The Effect of Contracting on Organizational Communication: Evidence from US Transit Agencies
*Names in bold indicate Presenter
One notable change in today’s public organizations is the increasing delegation of service delivery to a third-party organization through contractual arrangements. Previous studies have extensively looked at how contracting affect organizational efficiency and effectiveness (Boyne, 1998; Fernandez, 2009; Miranda & Lerner, 1995; Smirnova & Leland, 2014; Zullo, 2008). Yet contracting can also influence organizational communication patterns by decreasing managerial control over information and changing roles and interactions among organizational members. With a higher level of contracting, there can be more tensions and competition over resources, fragmented authority and responsibility as well as physical distance between public organizations and contractor’s employees, all of which can hinder organizational communication. At the same, the effect of contracting can vary depending on the relationship between public organizations (i.e. principal) and the contractors (i.e. agents), such as the duration and heterogeneity of the contracts.
This paper explores the impact of contracting on organizational communication, using the empirical evidence from the U.S. public transit sector: does the level of contracting affect organizational communication? How does the effect vary based on the characteristics of the principal-agent relationships? We test our hypotheses using data from a 2019 national survey on approximately 1000 top managers in operations, maintenance, engineering, service planning and strategic planning across the 300 largest fixed-route transit agencies in the U.S. metropolitan areas. The analysis will examine various characteristics of the principal-agent relationships including the ratio of overall contracting, duration and stability of relationships with contractors, and the type of contractors (i.e. public vs private organizations and organizational size of the contractors). Data about contracting comes from the National Transit Database.
Results provide important implications for public management as many public organizations across multiple fields (e.g. transportation, health care, housing) are contracting out the provision of public services. At the same time, public organizations are increasingly vulnerable to unexpected events, such as extreme weather, political protests, and cyber-security attacks, that increase the need for effective organizational communication. Understanding how contracting affects organizational communication is therefore a timely question to enhance public organizations’ operations and outcomes.