year.
 Philanthropism, partnerships and direct support to community well-being.
 Self-regulation (see above)

Nonmarket Strategy
Nonmarket strategy recognises that businesses are social and political beings, not just
economic agents. Because companies create and distribute value, a plethora of actors seek
to influence them – formally, through laws and regulation, and informally, through social
pressure, activism and efforts to shape the public perception of business. Companies can’t
escape this. Smart executives, therefore, engage with their social and political environment,
helping shape the rules of the game and reducing the risk of being hemmed in by external
actors. Yet, few companies are prepared to do the hard work and commit long term to
developing an effective nonmarket strategy. Fewer still understand how to integrate market
and nonmarket strategies to sustain competitive advantage.
Nonmarket strategy starts with a simple, dual premise – first, that issues and actors “beyond
the market” increasingly affect the bottom line, and second, that they can be managed just
as strategically as conventional “core business” activities within markets. The challenges for
CEOs and their leadership teams are one of simultaneous separation and integration. To
manage successfully beyond the market, executives must recognise the important
differences between the company’s market and nonmarket environments but then take an
integrated, coherent and strategic approach to both arenas. That is the key to turning
perceived non-business issues into strategic opportunities and thereby building sustainable
competitive advantage, as examples from leading corporations show.
THE (IA)3-FRAMEWORK
The (ia)3-framework is built around the analysis of issues, actors, interests, arenas,
information and assets. To manage the nonmarket environment proactively, we recommend
executives ask themselves six questions:
1. What is the issue? A company’s nonmarket environment is organized around
issues. A business should take a position on an issue if the issue’s resolution could
significantly affect the company’s ability to create and/or appropriate value. That
applies both to the upside and the downside – it is not just a matter of neutralizing
threats but also recognizing issues whose favourable resolution would generate a
new opportunity.
2. Who are the actors? Identifying the issue highlights the importance of “interested
parties” and the potential conflict among them. So, the next important task is
identifying the actors who care about the issue, which are generally those with an
economic or ideological stake in the issue. In politics, what matters most is
organization. Organized groups – such as farmers demanding agricultural subsidies
– are often more powerful than unorganized consumers who have to foot the bill via
higher food prices or taxes, even though the latter outnumber the former.
3. What are the interests? Building on the identification of actors who care about an
issue, the next critical question is what these actors actually want. What motivates
them? What do they hope to achieve and how critical is the issue for them? Also, how
homogenous is a particular actor? Do all members feel the same way about the issue
or is there an internal spirit that provides an opening for engagement?
4. In which arena do these actors meet? Nonmarket issues can play out in multiple
settings, from courtrooms and regulatory proceedings to parliamentary committee
hearings and industry forums all the way to the news media, the public domain or the
blogosphere. Knowing where actors meet matters greatly because the rules of the
game vary greatly across setting.
5. What information will move the issue in this arena? If money is the currency of
markets, information is the currency of the nonmarket environment. But the kind of
information that can influence the resolution of an issue varies across arenas. Public
opinion data will be more effective in lobbying critical members of a congressional
committee, for example, than in a courtroom or a regulatory hearing. Owners of
critical information often have a decisive advantage. Since politics – whether in formal
or informal settings – is all about persuasion having the right kind of information for
the issue and arena in question is key to success.
6. What assets do the actors need to prevail in this arena? Finally, while having the
right kind of information for a given issue and arena is critical, other assets matter as
well. A company’s reputation and its perceived trustworthiness are essential if it wants
to influence an issue in the public domain. Conversely, detailed knowledge of
committee procedures or key members’ concerns and views are necessary to
influence an issue in the context of a parliamentary committee. A broad network of
contacts and the ability to assemble and mobilize coalitions quickly can be critical
assets. On the other hand, association with the wrong actors – for example, a
disgraced former dictator, or a controversial policy group – can be a liability.
Multiple audiences: Many companies now source from or sell to countries around the world
and must therefore navigate simultaneously many distinct nonmarket environments that are
often characterized by conflicting social and political values.
The globalization of nongovernmental organizations: Not only has business become
global, but also NGOs and activists. And these nonmarket actors often use modern
communication technologies, the internet and the 24-hour news media even more effectively
than multinationals.
New regulatory hurdles: Paradoxically, while globalization has meant more market
opportunities, it has also meant new nonmarket challenges. Countries around the world
have opened industries, including financial services, telecommunications, energy and
transportation, creating tremendous market opportunities. But in parallel, governments have
created new regulatory agencies for these sectors with which investing corporations have
to grapple.
Competitive edge: Finally, globalization has made market competition even tougher. Who
hasn’t outsourced noncritical business functions, focused on their core competency and
shed underperforming assets? Building lasting competitive advantage in the market has
become harder, and leading companies increasingly look beyond the market to gain edge.

Markets and Nonmarkets

In light of the nonmarket environment’s growing importance for the bottom line, it is essential
for executives to get a firm grasp on the critical differences between managing within
markets and beyond them.
Markets do not exist in a vacuum; they are surrounded by social and cultural spheres. What
happens within this nonmarket environment inevitably shapes dynamics within markets.
What exactly is this nonmarket environment of business? The simple answer is all
relationships that do not unfold within markets yet nevertheless affect the company’s ability
to reach its business objectives. But why throw everything together? Surely there are
important differences between lobbying a key member of Congress, seeking regulatory
approval for a merger and teaming up with an NGO to fight hunger.
Second, compartmentalizing nonmarket management makes it harder truly to integrate
nonmarket considerations into the corporate strategy process. In too many companies,
nonmarket management amounts to an afterthought, a series of uncoordinated policy
offshoots aimed at no business actors. Yet, gaining a competitive advantage requires a
much more comprehensive approach: carefully designing nonmarket strategies that
complement, reinforce or enable market strategies.
Nonmarket Management
Markets are simple, but powerful mechanisms with near-uniform, generally predictable
cause-and-effect relationships. Nonmarkets are far less uniform and predictable. Regulatory
processes vary widely across countries, sectors and issue areas. The way the media
responds to a story in one culture often differs widely from the response in another culture.
The nonmarket environment also lacks the fungibility of money as an exchange medium.
You can invest money gained with product A one-to-one into the development of product B;
but recognition for having worked with a human rights group in Nigeria will not help you get
approval for a merger in Brussels. What is at the heart of nonmarket exchanges is not money
but information. And information is highly context specific. Public misconceptions
notwithstanding, the currency of lobbying is information, not money – superior information
about policy alternatives and their costs and benefits, preferences of key players and the
functioning of a particular policy process are the key to success. While money often helps,
it can sometimes become a liability outside the market.
In innovative, growth-oriented companies, the goal is to “beat the competition market”, to
secure “first mover advantage” and to be the “industry leader”. In the nonmarket
environment, in contrast, it is hard to do anything alone and companies need to know how
to work with others to excel. That does not mean that the nonmarket sphere lacks
competition. In fact, any lobbyist trying to get a few minutes with a top decision maker, any
corporate counsel embroiled in a major lawsuit and any brand manager vying for the seal of
approval from a well-known nongovernmental body knows how fiercely competitive the
nonmarket environment is. But in politics, having allies is key. Governments are wary of
catering to individual companies; but looking after important industries is a principal concern.
Even though citizens increasingly demand that companies contribute more to social and
environmental ends, when they do, the public is often sceptical of underlying intentions.
Since intentions cannot be seen, only behaviour, there is a premium on consistency in the
nonmarket environment.
Finally, whereas market competition is fundamentally about creating value – for customers,
owners, but also society – management beyond the market is ultimately about values.
Nonmarket strategy must be steeped in the company’s values, particularly if the goal is long-
term performance. Opportunistic lobbying for a particular policy may be advantageous in the
short-term but is unlikely to deliver the long-term benefits that mutually reinforcing
commercial, social and political actions can yield.

Public Private Partnerships

A partner is someone associated with another in a common undertaking, one of two or more
persons who are associated in a business or other joint venture and share risks and profits.
A public private partnership (PPP) is a hybrid governance arrangement whereby private
parties participate in, resulting in a contract for a private entry to deliver public infrastructure-
based services.
The mechanics of the arrangements can take many forms and may incorporate some or all
of the following features:
 The public sector entity transfers land, property or facilities controlled by it to the
private sector entity (with or without payment in return) usually for the term of the
arrangement.
 The private sector entity builds, extends or renovates a facility.
 The public sector entity specifies the operating services of the facility.
 Services are provided by the private sector entity using the facility for a defined period
(usually with restrictions on operations standards and pricing).
 The private sector entity agrees to transfer the facility to the public sector (with or
without payment) at the end of the arrangement.
A common misconception about PPP projects is that they are principally about private sector
financing of public infrastructure. This is not strictly correct. Financing is only one element.
The essence of a PPP is that the public sector does not buy an asset; it is purchasing a
stream of services under specified terms and conditions. This feature is the key to the
visibility (or not) of the transaction since it provides the right economic incentives.
The PPP is a strongly incentive-comparable contracting arrangement. The cost
effectiveness of a PPP relative to traditional procurement is a result of upfront engineering
of the design solution and the financing structure combined with downstream management
of the incentives built into the services payment mechanism and the risk transfer in the PPP
model.

Types of PPPs
PPPs can take many different forms, the most usual being BOT/BOO arrangements, joint
ventures, leasing, contracting out or management contracts, and various forms of public-
private cooperation.
 BOT (Build Operate Transfer). These are contracts where the private sector takes
primary responsibility for funding (financing), designing, building and operating the
project. Control and formal ownership of the project is then transferred back to the
public sector.
 BOO (Build Own Operate). In these arrangements, the control and the ownership
of the projects remain in private hands. With a BOO project, the private sector entity
finances, builds, owns and operates an infrastructure facility effectively in perpetuity.
 Leasing. Here part of the risk is transferred to the private sector. In France, most
PPPs are performed under concession contracts (essentially BOT-type contracts) or
lease contracts (which cover design and building, or operation, but do not embrace
project financing)
 Joint ventures. They take place when the private and public sectors jointly finance,
own and operate a facility. As examples there are urban regeneration schemes in the
United States in which local government authorities purchase and clear blighted
areas for private developers or themselves to invest in new construction, such as a
new city hall or a government office as part of downtown redevelopments.
 Options or management contracts. In these, the private sector is only partially
involved, for example it provides a service or manages the operation. Services or
management contracts allow the private sector to provide infrastructure-related
services for specified periods of time.
 Cooperative arrangements that occur between governments and private entities
are more informal than many of the equity partnerships and concession-type
franchise arrangements for social housing projects. In many localities, fiscal
incentives or guarantees are given to attract private capital into low-cost housing
associations for social housing projects.

General Characteristics of PPPs

 Participants. A PPP obviously involves two (or more) parties, and at least one of
them has to be a public body. Each, however, needs to be a principal, capable of
negotiating and contracting on its own behalf. All parties must make an organizational
commitment to the partnership.
 Relationship. Partnerships need to be enduring and relational. Governments buy
goods and services, they give grants, and they impose fines and taxes. None of these
transactions implies any real continuity of behaviour. Even if a public sector body
 were to use the same supplier year after year, this pattern would not be regarded as
a partnership.
 Resourcing. Each of the participants must bring something of value to the
partnership. PPPs seek to draw on the best available skills, knowledge and
resources, whether they are in the public or private sector, and deliver value for
money in the provision of public infrastructure services. For this to happen, each
partner must transfer resources (money, property, authority, reputation) to the
arrangement.
 Sharing. PPPs involve a sharing of responsibility and risk for outcomes (whether
financial, economic, environmental or social) in a collaborative framework. This
mutual responsibility contrasts with relationships between the public and private
sectors in which the public body retains control over policy decisions after getting the
advice of private sector entities. It also contrasts with relations between the public
and private sectors that are primarily contractual in nature and involve essentially
command relationships.
 Continuity. Underpinning the partnership will be a framework contract, which sets
out the “rules of the game” and provides the partners with some certainty. Its
existence enables the parties involved to make decisions without having to start from
scratch each time and develop from first principles the rules that govern these
interactions. While the PPP contract provides the basic architecture of the
arrangement, it is necessarily “incomplete” and does not (and cannot) specify all
components and allow for all outcomes. There must be shared values, a common
understanding of priorities and policy objectives, and a good measure of trust.

International Governance and International Organizations

Self-interested actors in an interdependent world make choices which seem rational from a
purely individualistic point of view but lead to collective outcomes that are Pareto-inferior to
feasible outcomes for all members of the group. The result is a failure to avoid joint losses
and the inability to secure joint gains.
International policy regime is a set of explicit or implicit principles, norms, rules and decision-
making procedures around which actor expectations converge in a given area of
international relations. The presence of an international policy regime does NOT imply the
existence of an international organization, or vice versa. However, the strength of an
international policy regime is often associated to the establishment of a fully-fledged
organized entity (e.g., GATT1947 to WTO 1997); also, international organizations can foster
the establishment of international policy regimes.

Institutional Tasks
 Regulatory Regimes. Regulation in international society is much like regulation in
any other social setting: it centres on the framing and promulgation of rules or
behavioural prescriptions whose purpose is to allow participating actors to reap joint
gains or avoid joint losses in situations characterised by interactive decision making.
Sometimes the subjects of these rules are states or governmental agencies acting
on behalf of states, as in the partial nuclear test ban treaty’s prohibition on the conduct
of nuclear tests on land, under water, and in the atmosphere or the granting of most-
favoured-nation status under the terms of the General Agreement on Tariffs and
Trade/World Trade Organization (GATT/WTO). In many other cases, the rules apply
 to the behaviour of corporations, nongovernmental organizations, or individuals
subject to the jurisdiction of states, even though the states themselves are the actual
members of regimes. Thus, businesses engaged in international trade are obliged to
comply with rules prohibiting the dumbing of goods on foreign markets. Tanker
operators are expected to follow the rules covering the discharge of oily wastes at
sea. As these examples suggest, regulatory arrangements may feature prohibitions
or requirements. To these categories, many analysts add permissions to cover
actions that parties are neither required to take nor prohibited from taking. Fisheries
regimes, for example, often permit fishers to make their own choices about the boats
they use in their efforts to harvest fish.
Some regulatory arrangements deal with relatively simple coordination problems;
others address the more ambitious regulatory task of coping with collaboration
problems. The rules pertaining to the use of sea lanes, airspace, or even the
electromagnetic spectrum, for instance, are largely matters of coordination in the
sense that no one has any serious incentive to cheat once the relevant “rules of the
road” are clearly defined and generally understood. New entrants desiring to join such
arrangements are typically expected to accept the rules in place at the time they
initiate the relevant activities. Rules of this short are generally easy to administer.
Regulatory arrangements dealing with collaboration problems, on the other hand, are
another matter. Because various actors stand to gain if they can violate these rules
without provoking similar violations on the part of others, such arrangements require
ongoing administrative apparatus to monitor the actions of their members, sort out
disputes about alleged violations, and coordinate responses to the actions of
violators. Fulfilling these requirements poses a major challenge in a social setting
lacking anything we would normally call a “government”. Even so, arrangements
concerning coordination problems and collaboration problems are similar in the
sense that they regularly lead to the development of informal prescriptions intended
to flesh out the formal rules set forth in constitutive agreements and because even
the formal prescriptions typically evolve, becoming “rules in use” in contrast to the
initial formulas articulated in constitutive agreements. Despite the complications that
arise from the absence of government in international society, therefore, regulatory
regimes in this setting are like their counterparts at other levels of social organization
in that they require authoritative interpretation on a regular basis. The search for
innovative ways to meet the need for authoritative interpretation in the absence of a
formally constituted government represents one of the principal challenges of
governance in international society.
 Procedural regimes. Regulatory arrangements prescribe actions that regime
members are expected to take or to refrain from in well-defined situations. The
objective of procedural arrangements is to provide mechanisms that allow actors to
arrive at collective or social choices regarding problems that arise in the issue areas
covered by regimes. Such problems come in a variety of forms. There may be a need
to deal with proposals to modify existing rules or to add new rules to the original set.
Consider the creation of geographically defined whale sanctuaries in which all
harvesting of whales is prohibited. The problem may involve making choices that in
turn trigger the application of a set of rules already in place. Perhaps the classic
instances deal with the setting of annual harvest or catch levels for living resources.
At the same time, situations arise in connection with some regimes that are unique
 because they address one-time problems. Despite these variations in the nature of
the problems they address, what sets procedural arrangements apart from regulatory
arrangements is their focus on making collective choices that arise in connection with
the operation of regimes in contrast to administering the sets of rules or prescriptions
that constitute central features of regulatory arrangements.
In every case, procedural arrangements raise a number of important concerns that
do not arise in connection with purely regulatory arrangements. The first involves the
character of the decision rule to be employed in making collective choices. Although
casual observers sometimes assume that unanimity is the normal rule at the
international level, regarding this requirement as a serious shortcoming of
international governance systems, reality is considerably more complex than such
arguments suggest. Not only are there many cases in which some type of majority
rule is in use, but international regimes also frequently operate under consensus rules
that allow the parties to move forward so long as no member feels so strongly about
an issue that it is prepared to go on record publicly as an opponent of actions
espoused by the majority. Many regimes leave room for individual members to file
reservations or objections that allow the majority to proceed with a collective choice,
while the objector is free to exempt itself from any formal obligation to comply with
the will of the majority. Beyond this, important questions arise over the nature of the
obligation flowing from collective choices arrived at through the operation of
procedural arrangements at the international level. At issue here is the extent to which
decisions reached by a competent group, such as the conference of the parties, are
binding on those who vote for them or, alternatively, require some process of
ratification on the part of individual members to become binding on those operating
under their jurisdiction. The status of decisions reached by the conference of the
parties may depend on the issue at hand.
 Programmatic regimes. Classical examples of international governance systems
typically feature the articulation of behavioural prescriptions and the establishment of
procedure to allow parties to make collective choices on a regular basis. Yet many
regimes are motivated, at least in part, by a desire to pool resources to undertake
projects that for one reason or another cannot be carried out on a unilateral basis.
Sometimes this involves setting up integrated monitoring and assessment programs
designed to broaden and deepen common knowledge about the problems that
regimes address. A striking case in point is the arrangement known as the
Environmental Monitoring and Evaluation Programme (EMEP), which operates under
the auspices of the Long-Range Transboundary Air Pollution (LRTAP) regime in
Europe and which is widely credited with having played a key role in the
transformation of this regime from a politically motivated practice based on a growing
East-West tension to an influential social practice based on a growing understanding
of the biological and chemical processes involved in “acid rain”. Programmatic
arrangements are required as well when the members of a regime agree to establish
and operate compensation funds, to set up procedures to implement agreements
pertaining to technology transfers, or to explore options for joint implementation with
respect to the fulfilment of obligations assumed under the provisions of regimes. A
particularly interesting programmatic option centres on the establishment of joint
development zones, which may only require agreement to harmonize production
decisions, as with the unitization of oil and gas fields to maximize recoverable
 reserves.
The issues that dominate discussions of programmatic regimes differ markedly from
those which require attention in connection with regulatory and procedural
arrangements. As the EMEP makes clear, it is often necessary to work out common
research designs and adopt comparable methods of data collection and analysis to
ensure that the results produced will be both powerful and acceptable to all parties
concerned. Many programmatic arrangements also require substantial organizational
arrangements to administer the day-to-day efforts involved. Looming over all these
organizational arrangements is the problem of finding the material resources needed
to carry out programmatic tasks. Unlike regulatory, major costs except when
noncompliance becomes a central issue, programmatic activities almost always
require the provision of material resources on a continuous basis. Such resources
may take the form of in-king contributions on the part of individual members, funds
contributed to a common pool, or some distinct income stream subject to the control
of a regime’s managers. Understandably, issues pertaining to material resources
regularly become a bone of contention in connection with programmatic regimes.
Individual members are reluctant to accord regimes the autonomy that goes with
access to an independent source of funds. Yet national contributions are often hard
to come by and subject to unpredictable fluctuations owing to the dynamics of
domestic political processes in which the fulfilment of international commitments is
not a high priority.
 Generative regimes. Regimes often perform tasks that are difficult to understand as
ordinary regulatory, procedural, or programmatic efforts but are of obvious
importance, nonetheless. These generative tasks centre on the development of
distinctive social practices where none previously existed. Partly, this is a matter of
defining or shaping the discourse in terms of which problems are discussed and, in
the process, setting agendas for regime members to confront. Most successful
regimes are built around a central idea or guiding vision, and they often function as
vehicles for disseminating the discourse associated with that idea. The operation of
regimes over time may also play a generative role in the sense of giving birth to new
ideas that subsequently become influential as determinants of thinking about major
problems. Regimes often reflect broader currents of cognitive change, and they may
promote discourses based on generative ideas that ultimately prove of limited value.
Some critics see the current movement toward incorporating the idea of sustainable
development into international governance systems. for example, as innovation we
may live to regret. Still, regimes often do serve to frame the discourse that focuses
the thinking of actors – including nonstate actors as well as states – both about the
nature of problems to be solved and about strategies for solving these problems.
In part, the generative role of regimes involves the development of constituencies
around various sets of problem-driven activities. At the official level, this often means
that governments agencies within member states incorporate the activities
associated with specific regimes into their mission statements, forming mutually
supportive alliances with their counterparts in other member states. The resultant
networks can and often do survive the ups and downs of broader relationships among
the states involved. Of even greater importance, in many cases, is the mobilization
of unofficial groups that take an interest in specific regimes and become
cheerleaders, watchdogs, and, in some cases, sources of material support needed
 to make regimes successful. The essential point is that regimes can and often do
become catalysts for the generation of both national and transnational groups that
are united by a commitment to fostering the goals embedded in the regime itself.
Strictly speaking, the existence of such a support group is probably not a necessary
condition for the success of international regimes. But there is growing evidence from
a variety of issue areas to suggest that such groups do provide critical backing in
many cases and that the rise of these groups sometimes emerges as one of the most
striking consequences of the operation of regimes, regardless of their nominal focus
on regulatory, procedural, or programmatic tasks.

International organizations
International organizations (IO) are organization established by an agreement among
governments, and as a rule with governmental members only. It is possible to distinguish
between:
 Agencies (e.g., FAO): they have their own membership, assembly and assessed
contributions.
 Funds and programmes (e.g., WFP): they do not have their own membership,
assembly and assessed contributions.
Bilateral IOs are organizations established between two states (e.g., Belgium-Luxembourg
Economic Union; International Joint Commission between USA and Canada).
Multilateral IOs are organizations among three or more states (e.g., UN, World Bank,
Council of Europe, Asian Development Bank, CERN)
The International Atomic Energy Agency is a multilateral IO because it was established in
1956 by 81 states with the aim of pursuing safe, secure and peaceful use of nuclear science
and technology. It has a formal, continuous structure.

Non-Governmental Organizations
NGOs have important roles to play in disbursing the aid that remains, but more broadly, in
helping to ensure that the new global rules – for trade, human movement, finance and
environmental governance – are both fair and effective in combating injustice.
Intrastate conflict has replaced war between nations, with NGOs not just the prime providers
of relief, humanitarian assistance and specialized services, but increasingly acting as
mediators between civilians, governments and the military in complex political regimes.
NGOs operate in so many contexts and at so many levels that generalization is hazardous.
Some are oriented primarily towards advocacy and others towards operational work on the
ground, with philosophies that range from welfare to empowerment, and from the political
organizing principles of civil society to the economic principles of the market. Some are
specialized providers of relief and humanitarian assistance, while others combine such work
with broad-based development activities.
Most NGOs are intermediaries in the sense that they work between the grassroots or
community level and other levels and sectors of society (such as governments, the general
public, businesses and other institutions of the market), providing a range of support
services that connect these different institutions with each other and with groups that are
poor or socially excluded. Membership-based groups are rare in the world of international
development whose modus operandi has been the provision of foreign aid, although in other
areas (like human rights and environment) they are common – Friends of the Earth, for
example, or Amnesty International. And there are many other potential fault-lines and
sources of difference within the development NGO community – North and South, large and
small, local and global, and those who accept government funding and those who don’t.
Increasingly, NGOs are combining elements of these different roles, functions and levels of
action to achieve their goals.

NGO Management
At the most general level, all organisations must deal with the same basic issues. For
example, they all have to set a direction or identify goals, mobilize resources for what they
do and find ways of getting employees to behave in ways that are consistent with the goals
that have been chosen. On its own, this generic level of analysis is not particularly useful –
a more detailed understanding is needed. Consequently, management thinking and analysis
disaggregates and focuses attention on different organizational types to determine and
compare how they behave and why. A common first disaggregation is between public
administration (the government), private for-profit (businesses) and non-profit organizations
(NGOs) – crudely distinguished as the “first”, “second” and “third” sectors.
First, although like governments they deal with issues in the public domain such as poverty,
injustice, exclusion or degradation of the natural world, NGOs have no statutory authority to
act. Their calling is voluntary and self-chosen, so NGOs must continuously justify their
presence in, and value to society.
Second, an NGO’s power and influence is based on civic engagement, social mobilization,
and reliance on social capital, not the political mandate and “string arm” of governments, or
the financial capital and influence of businesses. The quality of NGO engagement with
citizens is therefore a key determinant of organizational legitimacy and effectiveness.
In terms of their activities, NGOs have organizational and wider development goals whose
achievement relies on forces beyond their control – in the constituencies that work with or
try to influence at home and abroad. Consequently, organizational outputs are no real guide
to achievement. A manager must look further – to external impact across and in consort with
an array of actors with no clear-cut bottom lines of profit and loss or electoral success to rely
on. Instead, NGOs must construct their performance measures continually from a variety of
claimants or users.
As for many other non-profit organizations, a third distinctive quality of NGOs derives from
their position as intermediaries, wherein the resources required for their work do not come
from those they serve, either as taxpayers or customers. NGOs sit between, and must
negotiate with, resource providers and the populations that justify their existence. In other
words, aid usually exerts an influence on an NGO’s direction and identity that is allied to
national relations, forces and interests.
In addition NGO’s often work in conditions of instability, conflict, poor infrastructure and
poverty. Their constituencies reflect the lower, if not the lowest, strata of society
economically, politically and culturally. They have too little purchasing power to be of interest
to businesses but may constitute a potentially destabilizing force of concern to governments,
leading to distrust of NGOs as “allies of the poor”.
Depending on the policies of a country, the combination of foreign aid and alliances with the
poor can lead the ruling regime to place NGOs in the “opposition” camp, leading to open or
covert constraints on their work, or even on their existence. Unlike businesses that exist to
make money, NGO agendas are more likely to invite official suspicion and control. It cannot
be assumed that ruling regimes and those that contend for political power perceive an NGOs
as neutral.
Finally, in keeping with other non-profit organizations, NGOs cannot rely on hierarchy and
coercion, or financial rewards and material incentives as the means to obtain the compliance
of the staff toward organizational goals. Rather, the route to compliance lies in satisfying the
self-motivation of staff and volunteers – in other words, responding to the personal value
base that persuades an individual to work in and for the third sector. This values-demand
also applies to the processes of organizational change. If the NGO is to be true to its calling,
change must be negotiated and not simply imposed.

Challenges for NGO Management and Organizational Development

The distinctive nature of NGO management and organizational development set out above
creates a particular set of challenges. Six are especially important. The first three relate to
the fact that NGOs are “values-based” organisations, a characteristic that complicates the
nature of goals, incentives and management structures in several important ways. The
second three challenges relate to the complexity and uncertainty of the environment in which
NGOs tend to operate, calling for approaches that recognize and respond to the need to
manage multiple relationships, shifting combinations of roles and funding sources, and new
connections across old or unfamiliar boundaries.
Social change as a goal
NGOs see social change as the ultimate goal of their activities, defined very broadly to mean
a world without poverty, violence, injustice and discrimination. At root, social change is a
question of values, and values pose a constant dilemma for NGOs who want to link their
mission with their management style and organizational development. What is the
connection between “social change” outside the NGO and social change inside? Can the
organization be an effective catalyst for social change unless it practiced what it preaches
in terms of participation, democracy, non-discrimination and empowerment? On the other
hand, can the organization be effective at all unless it imposes a set of management
structures and decision-making processes that cut across these values? All NGOs face a
tension between these “developmental and institutional imperatives” when choices must be
made about strategy and structure, partnership and accountability, funding and human
resources. Much of the art of NGO management lies in reconciling, or at least
accommodating, these competing perspectives.
In addition, below this level of generality there are may differences and conflicts of opinion
about how best to achieve the goal of social change, and all NGOs must struggle with the
extreme complexity and highly value-laden nature of the processes that underlie the
problems they seek to address. Of course, all institutions face complexity: businesses must
produce goods and services that make profit in the marketplace, and governments must
perform and communicate sufficiently well to be re-elected. But NGOs must achieve
elements of both these sets of goals – efficiency, effectiveness and public support – and use
them to transform the worlds of economics, politics and social relationships through the
prism of a different set of values. This is a much more difficult task.
The nature of incentives
As a result of their values base and mission for social change, staff in NGOs are unlikely to
respond effectively to conventional command-and-control management hierarchies or
incentives based solely on material rewards. Of course, these things are not irrelevant, but
in general, personal commitment and satisfaction, a shared ideology and a feeling that staff
have a meaningful stake in the mission and direction of the organization are more important
incentives to performance.
This means that managers in NGOs may have fewer levels for influence than in business or
government, or at least that the levers are more difficult and complex to operate. Staff must
be brought into the processes of organizational change and decision-making on a less
hierarchical basis, and change may have to be slower and more incremental to secure the
necessary internal base of support.
Participation and empowerment
An internal commitment to values-based management complicates traditional structures and
processes in any organization but most of all in NGOs since concepts of participation and
empowerment lie at the heart of the paradigm they promote for social change. In theory at
least, NGOs must pay even more explicit attention to diversity, gender equity and other
issues of difference, the empowerment of staff so that they can live and work to their full
potential, and participatory processes that allow everyone a say in matters that affect them.
But these innovations must be organized and managed with great care lest they overly
impede decision-making – creating “participation paralysis” – and introducing tensions that
impede responsiveness, flexibility and impact. As intermediaries, NGOs face the added
complication that values must be reflected in external relationships if legitimacy is to be
maintained – a problem that has led to much debate about the theory and practice of
partnership.
Fortunately, the changing global context opens up a world of possibilities for NGOs to relate
to each other through alliances between equals and networks based on synergy, replacing
the asymmetries of power and voice that have characterized North-South relationships for
so many years. Information technology helps this process along by enabling less
hierarchical modes of organization and communication – advantages already well-exploited
by the business community, but not yet by many NGOs.
Multiple accountabilities and shifting relationships
The fact that NGOs locate their work in the spaces that exist between communities and
institutions of different kinds complicates the management of legitimacy, accountability, and
other external relationships. NGOs must demonstrate accountability to a wide range of
stakeholder groups who may have different information needs, priorities for the organization,
visions of success and definitions of legitimacy, including their boards of trustees, their
donors (individual and institutional), partners, staff and external critics. As noted above,
unlike governments (which must face elections) and businesses (which must face their
shareholders), NGOs have no single bottom line to measure their performance, and they
work in situations where attribution and causality are much more complex and dynamic.
The changing global environment also challenges NGOs to develop ways of working that
are less focused on promoting their own profile and more concerned with building alliances,
working with others, and dividing up roles and responsibilities in a collaborative way. More
openness to new ideas and a greater willingness to learn are essential in the context of new
problems and new actors, fast-moving and unpredictable change, the entry of corporations,
churches and trade unions into development debates, and the increasing sophistication of
information technology.
Learning is the key to a more sophisticated understanding of the changing context for
development work, the implications of these changes for NGO practice, and the ability of
managers to select the most affective alliances and strategies to reach their goals on a
continuous basis. Innovations in markets and economics demand much greater detail from
NGOs in their analysis and proposals, without losing the power of grassroots testimony and
straightforward protest. Finely nuanced judgements in complex political emergencies
require more highly developed information-gathering and analytical skills.
Diverse and unpredictable funding sources
Despite the relative decline of foreign aid, NGOs are still favoured by the donor community
and – in low-income economies – local funds are usually hard to find. As a result, many
continue to be funded more form public than private sources, something that may
compromise developmental imperatives by shifting accountability “upwards” reorienting
roles to areas prioritized by donors and inducing a creeping sense of self-censorship.
Sources of funds are also volatile, vulnerable to donor fatigue among the general public,
shifts in fashion and relationships among governments and international agencies and the
quirks and personalities of corporate philanthropy. Inevitably, therefore, many of the
management challenges faced by NGOs revolve around fundraising and financial
sustainability and how to preserve identity and continuity in core programmes when income
is difficult to predict from one year to the next. Keeping overheads low while preserving
quality, managing phases of expansion and retrenchment to take advantage of fund-raising
opportunities without overexposing the organization, and forging a team composed of
permanent staff, short-term assignments and consultants, are all familiar dilemmas for NGO
managers.
In selecting from fund-raising options, a critical challenge for managers is how to avoid
funding sources or modalities that lead to mission creep, compromise values and lead to
co-optation. Another is the need to distinguish between the size and profile of an individual
NGO and structural reform or systemic change as indicators of success.
NGOs as connectors
NGOS may have a particular geographical focus but recognize that social change requires
increasingly integrated action at the local, national and global levels. To be effective, NGO
campaigns need to build broad-based constituencies for implementation as well as policy
change among governments and international agencies, so they must develop strong links
with the media and with the public, churches, labour unions and NGOs in other movements.
Stronger organisational learning requires an active partnership with universities and think-
tanks consultants and researches.
In sum, NGOs constitute a crucial part of the “connective tissue” of a vigorous civil society,
so making and sustaining the right connections lies at the heart of effective NGO
management. The strength of NGOs lies in their ability to act as bridges, facilitators, brokers
and translators, linking together the institutions, interventions, capacities and levels of action
that are required to lever broader structural changes from discrete or small-scale actions.
For managers, this is an immensely challenging task because it requires a degree of human
and organisational flexibility and responsiveness that is difficult to achieve even in
predictable environments, conditions of financial stability and agencies of small to medium
scale. Since none of these conditions apply to NGOs, their task is even harder.
These challenges require managerial skills of the highest order, tailored specifically to the
context and values base of the NGO world, not the borrowing of second-hand advice from
business schools or bureaucracies. The development of an NGO management framework
that can sit confidently alongside management and organizational development theories
from other sectors remains an important task for the future.

Public Communication Campaigns

Public Communication Campaigns use the media, messaging, and an organized set of
communication activities to generate specific outcomes in a large number of individuals and
in a specified period of time. Public communication campaigns are an attempt to shape
behaviour toward desirable social outcomes. Those behaviours might include eating right,
drinking less, recycling, breastfeeding, voting or volunteering. The outcomes of those
behaviours – the campaigns’ ultimate goals – may include healthier individuals, families,
and communities or specific policy results that lead to better outcomes for individuals,
families, or communities.
Very rarely do public communication campaigns feature only communications through
media channels. “Promotion is only part of the marketing mix”. Usually, they coordinate
media efforts with a diverse mix of other communication channels, some interpersonal and
some community-based, to extend the reach and frequency of the campaign’s messages
and increase the probability that messages will successfully result in a change.
We can call this mix of communication channels the “air” and “ground” strategies. The air
strategy is the public media campaign, and the ground strategy uses community-based
communications or grassroots organizing. A good example of a ground strategy comes from
Centres for Disease Control’s (CDC) AIDS Community Demonstration Projects. Faced with
the challenge of reducing the risk of HIV transmission among ethnically diverse, hard-to-
reach, and high-risk populations, this campaign used volunteer networks of peers from the
target audiences and other trusted community members to relay its messages and small
media materials, along with condoms and bleach use kits. Messages conveyed through an
air strategy alone would not have worked; the situation called for a ground strategy that had
a fighting chance of reaching the intended audiences in ways that mattered. A ground
strategy can also involve organizing and mobilizing people for policy change that will support
the campaign’s main messages.
All campaigns are different and use different interventions. The common thread running
through them is their focus on similar results – trying to influence what people think, think
about, and do.

Two types of campaigns

Various literature and thinking about public communication campaigns makes a distinction
between two types of campaigns based on their primary goals: individual behaviour change
versus public will and political change.
Individual behaviour change campaigns
These campaigns, also called public information or public education campaigns, strive to
change in individuals the behaviours that lead to social problems or the behaviours that will
improve individual or social wellbeing. Well-known campaigns in this category target
behaviours such as smoking, drug use, recycling, designated driving, seat belt usage, or fire
and crime prevention. Many come from the public health arena, but this type of campaign
has branched out into other areas such as education, criminal justice, and early childhood.
Many, if not most, individual behaviour change campaigns use a social marketing approach.
This now well-known approach is grounded in commercial marketing techniques. With a
non-wavering focus on the customer, it markets behaviour change. How the customer thinks
and acts continuously shapes the marketing process.

Public will campaigns

This second type of public communication campaign focuses on creating public will that will
motivate public officials to take policy action. This type of campaign is becoming increasingly
common, yet there is far less understanding about what it is, much less how it should be
evaluated.
A public will campaign attempts to legitimize or raise the importance of a social problem in
the public eye as the motivation for policy action or change. It focuses less on the individual
who is performing the behaviour (i.e., the smoker, polluter, drug user), and more on the
public’s responsibility to do something that will create the environment needed to support
that behaviour change. For this reason, it is sometimes also referred to as a public
engagement campaign.
Public will campaigns are sometimes borne out of individual behaviour change campaigns.
For example, the anti-smoking movement and campaigns began by focusing on smokers
themselves. Once these campaigns “hit a wall” on the results they were achieving in terms
of getting smokers to quit, they turned to the public to create an environment that would
pressure smokers around them to stop. This included focusing on the dangers of second-
hand smoke to create the will and rationale needed to get smoking officially banned in most
public places. Some campaigns now use an individual change and public will component in
tandem.
The basic theory of change that underlies most public will campaign with policy change as
an outcome is based on the agenda-setting process, which encompasses media, public,
and policy agenda setting, in that order, and integrates framing, agenda setting, and priming
theory. The idea is that the policy agenda is influenced by what the public thinks, cares
about, and does. Public thinking and acting, in turn, are thought to be influenced at least in
part by the media. So, public will campaigns try to ignite a chain reaction of sorts in the
agenda-setting process. They do this primarily on two fronts; by working to influence what’s
on the media’s agenda and how issues get reported and by communicating to the public
directly. Public will campaigns typically coordinate these efforts with more traditional
organizing and policy advocacy work to bolster possibilities that the intended policy
outcomes are reached.
The goal of these campaigns, as their name implies, is to build public will. Therefore, the
measure of a campaign’s success is the extent to which it in fact accomplishes that goal.
For evaluation to be able to assess public will, it is important first to define it. Public will does
not, however, have a precise definition. Some, for example, equate public will awareness or
public education.
The Centre for Assessment and Policy Development (CAPD) defines public will work as the
steps required to change behaviours that influence social outcomes. It involves messaging,
organizing, and advocacy targeted at individual and collective beliefs, attitudes, and
behaviours. Public will work can include efforts to educate or inform the public with the intent
of having them support or oppose actions at a programmatic, system, or policy level. All
public engagement campaigns must figure out what it is that they want the public to do;
legislation is often one piece of that. This can mean more than calling one’s legislator to
express a position; it can mean encouraging individuals to behave in a way that creates the
necessary social context for change and to create the necessary rationale for policy change.
With this definition, public will is more than just public opinion or awareness. It is the
willingness to act in support of how a person feels about an issue. Effective communications
campaigns let people know the actions they want people to take. They should be actions
that reinforce policy agendas, and that people can undertake in their own backyards. This
linking of public will to behaviour is important because it has implications for how these types
of campaigns are evaluated.
This definition of public will also has implications for public will campaign design. The
behavioural link is key. Some campaigns say they are building will, but simply provide
information about an issue and then do not spur the audience to act. While the impact of
information on behaviours has a special place in the lore of campaigns, campaign results
and research show that knowing more about an issue does not have a direct effect on
behaviour. Raising public awareness can be an important part of a campaign, but awareness
and knowledge without action will go only so far.

Designing a Successful Fund-Raising Campaign for Your NGO

Know your competition and set realistic goals
To get your campaign off to a good start, you need to ask, “where do I want to end up?” If
this is the first time your organization is doing a campaign, it might be hard to answer this
question. Start by clarifying what you want for your organization and its causes in terms of
1) visibility; 2) resources, both financial and nonfinancial; and 3) future actions in support of
your organization or its causes by companies, people or other entities. Do some research
on what other campaigns of similar size and effort have achieved. Ask yourself if your
organization has the time, resources and energy to do as well or better than these other
campaigns.
Doing research on potential competition from other campaigns is essential for solid goal
setting and planning. Partners asked these types of questions in planning their campaigns:
 When should we run our campaign, given other campaigns in the country?
 Are the potential benefits of our campaign different from those of other campaigns?
Can our benefits stand out?
 Why should people give to our campaign when there are other campaigns competing
for people’s support?
 Are there any opportunities we can build on to differentiate our campaign?
If, in asking these types of questions, your organization is not able to differentiate its
campaign from other efforts, the perhaps you are not ready to plan and implement a
campaign.
Another question to ask yourselves is whether people generally care about the issue your
campaign wants to promote. Companies can see the advantage of being associated with
that cause, as do governments and other civic organizations. What about the cause you
want to promote? How hard will it be to mobilize people behind what your NGO does? If you
have any doubts about how well your cause resonates with people’s hearts and minds, do
some more research. Ask people who are not close to your work and will give you a
representative picture. If you can, interview someone who does market research for
companies or a media person who is well versed on public opinions on social issues.
if your organization decides to design a campaign, chances are that no matter when you
conduct it, there will be competition, making thorough advance planning and preparedness
more important. Your challenge is to develop a unique, simple campaign that emphasizes
the direct, positive impact that giving will have on particular issue or population. You need
to differentiate your campaign using messages, visual elements, and communication
vehicles creatively and effectively.

Communicate your goals

In communicating your campaign goals to the general public, you need to craft your
message carefully. The campaign goal should be communicated in clear, simple language,
be realistic and measurable. Test your goal statement on board members and friendly
supporters to make sure it sounds distinctive and compelling. Campaign goals focused on
a desired social outcome or benefit – whether for children, the environment, or another
cause – are effective.

Secure the right resources

It is important to be very realistic about your costs and your ability to 1) cover a high
percentage of your costs through sponsorships and donated services; and/or 2) raise
enough to cover your costs and generate a surplus to invest in your cause. Throughout the
campaign keep revisiting your expense and income ratios to make sure you are spending
wisely and getting a level of benefit that is commensurate with your level of investment.

Form a strong team

Early in the planning process, partners created steering committees to lend prestige,
visibility, and support to their campaigns. Members included leading public officials,
business executives, board members, media owners, and other prominent individuals. The
members’ name appeared on campaign print materials, and they made public appearances
on behalf of the campaign. You will need to assess staff and volunteers’ availability and
experience as you design your campaign.
 Campaign manager
 Advertising and media relations director
 Corporate relations manager
 Financial manager
 Administrator
 Program support

Create a clear brand

A fundraising campaign is one vehicle for reaching new audiences and heightening their
awareness of your organization and its issues. With a campaign your organization’s image
will be enhanced or tarnished according to how people perceive the campaign. Key to
success is selecting the campaign brand in the minds of the audiences they wanted to reach.
The better you identify and understand your different audiences, the greater your success
in creating your campaign brand image.

Building relationships with corporate partners

Two criteria for selecting partners:
1. Exclusionary criteria. An exclusionary criterion is one that automatically prevents
the organization from accepting any form of support from a company, foundation, or
individual. These pertain to activities that present a reputational risk for the
organization and for which clear thresholds can be identified and objectively
measured.
Excluded companies include those that derive a significant portion of their income
from the production and/or sale of tobacco, alcohol, arms, pharmaceuticals, and/or
mineral, oil, gas, or other extractive industries.
2. Cautionary criteria. Require a particularly careful assessment of the partner’s fit with
the organization’s mission. Corporate partners are screened on a one-by-one basis.
The cautionary criteria cover where a company: 1) has been involved in past
 controversies; 2) Is potentially exposed to future controversies; 3) Does not respect
internationally recognised human rights and fundamental labour standards; 4) Does
not respect materially the local or national laws and regulations of the countries where
it operated; 5) through its business practices, materially contributes to armed conflicts
or natural disasters.
Different ways for companies to participate in your campaign include:
 Underwriting sponsor. A company provides funding to cover administrative costs,
including salaries, materials, and event costs. This can be a pre-arranged lump sum
or can be based on a percentage of the estimated overall costs to run the campaign.
 Supporter. A company agrees to promote an employee-based campaign. It also
might commit to matching employees’ donations or to providing an outright grant. You
will want to advocate for either one of these options in your negotiations.
 In-kind. To reduce costs, a company donates products or services the campaign
needs such as phone lines and blank advertising services.
 Cause related marketing. This strategy associates the campaign with a product or
service produced by a company. Consumers are drawn to products that benefit or
promote a social cause, and therefore to the companies which make those products.
An increase in sales signals consumer appreciation for the company’s commitment
to social causes. Be sure that you are clear about the value of your organization’s
name and reputation. Make clear to the company what you want to receive in return.
Is it funds, free promotion, both? You need to be confident in your negotiations that
you bring the company an asset that will enhance consumers’ loyalty, recognition,
and /or admiration.