Governance By Objectives - Universities between Market and Bureaucracy


Today the higher education system is under pressure to adopt fundamental changes in the main fields of their responsibility. The Bologna Process, the emergence of private higher education institutions,  the increasing demand for higher education, international competition (ratings) and steep financial cuts by the government are just a few of the major changes in the higher education system. Often these changes are summed up in catchphrases like strengthening of competitiveness, cultivating a competitive international profile, or bringing the market in the old bureaucratic system (New Public Management) and mostly these changes are perceived as management fads that endanger the freedom of science and transforming the (old) University into a result driven service company ruled by several stakeholders with different interests. Since 2005 German universities are forced to pay their professors performance oriented. In addition to the standard salary each professor can achieve additional money because of specific scientific performance stated in a management by objectives process. This represents a shift in the governance structures (principles) of science from a bureaucratic system toward a market oriented system we call governance by objectives.

From organization sociology we know that pure bureaucracies and pure market driven organizations do not exist at all. In fact we have to recognize that most organizations bear characteristics of both. Especially in the management by objective process we have to consider this in different ways. Two points are interesting: From a theoretical point of view we have to consider that universities (now) bear both characteristics and ask what the special requirements are for an organization theory of hybrid organizations (1). Derived from the freedom of research, professors have a relatively high degree of autonomy according to the manner of how they fulfil their work. Especially decisions regarding to teaching and research topics they focused on has been nearly independent from any institutional strategy of the university leadership. Therefore the market principle should be as ineffective as the organization principle (hierarchy) (2). We can observe that more and more professors are paid performance oriented. So the question is how the professors and the universities get along with this new governance structure. Furthermore we know that trust is a precondition for market transactions as well as relations in organizations. So we have to consider these three, markets, hierarchies, and trust in the analysis of the governance by objectives. The presented results are based on qualitative interviews in three German universities and part of a larger research project.