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Competition, Imitation, and Punishment in the Design of Bureaucratic Performance

Summarizing the evidence accumulated from both dimensions – vertical and horizontal –
we find that two core themes emerge. The first is that all decisions about how to structure
regulatory organizations involve tradeoffs. From macro decisions associated with positioning
regulatory organizations within or outside the reach of the central government to those
considering whether to encourage personnel within the organization to work closely with each
other, no costless alternatives exist. While the types of tradeoffs can vary, organizational
decisions almost universally involve a tension between competing priorities, even if the tension
is not recognized at the time the design choice is made. Still, we argue that – unlike what is
commonly practiced by those leading design efforts – recognizing the blind spots associated with
any choice in design can allow a regulator to realize the benefits of a particular organizational
structure while mitigating the potential for the failures more likely to occur because of that same
The second theme that emerges from our survey is that organizational structure is as
much endogenously determined as it is decided ex-ante by policymakers. We show that a
regulator’s formal organization is critically impacted by organizational features that are not
always intended to affect its structure. These features can include the relative diversity or
similarity of the backgrounds of the regulator’s employees, the geographical proximity of its
functional units, and the degree of integration of the processes utilized by the organization.
Although many times these kinds of features are not instituted with the intention of affecting
how the regulatory agency is organized, they can serve either to reinforce or to reverse initial
structural decisions. Our observations suggest that, wherever possible, organizational structure
and its effects must be considered from the perspective of how the regulator actually operates.
Further, despite the fact that the formal structure of a regulator is often determined by politicians
and so may be largely beyond the control of those working in the organization – including its
leaders – these informal elements and features are very much within the control of those inside
the regulator. As a result, regulatory personnel may enjoy significant latitude to mitigate or
amplify the effects of the formal organizational design for the better functioning of the regulatory