Following the publishing of Governance of Public Sector Organizations: Proliferation, Autonomy and Performance, we interviewed the book’s co-editors Per Lægreid (Professor at the Department of Administration and Organization Theory, University of Bergen) et Koen Verhoest (Associate Professor and research Manager at the Public Management Institute, Catholic University of Leuven) on the state-of-the-art of public organizations governance and its ongoing changes.
1. Could you please identify two main trends in the governance of public sector organizations?
Per Lagreid: A first trend from the mid-1980s is increased agencification implying establishment of semi-autonomous organizations at arm length distance from political executives. Another trend is that there is a layering or sedimentation process going on producing composite and hybrid organizational forms. Rather than replacing old reforms, new reform initiatives tend to be added to old reforms and mix with them in rather complex ways. Recently, we see that the agencification process has stalled to some extent and that it has been supplemented by whole-of-government reform initiative implying stronger central control and interorganizational coordination.
Koen Verhoest: Public administrations have been, so to speak, smitten by agency fever, but we are also seeing parallel processes of decentralization and centralization and of regulation and de-regulation. We see complex combinations of structural reforms, linked both to NPM and post-NPM doctrines. A central feature of these changes is that there is an unstable balance between autonomy and steering of the central agencies. Moreover, there is a layering process ongoing: Post-NPM reforms do not fully replace NPM-related reforms, but are supplementing them, resulting in increasingly complex public sector organizations.
2. Why this increasing complexity?
PL and KV: One answer to this is that increased complexity in society tends to enhance complex organizational forms. Digging more into this question we would argue that there is no one-factor answer to this complexity. There are different driving forces such as international reform doctrines, as well as external pressure from the technical as well as the institutional environment. Historical-institutional legacy and administrative tradition and culture are also important as well as polity features embedded in existing structural arrangements. The possibility for executing an active reform policy from the political and administrative executives is constrained as well as enabled by such factors.
3. Could you explain the link between changes of organizational forms and performance of the Public Sector? How do changes in formal organization lead to better performance?
PL: The evidence based knowledge about the effects and implications of different administrative forms is still rather patchy. The means-end knowledge and ability for ex ante rational-calculation of the impacts and effects of different organizational forms are rather weak among the reform agents. However, it is clear from empirical evidence that different organizational forms do matter and do affect the way public organizations operate and work in practice. But usually, there is not a one-to-one relationship between organizational forms and performance. Based on the empirical evidence we discuss in the book, we can say something about the direction of this relationship but we cannot give a precise forecast of the strength of the impacts. This has to do with the fact that context matter to a great extent but also with the ambiguity of the performance concept.
KV: Another factor that may explain this weak causal link is that the formal organizational form does not say much about the actual features, in terms of autonomy and control. A major finding is that de facto autonomy and control of public organizations may differ substantially from what is formally prescribed for the involved organizational form. Therefore, one needs to study the actual, and even perceived, levels of autonomy and control in order to understand the effects on performance. But even then, many other, mutually affecting, intervening factors come into play, like leadership and organizational culture, organizational size, the nature of the task at hand, the presence of clear objectives, etc. A major challenge for empirical research is to systematically study the interplay of these intervening factors, upon which the performance of public sector organizations is contingent.
4. What are the practical implications of these organizational changes? Could you provide us with a concrete example?
PL: One implication is that reformers score higher on political control than on rational calculation. The Achilles heel in administrative reforms seems to be that reform actors have limited understanding of the consequences and implications of their own reform initiatives. Another implication is that rather than purifying a single model we need a repertoire of models for political-administrative institutions to understand the future challenges of public management, administration and governance.
The public administration is multi-functional and has to balance different values and norms. Therefore it is normally not a question of hierarchy, networks or market. The main challenge is how they can be combined and be balanced in a supplementary way. Designers of public sector organizations have to be aware of the fundamental dialectics between basic organizational principles for coordination, specialization autonomy and control.
KV: We question if simple ideas of autonomy are a necessary condition for increased performance. Changing the organizational form of affiliation, as in agencification, is clearly not a panacea for all diseases, not even for underperformance. In situations with a weak understanding of the effects and implications of reform it might be wise to avoid major and controversial radical reforms based on big new ideas and to opt instead for more incremental change processes that enjoy high legitimacy among the reformers as well as the reformed. There is also a need to build feedback-loops and possibilities for experiential learning into the reform process so that adjustments can be made as reforms proceed.
5. What will be the perspective for the next decade in terms of managerial, policy and financial autonomy?
PL: To a greater extent, we have to address the different dimensions of autonomy such as managerial and policy autonomy. One of the biggest flaws in New Public Management was the separation of management from policy. One important lesson from the agencification reforms is that political salience and tasks matter as well as mutual trust relations and reputations. This means that contexts matter and it is not a single answer to the question.
KV: A public sector organization’s degree of autonomy is actually a product of balancing managerial autonomy with policy autonomy and financial autonomy with structural aspects of autonomy. The autonomy granted on one dimension to one agency, in the daily organizational life of this agency, may become less relevant if autonomy on other dimensions is lacking. The same holds for the control of public sector organizations, where ex ante control, ex post result-oriented, financial, structural control and control by contacts are combined in hybrid forms. Thus, designers of public sector organizations need to make complex choices and trade-offs when creating agencies, and when doing this, they need to use a multi-dimensional understanding of autonomy and control. Moreover, formal design and its actual functioning are two different realities. Although agencification does attenuate political steering signals, compared to departments, de facto political control does not always respect the formal logic of organizational form, like in the case of highly salient tasks or strategic behaviour by agency managers. Formal rules and regulations, which seemed functional when the agencies were created, may become obsolete after a while or are not enforced as they were intended to be. Designing an optimal formal-legal agency status by combining degrees of autonomy and control is not the whole story. There is an additional need for behavioural guidelines for politicians and bureaucrats how to handle and review autonomy, control, and mutual relations during the lifetime of an agency.
6. What do the ‘whole-of-government’ reforms imply? Better coordination and increased control?
PL: Whole-of-government initiatives are important first of all to handle the ‘wicked issues’ that are not following the borders between organizations policy areas or administrative levels. NPM reforms was first of all directed towards the principal-agent issues of how superior bodies could control subordinate organizations within the same ministerial area, but had little to offer to address the more pressing question of how to handle problems and tasks that are transcending organizational borders. The challenge is to find organizational arrangements that can enhance increased cross-borders collaboration and horizontal coordination. Another element of this post-NPM movement is increased central control. In many countries the agencification process has been slowed down and the need for central capacity is back on the agenda.
KV: Summing up, the post-NPM ‘Whole-of-Government’ reforms imply an increased focus on integration, horizontal coordination, and enhanced political control. This counter-reaction of increased central control and coordination to organizational proliferation has been observable not only in Norway, Australia, and New Zealand, but also in the UK, Sweden, and The Netherlands. But ‘whole-of-government’ is, just as NPM, a rather ambiguous and not very coherent reform movement, supplementing rather than replacing NPM measures.
“Governance of Public