Read: management & leadership 5: External and internal steering of organizations: the stick, the carrot and the sermon

To achieve a goal with the help of others requires getting people to move in the right direction. Core elements of steering people are: transferring convictions to others, division of tasks (who does what) and coordination (of activities).

External steering: control of (a part of) society by the government or interest groups.
Internal steering: control of an organization by the management, a staff department with coordinating and influencing authorities (equal opportunities department, personnel department), or a representative advisory body.

Because of the many changes occurring in this field, 'steering' is a topical issue. Managers with a feel for social development want to give their employees the chance to work independently. Delegating authorities, giving responsibilities to lower levels of the organization, freedom of implementation: these are concepts belonging to an individualized society and a liberated employee.

But the other side of individualization is the question of community. How can managers ensure that the organization's objectives are attained? How can managers control and direct all those autonomous employees, who have goals of their own as well? Enforcing community, using orders, is a thing of the past. There is a need for control instruments that are not necessarily invested with power. Norms and values should be the basis underlying steering: steering is more and more a question of people being convinced themselves that they must attain a common goal. Besides, in reality 'the government' or 'the management' are less and less the parties unilaterally determining the goal.

The goal is increasingly the result of communication between various players: the government and its citizens, the management and its employees. This is in line with a participative and consultative management style. Managers and change agents commit themselves to making the organization's objectives a living reality for every individual in the organization.

Control instruments

The science of public administration distinguishes between the formal and informal control instruments used by governments. The formal instruments (a to e) are the 'classical' ones, the informal instruments (f and h) are being applied more and more frequently.

1. legislation and regulation: two functions: 1) formulating rules and ensuring compliance, and 2) enforcing specific behaviour through rules.
2. financing: making money available ad hoc through grants, rewards, premiums or structural financing on the basis of specific agreements, such as output financing, input financing, budget, allowance, lump sum;
3. information and education, to the extent that it influences behaviour in a certain way;
4. planning: formulating plans and making arrangements on their implementation;
5. organization: e.g. pooling know-how and skills in a centre of expertise;
6. persuasion;
7. negotiation;
8. personal influencing of individuals and organizations (e.g. by appointing an equal opportunities officer).

In reality, people hardly ever try to achieve a goal with just one single instrument - there is always a certain mix of instruments, with no more than one instrument being dominant.

Three types of steering

There are three different types of steering, each based on a different concept.

1. Direct regulation: steering by means of do's and don'ts ('the stick').
2. Indirect regulation: steering by making certain behavioural alternatives unattractive or attractive ('the carrot').
3. Self-regulation: convincing organizations or groups of citizens that they have to be responsible themselves for their direction ('the sermon').

The most important control instruments for direct regulation are legislation and rules. Most traditional government steering is of this type.

The main instrument for indirect regulation is granting premiums/subsidies, although information and education are also employed to influence behaviour.

For self-regulation, there are a number of alternatives: covenants (multilateral planning agreements), persons as instruments (e.g. appointing an environmental coordinator) and communication (i.e. the exchange of information between the government and other parties on the basis of equality rather than unilateral information from the government). Informal instruments play an important role in self-regulation.

Self-regulation has become increasingly popular in recent years, while direct regulation appears to be losing importance. Yet no single control concept is preferable to any other one.

Direct regulation has the following advantages:

• Because of the emphasis on legislation, carefulness is fairly certain.
• Legal security: everyone has the same rights and duties.
• If worst comes to worst, citizens or organizations may be forced to do or refrain from doing something.

Direct regulation does, however, have major drawbacks:

• Enforcement requires a lot of supervision.
• Because legislation has to be passed, the effects are not felt for a long time.
• It is not designed for complex situations.
• Legislation often prompts resistance or evasion, requiring more sanctions.

Indirect regulation has the following advantages:

• It can often be done quickly.
• It dovetails with the interests of individuals or organizations.
• It provides the freedom to display deviating behaviour without being punished.
• It requires less supervision (e.g. random inspection by an accountant or inspector).

Yet there are also drawbacks to indirect regulation:

• Costs can easily get out of hand: the more citizens or institutes behave in the desired manner, the more premiums will have to be paid.
• Information as the only instrument to influence behaviour is hardly effective.
• The size of the collective sector is increasing (to all outward appearances).
• The result is not guaranteed and cannot be enforced.
• Indirect regulation is based largely on the assumption that people act rationally and are driven by economic considerations.

Self-regulation, finally, has the following advantages:

• The results obtained are not enforced, i.e. more intrinsic (citizens and organizations themselves are convinced that something has to be done).
• No compulsion, so less supervision is required.
• It may be effective in segments of society that are relatively closed to government influence.
• It requires less government interference and, consequently, fewer civil servants.
• It fits in well with Dutch society, which is highly organized and has traditionally strong corporate tendencies.

Nevertheless, self-regulation also has its drawbacks and limitations:

• It relies on a feeling of 'common good' or long-term individual interest in (groups of) citizens.
• It denies the existence of minority groups or weaker groups in society.
• It may cause negative external effects to shift to other groups than the ones involved in self-regulation (for example: employers and employees themselves may regulate matters, to the disadvantage of welfare recipients or pensioners).
• It presupposes a high degree of organization with a fairly centralized decision-making structure (after all, the top of the organization must reach agreements with other parties or with the government).

In everyday reality, there are, of course, all kinds of combinations; in the case of self-regulation, for instance, it often comes in handy to use direct regulation as a threat.

Stick, carrot and sermon in internal steering

These three types of control concepts are derived from public administration, i.e. external steering issues. Yet they can also be employed for many internal steering issues. The staff department of Personnel & Organization, for instance, can choose from three control concepts in steering its training policy:

Direct regulation: the personnel department approves training plans, allocates the available money and decides on individual applications for training, based on all kinds of (written or unwritten) rules.

Indirect regulation: the personnel department steers training policy by distributing the money available for training in a specific manner (based on input or output characteristics), by granting funds to certain courses (or purchasing these at cheap rates), or by providing information on courses.

Self-regulation: the personnel department unconditionally gives the training money to decentralized departments, but reaches (non-binding) agreements with management on the way it is spent (e.g. special attention to courses for employees from ethnic minorities), and sets up a Training Centre (which makes expertise available on a facility basis).

It should be noted that certain types of steering are better suited to certain organizations than to others. Taking Mintzberg's six basic configurations as a starting point, the following link can be made with steering:

• In the (simple structure) entrepreneurial organization (coordination mechanism: direct supervision), direct regulation will be predominant, based on informal rules and 'do's and don'ts' determined by the management.
• In the machine bureaucracy (coordination mechanism: standardization of the working process), direct regulation will be based on many written rules enforced by extensive staff departments.
• In the professional bureaucracy (coordination by means of standardization of input or skills), indirect regulation can be used well, for it gives the top the possibility to steer decentralized units without limiting their autonomy too much.
• In the division organization (coordination by output standardization), self-regulation can be used at divisional level, using appropriate instruments such as planning agreements, organization (facilitation) and communication.
• In an ad-hocracy (coordination by mutual agreements), self-regulation is the most suitable option at the level of the individual employee, who works autonomously.
• In an idealistic organization (coordination by standardization of norms and values), self-regulation is also the best option.

Incidentally, the distinction between external and internal steering will become more and more blurred in the years to come, as the government attempts to achieve steering on an equal basis with various parties. This is all the more reason to apply the insights from public administration science to internal steering issues.