Performance Gaps and Managerial Decisions: A Bayesian Decision Theory of Managerial Action Kenneth J. Meier,* ,† Nathan Favero,* Ling Zhu ‡ *Texas A&M University; † Cardiff University; ‡ University of Houston ABSTRACT An extensive literature finds that managerial decisions matter for the performance of public organizations, yet little attention has been devoted to why managers make the decisions that they do. This article builds a theory of public management decision making based on the simple assumption that managers are concerned with performance and the perfor- mance gaps of their organization. Using a logic borrowed from bounded rationality and Bayesian decision theory, we theorize a set of prior expectations. Whether the organiza- tion meets these expectations or fails to do so is then used to specify a series of precise hypotheses about when managers make a variety of decisions including when to seek additional information, take risks, decentralize the organization, determine goals, or select a managerial strategy as well as other managerial actions. The logic of the theory can easily be extended to decisions about selecting goals or managerial strategy. We then extend the basic theory by considering multiple goals, hierarchy, and alternative theoretical approaches. The study of public 1 management is characterized by a strong belief and substantial evidence that what managers do matters for the performance of public organizations (Ingraham, Joyce, and Donahue 2003; O’Toole and Meier 2011; Pollitt and Bouckaert 2000; Simon 1947). Although a growing literature documents the impact of manage- ment on performance (Boyne 2003; Rainey 2014), there is substantially less focus on why managers make the decisions that they do. This absence of attention is surprising because there is a massive prescriptive theory on how managers should decide (Blake Address correspondence to the author at kenneth-j-meier@pols.tamu.edu. We would like to thank Lotte Bøgh Andersen, Simon Calmar Andersen, Rhys Andrews, Jens Blom-Hansen, Ohbet Cheon, Carla Flink, Nehemia Geva, Erik Godwin, David Lewis, George Krause, Martin Lodge, Steve Martin, Angel Molina, Poul Aaes Nielsen, Laurence J. O’Toole, Nicolai Petrovsky, Hal G. Rainey, James Rogers, Amanda Rutherford, Brian Shreck, Søren Serritzlew, Camilla Denager Staniok, Andrew Whitford, Søren Winter, Sam Workman, and seminar participants at the Danish Institute for Social Research, the Cardiff School of Business, the London School of Economics, and the LBJ School of Public Affairs for comments on previous versions of this article. 1 The theory presented here is very general and could easily be applied to managers in nonproit and private sector organizations. Speciic studies using this theory could actually probe whether public and private managers make the same decisions given similar situations. JPART doi:10.1093/jopart/muu054 © The Author 2015. Published by Oxford University Press on behalf of the Journal of Public Administration Research and Theory, Inc. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com. Journal of Public Administration Research and Theory Advance Access published January 7, 2015 at Texas A&M University Evans Library on January 9, 2015 http://jpart.oxfordjournals.org/ Downloaded from