Leadership and Bureaucracy

Abstract

In the midst of state budget cuts, Director Victor Wirth transformed the Illinois Department on Aging (IDOA) from a demoralized agency drowning in the paperwork of a massive compliance system into a cooperative organization devoted to service quality. I develop and apply a game-theoretic model of IDOA that shows how and why the management strategies pursued by Wirth brought about this transformation. Combining the model with detailed empirical evidence, I identify the key factors that allowed Wirth to lead the agency to a new equilibrium. His detailed knowledge of the strategic structure of IDOA allowed him to choose a new equilibrium. His desire and ability to communicate with every level involved in the implementation of the CCP as well as his considerable autonomy from the governor enabled him to create, articulate, and implement the strategies necessary to change the equilibrium. And finally his reputation in the aging field served as a bond that allowed him to enforce the new agency equilibrium, thereby overcoming problems of renegotiation proofness. This article also provides an empirical illustration of the folk theorem.