ADMINISTRATION

Terry / THINNING OF&ADMINISTRATIVE

SOCIETY / September
10.1177/0095399705277136 INSTITUTIONS
2005

THE THINNING OF ADMINISTRATIVE

INSTITUTIONS IN THE HOLLOW STATE

LARRY D. TERRY
The University of Texas at Dallas

During the past 20 years or so, governments worldwide have embarked on an ambitious
journey to improve government performance. Relying on a multitude of administrative tech-
nologies broadly classified under the heading of the New Public Management (NPM), re-
formers have sought to radically change the manner in which the public’s business is con-
ducted. Although the verdict is still out, evidence is accumulating that NPM philosophy and
practices may have produced unintended consequences. The author argues that in addition
to contributing to an increasingly hollow state, NPM philosophy and practices have contrib-
uted to a phenomenon described as the thinning of administrative institutions. Thin institu-
tions are weak; they lack the capacity for good administration—a requirement for maintain-
ing the American people’s confidence in government.

Keywords: thin institution; hollow state; new public management; reform

Students of administration remain generally of the opinion that the values

and practices of American Business can be accepted for governmental ad-
ministration with only slight reservations. There is an aura of explicit doubt
and skepticism about all of these tenets.
—Dwight Waldo (1984)

Milward, Provan, and Else (1993) introduced the term hollow state into
the public affairs community. Drawing on the private-sector idea of the
hollow corporation, Milward and his associates use the metaphor of the
hollow state to “describe the nature of the devolution of power and

AUTHOR’S NOTE: This article draws on a chapter in The Administrative State Reconsid-
ered, with John Cadigan, Robert Durant, Donald Kettl, Howard McCurdy, Patricia Ingraham,
Norma Riccucci, David Rosenbloom, Barbara Romzek, and Larry D. Terry, which is being
published by Georgetown University Press.
ADMINISTRATION & SOCIETY, Vol. 37 No. 4, September 2005 426-444
DOI: 10.1177/0095399705277136
© 2005 Sage Publications

426
 Terry / THINNING OF ADMINISTRATIVE INSTITUTIONS 427

decentralization of services from central governments to subnational gov-

ernments, and by extension to third parties—nonprofit agencies and pri-
vate firms—who increasingly manage in the name of the state” (p. 193).
Stated simply, the hollow state refers to the extent to which governments
are directly involved in providing services. Although scholars have used
other terms to describe the same phenomenon, the metaphor of the hollow
state is now widely recognized as the term of choice among those who talk
and write about the changing nature of the public sector.1
When Milward and his coauthors (1993) directed our attention to the
hollow state, the phenomenon was in its infant stages of development, but
it was rapidly maturing as administrative technologies such as contracting
out, deregulation, and other forms of privatization gained widespread
popular and political support. As the march toward an increasingly hol-
low state proceeded with deliberate speed, writers across a spectrum of
disciplines sought to understand its nature, characteristics, and admini-
strative requirements as well as its implications for democratic gover-
nance (Milward, 1996; Milward & Provan, 2000; Peters, 1994). These
scholarly efforts have provided important insights into the hollow state
phenomenon.
We now know a great deal about the hollow state. We know that public
managers need different competencies and skill sets to effectively func-
tion in the hollow state (Johnston & Romzek, 1999; Kettl, 1993; Milward,
1994; Praeger & Desai, 1996; Savas, 2000; Van Slyke, 2003; Wallin,
1997). We know that an increasingly hollow state raises important ques-
tions about democratic accountability and, in turn, the legitimacy of the
administrative state (Bardach & Lesser, 1996; Box, Marshall, Reed, &
Reed, 2001; Milward & Provan, 2000; Peters, 1994; Terry, 1998a).
Finally, we know that administrative technologies primarily used to create
the hollow state are integral components of a global revolution in public
management broadly described as the New Public Management (NPM;
Aucoin, 1995; Boston, Martin, Pallot, & Walsh, 1996; Hood, 1991,
1995a, 1995b; Kettl, 1997). This revolutionary approach to public man-
agement and its effect on administrative institutions forced to function in
an increasingly hollow state is the focus of our attention.
In this article, I argue that NPM philosophy and practices have contrib-
uted to an increasingly hollow state with thinning administrative institu-
tions. I make the case that thin administrative institutions are fragile
(Comfort, 2002). Fragile institutions lack the integrity and, in turn, the
capacity to effectively serve the public good. In pursuing this line of
428 ADMINISTRATION & SOCIETY / September 2005

argument, I assert that fragile administrative institutions are weak; weak

institutions lack the capacity for good administration. This is a matter of
great concern, for as Alexander Hamilton (1787) wisely informs us in
Federalist 27, the American public’s confidence in government is “pro-
portioned to the goodness or badness of its administration” (p. 172). The
thinning of administrative institutions merely exacerbates the erosion of
public confidence in government (Nye, Zellikow, & King, 1997; Orren,
1997; Ruscio, 1996, 1997). The current state of affairs deserves serious
consideration; it raises troubling questions about the long-term stability of
the U.S. constitutional democracy.
I begin by briefly discussing the NPM. This discussion is guided by the
premise that the NPM movement is, in many respects, a response to the
crisis of the Western state created by market libertarians (Cohn, 1997).
Special attention is devoted to the two dominant approaches of the NPM
movement, liberation management and market-driven management.
Next, I discuss the concept of thin institutions. Drawing on the institu-
tional theories of Philip Selznick (1957, 1992) and Richard Scott (1995), I
offer a theoretical framework for examining and assessing the capacity of
administrative institutions. I use this framework and concrete examples to
illustrate how NPM reforms are contributing to the thinning of adminis-
trative institutions. Finally, I conclude by speculating on what this may
mean for the U.S. constitutional democracy.

CRISIS, REFORM, AND THE NPM

The Dutch scholars Arjen Boin and Paul ‘t Hart (2003) make a con-
vincing argument about the relationship between crisis and reform. In a
probing analysis of public leadership in times of crisis, Boin and ‘t Hart
argue that crises provide golden opportunities for reforming institutional
structures and long-standing policies (p. 545). Although Boin and ‘t Hart
challenge aspects of the so-called crisis-reform thesis, they acknowledge
that political leaders use and in some instances create crises to generate
momentum for governmental reform efforts.
Boin and ‘t Hart (2003) assert that “reform leadership is an exercise in
creative destruction” as “old structures must be destroyed before new ones
can be implemented” (p. 549). They advise reform-minded public leaders
to “exploit the crisis damage” and to “build support for nonincremental
reform” by portraying “crises as the result of flaws in the existing
 Terry / THINNING OF ADMINISTRATIVE INSTITUTIONS 429

institutional order” (p. 549). Leaders are told to make frequent, strong
public pronouncements about their commitment to drastic changes.
Boin and ‘t Hart’s (2003) crisis-reform thesis and related reform
imperatives are illuminating, especially when they are viewed in light of
the global governmental reform initiatives of the last 20 years or so.
Beginning with Ronald Reagan in the United States and Prime Minister
Margaret Thatcher in the United Kingdom, political leaders of the market
libertarian persuasion (James, 1992) sought to create a sense of crisis to
achieve a wide-ranging restructuring of the public sector. To achieve this
end, they used multiple strategies, including “rhetoric and policy deci-
sions to undermine the capabilities of the state, turning the macrocrisis of
Western society into a crisis of the western state [italics added]” (Cohn,
1997, p. 596; see also Aucoin, 1995). By vilifying the administrative state
in general and public servants in particular, market libertarians attempted
to create a climate of discontent (Terry, 1997). The desired result was a cri-
sis that demanded radical changes in the fundamental nature of the state.
Daniel Cohn (1997) astutely observes that “neoconservative govern-
ments, lead by committed market libertarians” were determined to change
the “purposes and operating values of the state” (p. 586). According to
Cohn, market libertarians were unified in their goal of protecting the mar-
ket from society’s demand. This was a radical departure from the goal of
protecting society from the market’s demands, a dominant characteristic
of the Keynesian welfare state (p. 586).
Market libertarians, with the support of the more pragmatic market lib-
erals, were successful in turning the macrocrisis of Western society into a
crisis of the Western state (Cohn, 1997; James, 1992; Jessop, 1993, 1995).
In English-speaking democracies especially, political leaders exploited
the crisis by blaming the state for slow economic growth, inflationary
wage pressures, and a multitude of other economic and social ills. Consis-
tent with the arguments advanced by Boin and ‘t Hart (2003), market lib-
ertarians communicated a sharply honed message: The only way to turn
the situation around was to drastically reform the public sector by imple-
menting management technologies compatible with the new so-called
Schumpeterian workfare state (Cohn, 1997; Jessop, 1993). This required
dismantling and abandoning traditional administrative management prac-
tices of the Keynesian welfare state (Barzelay, 1992; Osborne & Plastrik,
1997; Roberts & Bradley, 2002) and replacing them with management
technologies conveniently organized under the label of the NPM.
430 ADMINISTRATION & SOCIETY / September 2005

THE NPM AND THE RESTRUCTURING OF GOVERNANCE

Governments worldwide responded to the market libertarians’ mes-

sage and adopted NPM philosophy and practices. Countries as diverse as
New Zealand, Zambia, Japan, Italy, Portugal, Turkey, Chile, France, Sin-
gapore, and Australia aggressively pursued sweeping governmental
reforms (Haque, 2001; Hood, 1995a, 1995b; Organisation for Economic
Cooperation and Development, 1995). With an evangelical zeal, NPM
believers sought to covert others by enthusiastically proclaiming that the
“New Public Management was here to stay” (Borins, 1995, p. 122). But
what exactly does this mean? Moreover, what is the NPM? Answers to
these questions have been subject to intense debate.
At least as far back as 1991 when Christopher Hood published his sem-
inal article “A Public Management for All Seasons?” NPM has been
debated at professional conferences and in the scholarly literature (Jones,
2002; Jones, Schedler, & Wade, 1997; Kettl, 1997; Terry, 1998b; Thomp-
son, 1997). Scholars have debated the origins and theoretical foundation
of NPM (Gruening, 2001), questioned whether NPM represents a sepa-
rate and distinct field of public-management inquiry (Barzelay, 1999;
Lynn, 1998; Mathiasen, 1999), and pondered whether NPM is a passing
fad (Jones, 2002; Lynn, 1998). Although this debate is far from over, there
is at least general agreement on the theoretical foundation of NPM. Schol-
ars agree that managerialism (Enteman, 1993; Pollitt, 1990), public-
choice theory (Buchanan & Tullock, 1962), transaction-cost economics
(Williamson, 1995), and principal-agent theory (Jensen & Meckling,
1976; Mitnick, 1975; T. Moe, 1984; Wood, 1989) are important influ-
ences. The complex mixture of these theoretical perspectives has pro-
duced what I describe elsewhere as the neo-managerialist ideology or
neo-managerialism (Terry, 1998a).2
Neo-managerialism provides the philosophical foundation for two dif-
ferent approaches associated with the NPM. The first of these, liberation
management, is based on the idea that public managers are competent and
highly skilled individuals familiar with good management practices.3
Consequently, managerial malfeasance is not a plausible explanation for
the supposed poor performance of public agencies. If managerial incom-
petence does not explain the shortcomings of administrative institutions,
what does? Critics of liberation management offer a host of answers, but
its proponents give a clear, unambiguous response: The bureaucratic sys-
tem, with its burdensome rules, controls, and procedures, is largely
responsible for poor government performance. Stated a bit differently, the
 Terry / THINNING OF ADMINISTRATIVE INSTITUTIONS 431

dysfunctional bureaucratic system has incarcerated public managers, lim-

iting their freedom to improve government performance (Gore, 1993). To
achieve better results, public managers must be freed (liberated, many
say) from what is condemned as senseless red tape. As Peter Aucoin
(1995) notes, advocates of liberation management argue that politicians
and others must let managers manage (Boston et al., 1996; Kettl, 1997; see
also Aucoin, 1995). How are public managers to secure their freedom
from an evil, oppressive bureaucratic system? Supporters of liberation
management offer a variety of interrelated strategies ranging from dereg-
ulating the internal management of public agencies to decentralizing and
streamlining various management processes such as procurement, human
resources, and budgeting (Kelman, 1987; Osborne & Gaebler, 1992).
The second concept, market-driven management, provides a lightning
rod for scholarly discussion of NPM (Box et al., 2001; deLeon &
Denhardt, 2000; Denhardt & Denhardt, 2000; Gawthrop, 1999; Stivers,
2000). Two basic premises guide market-driven management. One is the
presumed advantage of competition; the other is the perceived superiority
of private-sector technologies and practices. With regard to competition,
supporters of market-driven management rely on neoclassical economics
and its admiration for the belief in the efficiency of the markets (Peters,
1996). From this perspective, competition refers to the “creation of inter-
nal markets in an attempt to reform the public sector from the inside”
(Loffler, 1997, p. 7; see also Considine, 2001, p. 28; Peters, 1996, p. 28).
Proponents of market-driven management make the compelling argu-
ment that exposing public managers to market forces motivates them to
improve their performance (Boston et al., 1996; Kettl, 1997). In the world
of market-driven management, competition is a proven strategy to make
managers manage (Aucoin, 1995; Kettl, 1997).
The perceived superiority of private-sector practices and technologies
has a long tradition. Champions of market-driven management argue that
any effort to distinguish between public and private management is mis-
guided and urge public-sector managers to learn from their private-sector
brethren. This certainly makes sense if one presumes that management is
management (Peters, 1996, p. 28) and that the record of private-sector
managers speaks for itself.
Guided by the neo-managerialist ideology, supporters of both libera-
tion and market-driven management sought to radically transform the
public manager’s role (Barzelay, 1992; Roberts & King, 1996; Schnieder,
Teske, & Mintrom, 1995). Public managers are strongly encouraged to
reinvent themselves, relying primarily on private-sector management
432 ADMINISTRATION & SOCIETY / September 2005

theory rather than theories of democratic governance (deLeon &

Denhardt, 2000). They are instructed to become innovators and risk takers
(Borins, 2000) to radically alter institutional structures, practices, and
norms. In other words, public managers are expected to assume the role of
entrepreneur.
In the United States, the public entrepreneurship model is by far the
most widely recognized model of administrative leadership. Just why
Americans are infatuated with public entrepreneurship is a question to
ponder. Despite its popularity, public entrepreneurship has been subjected
to intense criticism. Its critics charge that public entrepreneurship con-
flicts with democratic theory (deLeon & Denhardt, 2000; Diver, 1982;
Gawthrop, 1999; Goodsell, 1993; R. Moe, 1994; Stever, 1988; Terry,
1993, 1998a). Champions of public entrepreneurship have not let such
criticism go unanswered: They contend that public entrepreneurship
poses no threat to democracy if it is “civic regarding” (Bellone & Goerl,
1993). Moreover, proponents assert that little empirical evidence has been
presented to substantiate the claim that public entrepreneurship poses a
threat to democracy (Borins, 2000).
The spirited debate concerning NPM and public entrepreneurship has
focused primarily on the extent to which neo-managerialist philosophy
and practices undermine or strengthen values that are highly prized in the
U.S. constitutional democracy. Whereas effectiveness, efficiency, and
economy are given adequate attention, the protection of values such as
accountability, fairness, justice, and representation are central to the
debate. What is missing from the debate, however, is a discussion of the
long-term effects of NPM philosophy and practices on the integrity of
administrative agencies. This is an important question within the context
of NPM and reform efforts to reinvent government. Public entrepreneurs,
especially those who embrace the neo-managerialist ideology and with it
the principles and practices of liberation and market-driven management,
are contemptuous of established institutional structures, practices, and
norms. Armed with a multitude of reform strategies such as privatization,
contracting out, user chargers, vouchers, decentralization, and downsiz-
ing (to name a few), the new public manager is expected to radically
transform administrative institutions of government.
Although the verdict is still out, evidence is accumulating that NPM
philosophy and practices may have produced unintended consequences.
In addition to contributing to an increasingly hollow state with a unique
set of administrative and institutional challenges, NPM philosophy and
practices have weakened the capacity of many public agencies. Both
 Terry / THINNING OF ADMINISTRATIVE INSTITUTIONS 433

liberation management and market-driven management have contributed

to a phenomenon I describe as the thinning of administrative institutions. I
now explain this concept in more detail, drawing on the institutional theo-
ries of Philip Selznick (1957, 1992) and Richard Scott (1995).

THE THINNING OF ADMINISTRATIVE INSTITUTIONS:

AN ANALYTICAL FRAMEWORK

Philip Selznick’s (1957) Leadership in Administration: A Sociological

Interpretation is widely regarded as a classic work in the area of institu-
tional theory. Selznick’s exposé on institutional leadership addresses a
variety of topics ranging from the importance of defining and redefining
an institution’s mission to the defense of institutional integrity. The latter
is of special interest here.
Selznick (1952) introduced the concept of institutional integrity in a
study of communist organization. It was not until the publication of Lead-
ership in Administration, however, that the concept attracted serious
attention. In describing what he means by the “institutional embodiment
of purpose” (p. 90), Selznick explains the meaning and importance of
institutional integrity. He suggests that it is the responsibility of the leader
as statesman to protect the “institution’s distinctive values, competence
and role” (p. 119). This is what he means by the defense of institutional
integrity. Selznick contends that an institution’s integrity is vulnerable to
corruption when its values are “tenuous or insecure” (p. 120).
More than 30 years later, in the Moral Commonwealth: Social Theory
and Promise of Community, Selznick (1992) offers a more complex and
developed notion of institutional integrity. Although the essence of the
concept remains the same, Selznick examines integrity from the perspec-
tive of the moral institution. After discussing the concept of identity and
character and their relation to institutional integrity, Selznick explains the
idea of integrity this way:

A test of moral character is the idea of integrity. This idea brings morality to
bear in a way that respects autonomy and plurality of persons and institu-
tions. The chief virtue of integrity is fidelity to self-defining principles. To
strive for integrity is to ask: What is our direction? What are our unifying
principles? And how do these square with the claims of morality? . . . .
Integrity involves wholeness and soundness . . . . Integrity has to do with
principles, and therefore with principled conduct . . . . What counts as integ-
rity, and what affects integrity, will be different for a university press or a
434 ADMINISTRATION & SOCIETY / September 2005

commercial publisher; for a constitutional court and a lower court; for a

regulatory agency and a highway department. Each type of institution has
special functions and values; each has distinctive set of unifying principles.
(pp. 322-324)

Selznick’s (1992) notion of institutional integrity is central to the idea

of thin institutions. Let me use the analogy of ice on a frozen lake to clarify
this point. When the ice on a frozen lake is several inches thick, it can sup-
port the weight of ice skaters and those who wish to engage in the sport of
ice fishing. The thicker the ice, the more integrity or strength it has. In this
case, one can speak of the ice on the lake as safe and sound. If the ice were
thin, however, we would have a totally different scenario. The thinner the
ice, the more problematic it becomes in terms of safely supporting the
weight of recreational skaters and fishermen. The thinner the ice, the more
it lacks integrity. Consequently, we can say that thin ice on the lake has a
high probability of collapsing if subjected to too much weight. Obviously,
the exact point at which the thinly layered ice is likely to collapse is con-
tingent on the density of the ice and the amount of weight applied to it. The
analogy of ice on a frozen lake can be applied to administrative institu-
tions as well. Richard Scott’s (1995) institutional framework, when com-
bined with a modified version of Selznick’s (1957, 1992) idea of institu-
tional integrity, is helpful here.
In a comprehensive overview of the institutionalist approach to organi-
zation theory, Scott (1995) provides an analytical framework that identi-
fies three essential elements or pillars of an institution (p. 47). These pil-
lars are described as regulative, normative, and cognitive systems. An
institution’s regulative system is designed to constrain and standardize
behavior. According to Scott, the regulative system is primarily con-
cerned with “rule-setting, monitoring, and sanctioning activities” (p. 52).
In the tradition of Chester Barnard (1938), Scott (1995) states that “regu-
latory processes involve the capacity to establish rules, inspect others’
conformity to them, and as necessary, manipulate sanctions—rewards or
punishments—in an attempt to influence future behavior” (p. 52).4
The institution’s normative system consists of norms and values that
determine what is desirable and define how organizational members are to
go about achieving preferred goals and objectives. Scott (1995) suggests
that the normative system places an emphasis on “normative rules that
introduce a prescriptive, evaluative, and obligatory dimension into social
life” (p. 54). The normative system performs the important function of
stabilizing norms and values that are internalized and considered
 Terry / THINNING OF ADMINISTRATIVE INSTITUTIONS 435

TABLE 1
Institutional Elements and Carriers

Elements
Carriers Regulative Normative Cognitive

Cultures Rules, laws Values, expectations Categories, typifications

Structures Governance systems, Regimes, authority Structural isomorphism,
power systems systems identities
Routines Compliance, Conformity, performance Performance programs,
obedience of duty scripts

SOURCE: Scott and Christensen (1995).

compulsory by others. As noted by Scott, “shared norms and values” are

“regarded as the basis of a stable social order” (p. 56).
The third pillar, cognitive systems, concentrates on constitutive rules
embedded in cultural systems. Constitutive rules assist organizational
members in interpreting and making sense out of their world, especially as
it relates to determining “what kinds of action can be taken by what kind of
actors” (Scott & Christensen, 1995, p. xviii). The cognitive system sensi-
tizes organizational members to the “socially mediated construction of a
common framework of meaning” (Scott, 1995, p. 58).
Scott (1995; Scott & Christensen, 1995) uses the concepts of regula-
tive, normative, and cognitive systems as the foundation for building a
definition of institutions. With the proceeding discussion as a backdrop,
he offers the following definition:

Institutions consist of cognitive, normative, and regulative structures and

activities that provide stability and meaning to social behavior. Institutions
are transported by various carriers—culture, structures, and routines—and
they operate at different levels of jurisdiction. (Scott & Christensen, 1995,
p. xiii)

Table 1 depicts the three pillars and the three types of carriers contained
in Scott’s definition.
When combined with a somewhat modified version of Selznick’s
(1952, 1957, 1992) idea of institutional integrity, Scott’s (1995; Scott &
Christensen, 1995) institutional framework provides a valuable analytical
device for examining and assessing the capacity of administrative institu-
tions. With this in mind, we can say that institutional integrity refers to the
overall strength and soundness of an institution’s regulative, normative,
436 ADMINISTRATION & SOCIETY / September 2005

and cognitive systems that provide stability and meaning to social behav-
ior. A thin institution lacks integrity because of the erosion and, in turn,
weakening of its regulative, normative, and cognitive systems. I use this
conceptualization of thin institution in discussing the effect of NPM phi-
losophy and practices on the capacity of administrative agencies.

NPM REFORMS AND THE THINNING

OF ADMINISTRATIVE INSTITUTIONS

In summarizing our earlier discussion, it was noted that liberation

management and market-driven management are the standard bearers of
the NPM. As may be recalled, advocates of liberation management argue
that public managers must be liberated from a bureaucratic system
plagued by cumbersome rules, regulations, and red tape. Proponents of
market-driven management labor under the assumption that increased
competition and strict adherence to private-sector management practices
are key ingredients to making public managers manage, thereby improv-
ing the performance of administrative agencies. Although both liberation
management and market-driven management have produced some posi-
tive results, each has also contributed to the thinning of administrative
institutions. Many public agencies now lack the required integrity to ful-
fill their mandated responsibilities.

THE THINNING OF REGULATIVE SYSTEMS

In their zeal to eliminate rules, regulations, and so-called red tape,

advocates of liberation management failed to recognize the important role
that rules and regulations play in strengthening the capacity and integrity
of administrative institutions. As noted by Scott (1995) and other promi-
nent organization theorists (Cyert & March, 1963; DiMaggio & Powell,
1983; March & Olson, 1989; Meyer & Rowan, 1977), rules are a stabiliz-
ing force; they structure conduct in organizations. William Ocasio (1999)
makes this clear when he states:

Rules are embodied in the policies, programs, procedures, routines, and

conventions around which organizational activities are constructed. They
comprise the knowledge, capabilities, beliefs, values, and memory of the
organization and its members and are invoked in response to internal and
external stimuli. Rules are . . . tools that both empower and control the
 Terry / THINNING OF ADMINISTRATIVE INSTITUTIONS 437

social construction of organizational practices. They are . . . a guide for

organizational adaptation and change. (p. 386)

The indiscriminate attacks on rules and red tape are misguided (see
Goodsell, 2000). Herbert Kaufman’s (1977) oft-quoted maxim that “one
person’s red tape is another’s treasured procedural safeguard” (p. 4) cer-
tainly deserves serious consideration. As one observes the rhetoric and
action of those who march under the banner of liberation management, it
becomes readily apparent that rules and regulations are to be avoided,
much like the SARS virus (see Aucoin, 1995). This line of thinking has
contributed to thin regulative systems. Thin regulative systems undermine
the integrity of administrative institutions and weaken their capacity to
serve the common good. A concrete case involving the Federal Aviation
Administration’s (FAA) misuse of purchase cards drives this point home.
The General Services Administration (GSA) is delegated authority and
responsibility for administering the federal government’s credit card pro-
gram. The GSA frequently enters into contractual agreements with com-
mercial banks to secure credit cards for federal employees to use for offi-
cial business. According to the General Accounting Office (GAO), this
method of payment is “intended to streamline procurement and payment
procedures and reduce administrative burdens by reducing the number of
procurement requests, purchase orders, and vendor payments issues”
(United States GAO, 2003, p. 5). The GAO stated that the “benefits of
using purchase cards are lower costs and less red tape [italics added] for
both the government and the vendor community” (p. 1).
The Department of Transportation and Related Agencies Appropria-
tions Act of 1996 exempted the FAA from the Federal Acquisition Regu-
lations and other related laws. Congress gave the FAA the autonomy and
authority to develop and implement its own procurement system. The
agency adopted a decentralized acquisition system, allowing regional
offices to develop their own purchase-card programs and methods for
monitoring and controlling the use of such cards. In the spirit of liberation
management, the FAA’s specialized purchase-card program was designed
to liberate acquisition managers from the red tape of the procurement
process.
In September 2001, the Department of Transportation’s Office of the
Inspector General released a report critical of FAA’s purchase-card pro-
gram. This report prompted Congressman Don Young, chairman of the
Committee on Transportation and Infrastructure, to ask the GAO to
review the FAA’s purchasing controls and activities. What the GAO found
438 ADMINISTRATION & SOCIETY / September 2005

was disturbing. The GAO reported numerous weaknesses in the FAA’s

purchase-card controls and stated that such weakness “resulted in instan-
ces of improper, wasteful, and questionable purchases, as well as missing
assets.” GAO identified $5.4 million in improper purchases.
The FAA’s brief journey into the world of liberation management is a
textbook case of bad administration. The FAA’s misuse of taxpayers’ dol-
lars does little to increase the American public’s confidence in government.

THE THINNING OF NORMATIVE SYSTEMS

As mentioned, the institution’s normative system performs an impor-

tant function by determining and reinforcing desired values and norms.
NPM practices, especially those associated with market-driven manage-
ment, are thinning the normative systems of administrative institutions.
This is readily apparent when one considers the increased use of downsiz-
ing as a strategy for lowering costs and increasing productivity.
Downsizing entails the divestiture of human assets (Fisher & White,
2000). At the federal government level, many agencies adopted downsiz-
ing as management strategy in response to the so-called reinventing gov-
ernment movement promoted by the Clinton administration. The United
States GAO (2000) reported that the nonpostal civilian workforce is
smaller than it was more than a decade ago. The federal workforce was
reduced from approximately 2.3 million employees in fiscal 1990 to
fewer than 1.9 million in 1999 (p. 7). This reduction was aggravated by the
fact that a number of federal agencies drastically reduced or froze their
hiring efforts for extended periods of time. While reducing the size of the
workforce, these measures also “reduced the influx of new people with
new skills, new knowledge, new energy and ideas” (United States GAO,
2001, p. 22). The manner in which the downsizing was implemented has
resulted in serious short-term and long-term consequences. In an earlier
report addressing the adverse consequences of poorly planned and exe-
cuted downsizing, the United States GAO (2000) offers the following
assessment:

A lack of adequate strategic and workforce planning during the initial

rounds of downsizing by some agencies may have affected their ability to
achieve organizational mission. Some agencies reported that downsizing in
general led to such negative effects as loss of institutional memory [italics
added] and an increase in work backlogs. (p. 7)
 Terry / THINNING OF ADMINISTRATIVE INSTITUTIONS 439

These comments are insightful as they reveal the thinning of many

agencies’ normative systems. The loss of institutional memory seriously
weakens an agency’s capacity. The departure of institutional elders—
those individuals who possess extensive knowledge, expertise, and valu-
able information about an organization’s history—because of agency
downsizing jeopardizes the security of institutional values and norms.5
With the massive exodus of institutional elders, agencies lose the ability to
transmit and protect values and norms (Selznick, 1957). This weakens
their integrity.

THE THINNING OF COGNITIVE SYSTEMS

In the previous discussion regarding cognitive systems, I noted that this

particular institutional element assisted organizational members in inter-
preting and making sense of their world. Both liberation and market-
driven management have altered constitutive rules, thereby complicating
the sense-making process for managers in many agencies. With the elimi-
nation of important rules and regulations and the loss of institutional
memory, public managers are experiencing difficulty in interpreting and
adapting to wider belief systems and cultural frames imposed on the
agency. This has serious consequences for agencies in terms of their
capacity to respond to external pressures requiring that they become
isomorphic (DiMaggio & Powell, 1983).

CONCLUSION

I opened this article with a quote from Dwight Waldo’s (1984) The
Administrative State warning us about the potential problems of blindly
accepting the philosophy and practices of American business. As has
often been the case, Waldo was right on target. The ideas embodied in both
liberation management and market-driven management, if swallowed
whole, may not serve democracy well. We in the public administration
community must take Waldo’s comments to heart. There is a great deal at
stake, namely the stability of U.S. constitutional democracy.
I have argued that the thinning of administration institutions is an issue
that deserves our undivided attention. We must take corrective action to
reverse this trend because thin institutions are weak institutions; weak
institutions lack the capacity for good administration. And as I noted on
several occasions, good administration is a necessary requirement for
440 ADMINISTRATION & SOCIETY / September 2005

restoring the American people’s trust and confidence in government. The

analytical framework presented here is a modest attempt to shed some
light on a vexing problem that threatens the very core of our precious
constitutional democracy.

NOTES

1. As Milward, Provan, and Else (1993, p. 310) note, scholars have used terms such as the
shadow state, government by proxy, third-party government, and the contracting regimes to
describe the hollow state phenomena.
2. This discussion of neomanagerialism and the new public management is based on
Terry (1998a).
3. The term liberation management was popularized by Thomas Peter (1992), but it did
not gain intellectual currency until Paul Light (1997) used it to describe one of his four “tides
of reform.”
4. Scott (1995) suggests that an institution’s regulative system primary mechanism for
control is coercion (p. 53). Although he relies on DiMaggio and Powell’s (1983) typology,
the intellectual roots of using coercion as a control mechanism can be traced back to Chester
Barnard’s (1938) discussion of methods of persuasion (pp. 142-148).
5. The term institutional elder was coined by Linda M. Terry. I would like to thank her for
sharing this concept with me.

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Larry D. Terry is the executive vice provost for academic affairs and a professor of
public administration at the University of Texas at Dallas. He is the editor in chief of
Public Administration Review and a fellow of the National Academy of Public
Administration.