Role of Leadership and Governance for Public Sector Sustainability

Introduction

The “public sector plays a key economic role as a regulator, service provider, and employer, and accounts for a significant share of economic activity in every country” (UNECE, 2017, p. 18), national, regional, and local levels. The public sector has many roles and functions, such as building and maintaining trust in the government, drafting rules and laws, ensuring social security, creating favorable institutional frameworks, providing quality services, and responding “to the needs of citizens and businesses” (European Commission, 2013, p. 6).

Public sector has multiple and competing objectives and often requires a balance to be stuck between competing values. Altruistic motivations (e.g., to support a community or the values of an organization) are also an important driver of public sector innovation efforts (Daglio et al., 2014). Public sector organizations have gained lot of importance in India, especially after the globalization due to the efforts of government. Many new strategies have been developed to empower them with strong and visionary leadership for effective governance. However, in spite of these efforts, the anticipated transformation in the overall performance of public sectors is yet to be achieved by the Indian public sectors and in general, by all the public sectors in the world. Lack of futuristic leadership is found to be one of the key challenges in this journey. Though, this statement is not valid for all the highly performing public sectors in India, it is applicable for many other public sectors which are yet to reach the acceptable levels of performance. Some of these unviable public sectors have been shut down or sold to private parties by the government in the recent past. At the same time, to develop the strong leadership, managements of these public sector organizations face many other challenges and issues. On the other side, India has witnessed a tremendous growth in private sectors through dynamic leadership of them.

The academic interest in public sector leadership grew more in the recent past with many authors contributing diverse strategies to manage this sector in a better manner leading to their long-term sustainability. However, studies with a specific focus on leadership as one of the prime contributor towards effective public sector governance have been very few. Thus, there exist a gap in the body of knowledge in this area, calling for an in-depth exploration of role and impact of leadership in public sectors. Therefore, considering this gap, the present chapter developed the following objectives.

Background

After independence, India pursued the path of development in which the public sector would play a vital role. Unfortunately, public sectors manifested themselves into loss-making enterprises with low-capacity utilization, overcapitalization due to severe cost overruns, and an inability to innovate and compete with global players. Rather than augmenting government resources, PSUs (Public Sector Units) started to become a cost center consuming capital resources for their survival (Khumawala 1997). With increasing constraints on resources and budgets, the Indian government has finally begun to ‘divest’ the so called state-owned ‘assets’, which have become more of a ‘liability’. However, inspite of its best efforts, the public sector in India needs to revamp its policies and procedures to move towards a robust, effective, viable entity to achieve long-term sustainability. With this background, a systematic literature review has been conducted by the authors to achieve the objectives of this chapter.