Shifting Administrative Intensity and Employee Composition: Cutback Management in Education

• Author: Amanda Rutherford,Joris van der Voet
• Published date: 01 August 2019
• Date: 01 August 2019
• DOI: 10.1177/0275074018794701
• Subject Matter: Articles

https://doi.org/10.1177/0275074018794701

American Review of Public Administration

2019, Vol. 49(6) 704 –719

© The Author(s) 2018

Article reuse guidelines:

sagepub.com/journals-permissions

DOI: 10.1177/0275074018794701

journals.sagepub.com/home/arp

Article

Public organizations are increasingly confronted with orga-

nizational decline, or a “substantial, absolute decrease in an

organization’s resource base over a specified period of time”

(Cameron, Whetten, & Kim, 1987, p. 224), as a result of eco-

nomic downturns and policies of austerity. In the wake of

economic and financial uncertainty, some scholars have

argued that an organizational state of decline has become a

long-term reality for public organizations (Bozeman, 2010).

Indeed, organizational decline is now the norm rather than

the exception for many organizations (Cameron & Smart,

1998). Moreover, the declining financial resources of public

organizations often coincide with environmental turbulence,

or the degree to which changes in the environment are unpre-

dictable (Boyne & Meier, 2009a). Unpredictability affects

organizational responses to decline because it decreases the

ability of decision makers to analyze a situation with high

levels of certainty (Jick & Murray, 1982; Levine, 1979).

Decline and turbulence—as well as their combined effects—

are of importance to both practitioners and researchers of

public management given the continual constrain of finan-

cial resources with which public organizations have to work.

Despite recent calls for systematic, longitudinal assess-

ments of substantive and unpredictable decreases in financial

resources in the public sector (Bozeman, 2010; Pandey,

2010), contemporary public management research has not

resulted in a substantial body of evidence concerning the

organizational effects of decline and turbulence. Generic

management research on organizational decline indicates

that declining financial resources are related to a range of

dysfunctions, such as increased centralization, reduced

innovation, and lower employee morale (Brockner et al.,

2004; Cameron, Whetten, & Kim, 1987). Public manage-

ment research has especially highlighted the negative conse-

quences of decline for employee well-being (Esteve,

Schuster, Albareda, & Losada, 2017; Kiefer, Hartley,

Conway, & Briner, 2015; Van der Voet & Vermeeren, 2017).

Because empirical evidence on other effects of decline

remains scarce (Bozeman, 2010), several authors have called

for increased longitudinal evidence regarding the conse-

quences of organizational decline (Pandey, 2010). Research

on environmental turbulence has indicated that turbulence is

disruptive for organizational decision-making, work pro-

cesses, and ultimately organizational performance (Boyne &

Meier, 2009b; Van den Bekerom, Torenvlied, & Akkerman,

2015). In particular, there is a need to examine the combined

effects of decline and turbulence, as these concepts have only

been studied separately (cf. Cameron, Whetten, & Kim,

1987).

In this study, we examine how public managers respond

to declining and turbulent financial resources by means of

cutback management. We focus our attention on staffing and

personnel management following the argument by Anderson

and Mark (1985) that, “the effects of budget reductions and

794701ARPXXX10.1177/0275074018794701The American Review of Public AdministrationRutherford and van der Voet

research-article2018

1Indiana University Bloomington, USA

2Leiden University, The Netherlands

Corresponding Author:

Joris van der Voet, Leiden University, Turfmarkt 99, Den Haag, 2511 DP,

The Netherlands.

Email: j.van.der.voet@fgga.leidenuniv.nl

Shifting Administrative Intensity and Employee

Composition: Cutback Management in Education

Amanda Rutherford1 and Joris van der Voet2

Abstract

Many public organizations are increasingly confronted with substantive and unpredictable reductions of financial resources.

Despite growing research attention to this issue, empirical investigation of the organizational consequences of decline and

turbulence has been limited. This article aims to understand the combined effects of decline and turbulence on personnel,

one of the largest expenditure categories in organizations. Analyses use data from 2- and 4-year public institutions of higher

education in the United States from 1988 to 2012. Findings in this context suggest that while decline alone has little to no

effect on staffing, turbulence is associated with larger effects that are moderated by decline. Two-year institutions more

closely resemble operational, efficiency-oriented responses to turbulence, and 4-year institutions reflect a more strategic

reaction.

Keywords

cutback management, administrative intensity, financial decline, higher education

Rutherford and van der Voet 705

fluctuations should eventually make themselves felt in terms

of staff allocation” (p. 297). Furthermore, Bozeman (2010)

claims that, “One interesting question is whether administra-

tive intensity (the ratio of administrative employees to pro-

duction or services delivery employees) rises or falls during

periods of decline” (p. 560). As such, we study the extent to

which managerial reactions via resource allocation have con-

sequences for organizational structures and staff composi-

tions in two ways. First, we assess the effects of decline and

turbulence on administrative intensity, defined here as the

size of the bureaucratic component of an organization.

Second, we consider consequences of decline and turbulence

for full-time front-line staff.

In this study, we examine the effects of decline and turbu-

lence in institutions of higher education in the United States

between 1988 and 2013. In this context, colleges and univer-

sities have recently received varied levels of state financial

support, challenging their ability to consistently operate at

the status quo. In addition to decline, these institutions can

experience turbulence with regard to multiple resource

streams that are needed for organizational stability. As per-

haps evidenced by popular discussions of the role of adjunct

faculty and administrative bloat, we consider higher educa-

tion a prime context for considering the questions in which

we are theoretically interested. Of note, our analysis is not

based on individual-level managers but focuses on organiza-

tions with the assumption that managerial reactions will be

manifested at the organizational level.

We aim to contribute to the literature on organizational

decline and turbulence in three ways. First, we aim to better

understand the linkage between financial decline and person-

nel in public organizations. Staffing is one of the largest

expenditure categories in public organizations, but the rela-

tionships between organizational decline, administrative

intensity, and staff composition have received limited research

attention (Bozeman, 2010). Second, we account for the mod-

erating effect of turbulence in the relationship between declin-

ing financial resources and personnel. Turbulence can disrupt

organizational adaptation to financial decline by limiting the

information that decision makers have at their disposal (cf.

Boyne & Meier, 2009b). We therefore propose that turbu-

lence may decrease the organizational effects of decline as

decision makers prefer to maintain the status quo or delay

organizational response to decline (cf. Karim, Carroll, &

Long, 2016). A third contribution is that we compare and con-

trast organizational settings to further consider responses to

decline and turbulence. In our context, 2- and 4-year public

institutions in the United States have different organizational

characteristics that may give rise to important variation in

terms of organizational responses to decline and turbulence.

Both types of institutions are confronted with threatened

financial resources, but 4-year institutions should have more

flexibility in resource allocation due to a greater diversity of

tasks, more opportunities to grow alternative sources of fund-

ing, and larger possibilities for strategic maneuvering. While

most research on decline and turbulence examines a homoge-

neous group of organizations (e.g., Boyne & Meier, 2009a;

Cameron, Whetten, & Kim, 1987; Freeman, 1979; Greve,

2003; Latham & Braun, 2009), the comparison in this study

can provide insight on how organizational characteristics give

rise to divergent responses to organizational decline and envi-

ronmental turbulence.

In the sections that follow, the literature on organizational

decline, turbulence, cutback management, and staff compo-

sition is reviewed, and theoretical expectations concerning

the relationships between our central concepts are formu-

lated. We then review our data sources and methodology

before presenting the results of our analyses. Finally, we dis-

cuss the implications of our analysis for public administra-

tion research and practice.

Development of Knowledge on Decline,

Turbulence, and Cutback Management

There are several reasons why organizational decline is a

managerial challenge. One perspective highlights the direct

negative effect of decline on organizations. Such dysfunc-

tions include increased centralization and conflict as well as

decreased morale and innovation (Cameron, Whetten, &

Kim, 1987). Second, decline can alter the conditions and

expectations under which managers operate. Organizational

decline is a deviation from management under normal (sta-

ble) conditions and imposes constraints on managerial

behavior (McKinley, 1987). For example, organizational

decline may cause managers to attempt to buffer negative

performance effects or maintain employee well-being (Van

den Bekerom & Meier, 2016; Van der Voet & Vermeeren,

2017). Third, public managers must respond to decline to

address its cause and ensure the survival of the organization

in the long-term. This perspective emphasizes that decline

forces managers to make difficult trade-off decisions in the

form of cutback management. This area in particular has

received attention in public management literature (for a

review, see Raudla, Savi, & Randma-Liiv, 2015).

Cutback management can be defined as “managing orga-

nizational change toward lower levels of resource consump-

tion and organizational activity” (Levine, 1979, p. 180). The

challenge of cutback management is to balance short-term

objectives of maintaining the organization’s budget with lon-

ger term goals such as maintaining or improving organiza-

tional performance and staff morale. Despite ample attention

to the challenges that are inherent to cutback management,

this line of research remains in many ways a “wisdom-litera-

ture” in the sense that the empirical investigation of manage-

rial responses to organizational decline has remained limited.

Much of the early literature consists of conceptual reflections

(Behn, 1980; Jick & Murray, 1982; Levine, 1978, 1979;

Whetten, 1980), supplemented by case study evidence

(Murray & Jick, 1985). Notable exceptions are the work by

Cameron, Whetten, and Kim (1987; see also Cameron, Kim,