The Dog That Didn't Bark: How Public Managers Handle Environmental Shocks

Do negative budgetary shocks reduce performance in public organizations? If so, by how much and in terms of which criteria? Are public managers able to make internal management choices to limit or eliminate the effects of such shocks? These questions are investigated in a set of hundreds of organizations over an 8‐year period. For the most part, budgetary shocks of 10 per cent or more have only limited or no negative impacts on performance in the short term. The most salient policy objective and production for more disadvantaged clientele are especially insulated from shocks. Decisions about internal resource allocation and personnel management can be shown to protect core production while sacrificing more peripheral activities and capital investment. Questions that remain to be investigated include whether short‐term protection comes at the expense of some longer‐term losses, and—ironically—whether effective management under such circumstances weakens over time the political case for adequate budgets.