Privatizing Correctional Institutions: An Organizational Perspective

• Author: DAVID SHICHOR
• Published date: 01 June 1999
• Date: 01 June 1999
• DOI: http://doi.org/10.1177/0032885599079002006
• Subject Matter: Articles

THE PRISON
Shichor /
JOURN
ORGANIZAAL / June
TIONAL 1999
PERSPECTIVE
PRIVATIZING
CORRECTIONAL INSTITUTIONS:
AN ORGANIZATIONAL PERSPECTIVE
DAVID SHICHOR
California State University, San Bernardino
The privatization of jails and prisons became a growth industry during the second
half of the 1980s and the 1990s. Although the private sector has provided diverse
services for adult correctional institutions for a long time during the 20th century, the
operation and management of entire facilities is a relatively new phenomenon. This
article analyzes, on a theoretical level, the organizational changes that occur when
private corporations are contracted to operate adult correctional facilities. The ma-
jor theoretical concepts reviewed are goal orientation, cui bono—who are the pri-
mary beneficiaries of the organization, the organization-set, and “steering versus
rowing.” This article concludes with some suggestions that should be taken into con-
sideration when correctional privatization decisions are being made.
Since the 1980s, there has been a major interest in the United States in the
privatization of correctional institutions, and indeed, there has been a con-
stant growth in the number of federal, state, and county facilities operated by
private for-profit corporations. The privatization trend also appears in several
other industrial societies, especially those having an Anglo-Saxon historical
and legal background and tradition (i.e., United Kingdom, Australia, Can-
ada, and New Zealand). This development led to a professional interest in
this issue and has yielded a volume of theoretical, legal, historical, policy-
oriented, and even empirical contributions (e.g., Bowman, Hakim, & Seiden-
stat, 1993; Christie, 1993; Di Iulio, 1990; Durham, 1989; Easton, 1998; Feeley,
1991; Harding, 1997; James, Bottomley, Liebling, & Clare, 1997; Lilly &
Knepper, 1992; Logan, 1990; McDonald, 1990; McDonald, Fournier,
Russell-Einhorn, & Crawford, 1998; Moyle, 1994; Robbins, 1989; Shichor,
1995; U.S. General Accounting Office, 1996).
I would like to thank Gilbert Geis for his helpful comments and editorial help on a previous
version of this paper.
THE PRISON JOURNAL, Vol. 79 No. 2, June 1999 226-249
© 1999 Sage Publications, Inc.
226

---

Shichor / ORGANIZATIONAL PERSPECTIVE
227
Simultaneously, there has been an increase in the number of private corpo-
rations getting involved in all aspects of the prison business, including the fi-
nancing and construction of new facilities and the renovation of existing
ones. Several of these companies have gone public, and they are trading on
the stock exchanges. The two largest companies, Corrections Corporation of
America (CCA) and Wackenhut Corrections, which account for about 75%
of the market share, have been among the best performing companies on the
New York Stock Exchange since the mid-1990s, and they are highly recom-
mended by brokers and financial advisors for investment. Scores of financial
institutions, brokerage houses, venture capitalists, and other money interests
are investing in this flourishing industry.
This large-scale private involvement in corrections was fueled primarily
by dramatic changes in the sociopolitical atmosphere that have been taking
place in the United States and several other industrial countries since the
mid-1970s, which had a major impact on penal policies and brought about
the war on crime and war on drugs campaigns. As a result, the number of in-
mates in the United States in state and federal institutions increased from
328,695 at the end of 1980 to 1,244,554 at the end of 1997 (Proband, 1998).
Irwin and Austin (1994) refer to this trend as “America’s imprisonment
binge.” The unprecedented growth of the inmate population resulted in major
prison overcrowding and a concomitant increase in correctional expendi-
tures. These developments opened the door for private for-profit corpora-
tions to finance and build correctional institutions, and operate and manage
them.
The promise of privatization is that it is a vehicle that can finance and
build correctional facilities faster and cheaper than government agencies,
and that it can operate them for a lower cost without reducing the quality of
the service provided (e.g., Logan, 1990; Thomas, 1998). The arguments to
support the privatization of correctional institutions focus on the upholding
of economic interests of the government and private contractors. Govern-
ment agencies, attempting to cope with a constantly increasing inmate popu-
lation, seek to save money and relieve the pressure of overcrowding by con-
tracting out prison construction and operations. Private companies rely on
their business acumen, their flexibility, and their ability to employ a smaller,
nonunion staff for lower wages and fewer benefits than civil servants receive.
They realize that they can make a profit on the financing, building, and opera-
tion of confinement facilities.
Privatization of correctional institutions entails major changes in the pol-
icy making, the management, and operations of correctional facilities. Stolz
(1997) used the concept of the correctional subgovernment in her analysis of

---

228
THE PRISON JOURNAL / June 1999
the above changes. She defined this concept as “a group of like-minded indi-
viduals who represent key parts of the legislature (usually subcommittees),
the executive branch (usually bureaus operating specific programs), and the
private sector (most often industries or producer-oriented interest groups)”
(Stolz, 1997, p. 108). The corrections subgovernment that emerges as a result
of privatization, according to Lilly and Knepper (1993), includes private cor-
porations that operate prisons and profit from them, government agencies in-
terested in their own continuing existence, and professional organizations
that hold interested groups together. The privatization of correctional facili-
ties introduces major changes in this subgovernment. Among others, “it is
evident that private corporations that operate or may seek to operate correc-
tions facilities will become involved in the corrections policy-making arena”
(Stolz, 1997, p. 99). The involvement of private corporations in corrections
introduces profit as a goal to be achieved by some members of the subgovern-
ment. This aim may have an impact on “the goals of other participants in the
corrections subgovernment by changing the reward structure” (Stolz, 1997,
p. 100). It also may increase the involvement of elected officials in correc-
tional matters, because it opens possibilities for campaign contributions from
already involved private corporations and from those that hope to enter the
prison business. In addition, with the entrance of private corporations into the
operation of prisons, the role of corrections officials changes from program
administrators to contract monitors. Furthermore, there may be changes in
the interrelationships among private interest groups participating in the sub-
government. As an example, Stolz (1997) notes the relationship between the
American Correctional Association (ACA), a nonprofit private professional
organization, and private corrections corporations that use ACA’s accredita-
tion standards for correctional facilities to affirm and document their suit-
ability for operating prisons.
The inclusion of private corporations into the corrections subgovernment
may have a substantial impact on the policy-making process as well, and it
may introduce conflict between interest groups in the subgovernment. The
most obvious conflict would be between private correctional corporations
and organizations representing or supporting correctional employees. A
known and declared major strategy of cost control by private firms is to hire
employees who are not represented by these organizations, are paid lower
salaries, and given few, if any, fringe benefits that organized labor receives.
Government agency officials, who previously may have been in conflict with
organizations representing correctional employees, may become allies with
them to oppose the expansion and policy-making involvement of private cor-
porations. Government administrators also may function as mediators be-
tween employee organizations and private companies. Finally, corporations

---

Shichor / ORGANIZATIONAL PERSPECTIVE
229
that have a general common interest in promoting privatization will likely
compete with each other for contracts and market share. Stolz’s (1997)
analysis indicates that privatization has the potential to impact the correc-
tional subgovernment; the roles of the participants; the reward system; and
the policy-making process by diminishing the influence of advocacy groups
that represent inmate interests, such as the American Civil Liberties Union
and Friends Outside, and by increasing the influence of private corrections
corporations.
This article explores the organizational changes that may occur with the
privatization of prison operations. The analysis is based on several theoreti-
cal approaches, models, and concepts. It describes some of the possible out-
comes of this major correctional policy change and tries, as much as possible,
not to get involved in the ongoing debate regarding the pros and cons of cor-
rectional privatization.
GOAL ORIENTATION
Goal orientation is probably the most defining element of an organization.
Several classical works define organizations based on their pronounced goal
orientation. For example, Selznick (1948) suggested that organizations are
rationally ordered instruments for the achievement of stated goals....