Strategic Change Management in the Public Sector: An EFMD European Case Book

S T R AT E G I C C H A N G E MANAGEM ENT I N TH E PUBLIC SECTOR STR ATEGIC CHANGE MANAGEMENT IN THE PUBLIC SECTOR An ...

Author: Francesco Longo | Daniela Cristofoli

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S T R AT E G I C C H A N G E MANAGEM ENT I N TH E PUBLIC SECTOR

STR ATEGIC CHANGE MANAGEMENT IN THE PUBLIC SECTOR An EFMD European Case Book Edited by

Francesco Longo and Daniela Cristofoli

Copyright © 2007

John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England Telephone (+44) 1243 779777

Email (for orders and customer service enquiries): [email protected] Visit our Home Page on www.wiley.com All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP, UK, without the permission in writing of the Publisher. Requests to the Publisher should be addressed to the Permissions Department, John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England, or emailed to [email protected], or faxed to (+44) 1243 770620. Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The Publisher is not associated with any product or vendor mentioned in this book. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold on the understanding that the Publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional should be sought. Other Wiley Editorial Offi ces John Wiley & Sons Inc., 111 River Street, Hoboken, NJ 07030, USA Jossey-Bass, 989 Market Street, San Francisco, CA 94103-1741, USA Wiley-VCH Verlag GmbH, Boschstr. 12, D-69469 Weinheim, Germany John Wiley & Sons Australia Ltd, 42 McDougall Street, Milton, Queensland 4064, Australia John Wiley & Sons (Asia) Pte Ltd, 2 Clementi Loop #02-01, Jin Xing Distripark, Singapore 129809 John Wiley & Sons Canada Ltd, 6045 Freemont Blvd, Mississauga, ONT, L5R 4J3, Canada Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. Anniversary Logo Design: Richard J. Pacifico Library of Congress Cataloging-in-Publication Data Strategic change management in the public sector : an EFMD European case book / edited by Francesco Longo and Daniela Cristofoli. p. cm. Includes bibliographical references and index. ISBN 978-0-470-51684-3 (cloth : alk. paper) 1. Public administration—Europe—Case studies. 2. Organizational change—Europe— Case studies. 3. Strategic planning—Europe—Case studies. 4. Public institutions— Europe—Management—Case studies. 5. Administrative agencies—Europe—Management— Case studies. I. Longo, Francesco. II. Cristofoli, Daniela. III. Title: EFMD European case book. JN94.A58S77 2007 352.3′67—dc22 2007020424 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 978-0-470-51684-3 (HB) Typeset in 11.5/15pt Bembo by SNP Best-set Typesetter Ltd., Hong Kong Printed and bound in Great Britain by TJ International Ltd, Padstow, Cornwall, UK This book is printed on acid-free paper responsibly manufactured from sustainable forestry in which at least two trees are planted for each one used for paper production.

CONTENTS

PREFACE ABOUT THE CONTRIBUTORS 1

MANAGING PUBLIC REFORMS EFFECTIVELY: A STRATEGIC CHANGE MANAGEMENT APPROACH

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1

Francesco Longo Introduction A classification of public reforms and change management Features of public reforms and change processes The role of the organisational structure and the managerial tools in reforms and change process A comprehensive strategic approach to designing and implementing reforms and managing change How to design and manage a process of change References

1 4 6 9 11 15 18

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CONTENTS

2

A GUIDE THROUGH THE CASE BOOK Daniela Cristofoli and Francesco Longo

3

THE BRUSSELS PORT AUTHORITY’S CONTAINER TERMINAL: THE UPS AND DOWNS OF PUBLIC–PRIVATE PARTNERSHIPS

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Jan Mattijs Introduction Challenges and strategic issues The container terminal project Operating the container terminal: from start-up to failure . . . and restart Appendix

4

MANAGERIAL CHANGES AT ESTONIAN HOSPITALS

27 30 34 40 44

55

Ruth Sepper and Ruth Alas Introduction The North Estonia Regional Hospital The NERH formal reform processes The change management processes in terms of strategic objectives, actions and results Gap between the planned and implemented strategic change How to make the strategic change successful References

55 57 61 62 75 78 79

CONTENTS

5

LOLF AND CHANGES IN THE FRENCH PUBLIC SECTOR: THE CASE OF THE PAUL CÉZANNE UNIVERSITY – AIX-MARSEILLE III

81

Robert Fouchet and Emil Ture

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Introduction UPCAM’s organisation at the outset of LOLF reforms A historical account of UPCAM’s external governance relations LOLF Description Anticipated effects of LOLF regulations over the public sector links Expected changes in UPCAM’s management The change process Outcomes, expectations and conclusions Case requirements Reference Appendix 1 Appendix 2 Appendix 3 Appendix 4

81 82

94 96 98 110 112 112 113 114 115 117

POLITICAL AND MANAGERIAL CHANGE IN THE CITY OF COESFELD

119

86 90

Harald Plamper and Ingrid Beutel-Menzel Introduction The city of Coesfeld The reform goals and processes The reform activities The results of the reform programmes Winning awards How to manage the future?

119 122 124 128 137 139 140

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CONTENTS

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IMPLEMENTING EQUAL IN MEGARA MUNICIPALITY

145

Joyce Liddle and Ioannis Oikonomopoulos

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Introduction Greece and the European dimension Megara Municipality The EU initiative EQUAL Lessons learned from prior EU Programmes and transfer into EQUAL Megara’s involvement in the EQUAL Programme Outputs of the EQUAL Programme Interpretation of EQUAL outputs Lessons learned from EQUAL References

145 147 149 152 155 158 161 162 168 169

CHANGE MANAGEMENT PROCESS IN THE CITY OF AMERSFOORT

175

Piet Severijnen and Job van de Bovenkamp Ba

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Introduction Local government in the Netherlands The city of Amersfoort How to successfully restructure an internal department The change process and the department reorganization Appendix

175 177 183 187 188 199

MILAN MUNICIPALITY AND THE GOVERNANCE OF MUNICIPAL ENTERPRISES

201

Daniela Cristofoli and Francesco Longo Introduction Providing Milan’s citizens with public services: Milan Municipality and the municipal companies

201 202

CONTENTS

Ensuring the satisfaction of public needs: instruments for controlling municipal companies Controlling the municipal companies: what is Milan Municipality’s outlook?

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MANAGING BARCELONA’S OLYMPIC HERITAGE

206 210

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Lidia García, Francesc Rubio, Koldo Echebarria and Alfred Vernis Introduction Sports Associations and the Olympic Games Contracting Out: A model for managing sports facilities Sports Area, districts and management organizations Types of management organizations: selected examples The advantages of indirect management Appendix 1 Appendix 2

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MANAGEMENT BY RESULTS: ITS WAY FROM IDEA TO DOGMA IN THE CASE OF SWEDEN

213 214 216 222 225 228 230 231

233

Göran Sundström Introduction What is Management by Results Management by Results in Sweden: the story MBR: Reinventing the wheel? References

233 235 237 257 262

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CONTENTS

12

MUNICIPALITY OF BAAR: SPEYER AWARD FOR LOCAL GOVERNANCE

265

Albert Hofmeister and Jürg Dübendorfer Introduction Pillars of the Swiss system The Change process New initiatives and instruments for better public management New initiatives and instruments for the collaboration with citizens Result: Speyer Award for local governance Next steps: “in order to remain good you have to improve continuously” 13

THE INTEGRATION OF PERFORMANCE MANAGEMENT INTO THE MANAGEMENT OF THE LONDON BOROUGH OF LEWISHAM

265 266 271 273 276 280 283

285

Paul Joyce Introduction Public Policy context London Borough of Lewisham The emergence of the system (1994–2005) Conditions influencing the development of performance management – political management The effects of performance management in Lewisham Council Making performance management work in government organization References Website references INDEX

285 286 288 295 302 303 306 308 309 310

PR EFAC E

A B O O K A B O U T S T R AT E G I C CHANGE MANAGEM ENT There is plenty of debate about public management reforms. There is also sufficient agreement about which reforms are needed and which managerial tools should be introduced in the public sector. What is missing is the proper implementation of these reforms, which are often designed and announced, but never get beyond the drawing board. We believe that there are several reasons behind this. One of these reasons is that the theoretical and managerial debate focuses more on the design of the reforms than on how they should be implemented. The implementation of managerial reforms often requires public organizations to change their structures and behaviours. As a consequence, for a successful reform implementation it is necessary that these change processes are effectively managed. We would therefore suggest that both academics and practitioners devote more attention to the change management pro-

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cesses that follow reforms. What factors can facilitate change processes? How should change processes be managed? What tools should be employed to do so? These are just some of questions we will try to answer in this case book.

WHY A CASE BOOK? The description of different case histories seems to us to fit in with the aim of understanding the change management processes and identifying their drivers. Looking at different cases of change management processes in the public sector we can realize the difficulties and resistance that implementing reform has to face within the public sector, we can understand the different forces able to affect the change processes, we can identify the different players involved in the change processes and understand their attitude to change, we can see how the change processes evolve, etc. The aim is to gain some insights about how change processes should be designed and managed. The case authors are analysts who are not always directly involved in what they describe, thereby assuring a more detached and objective approach. The downside is that it becomes harder for them to fully understand the heart of organizations, their cultures and their social dynamics. This case book analyses many different public sector organizations in order to achieve a wide-ranging and diversified overview, giving the reader the chance to look at difficulties and resistance to change in different scenarios and evaluate the impact of different change strategies for managing change processes. The aim of the book is to form grounds for discussion since it is unlikely that general agreement about how to manage change processes can be achieved. We believe, in fact, that there is no

PR EFAC E

best way in change management, and even evaluating the extent of success or failure is very subjective. This is our starting point, and all we are trying to do is offer a framework on which to build a discussion about how to manage change processes.

A CASE BOOK FOR TRAINING AND TEACHING The book aims to be particularly useful for managerial training and teaching. The cases are written in order to be discussed in workshops and classrooms (or in parks or pubs when applying creative teaching methods!). That’s why the cases are descriptive and interpretative in nature. We think that change management is the attitude and mindset public managers need. To cultivate it they need a good theoretical background about the institutional and organizational dynamics of the public sector; they also need to practise reform, to study cases, to discuss different solutions. They have to develop the ability to design and manage change in the public sector. Each single case has many different perspectives that can be analysed and discussed. It is not always possible to come to an agreement about the best solution, partly because of the complexity of the public environment. It certainly helps to always keep the discussion lively and intense (effective for teaching and emotional comprehension).

WHICH CASES? All the cases deal with medium to large public sector organizations at local level. All the organizations described are autono-

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mous, and none depends directly on central government. This means that the cases are not only local governments (municipalities) but also local authorities, local public companies, local quangos, etc. The cases also deal with different sectors: government, health care, university, utility, sport, economic development, etc. This means that we have a wide spectrum of local public sector organizations, differentiated by their institutional configuration and mission. The focus is on internal organization development and not on general reforms. The national reform framework is considered here purely for its environmental conditions or influences.

WHY A EUROPEAN CASE BOOK? The aim of the book is to get an international comparative perspective, in order to look for common problems and solutions for implementing managerial development. As a result we have 11 different cases from 11 different countries. We want to see the differences in situations that are of a sufficient cultural, social, political and economic similarity to be compared. A like-for-like comparison helps to understand if the difficulties in reform implementation are shared, and thus whether change strategies can be applied. Typically, the comparisons select different countries that meet the following criteria: all English speaking countries (Commonwealth plus USA and Canada); countries from the same regional area (middle and north Europe); all industrialized countries, etc. We wanted to produce a European case book because we think that Europe has its own specific, powerful and vivid tradition and framework in public administration, welfare and society. We need to further explore this common social framework, looking for our own identity.

PR EFAC E

We feel that the 11 cases selected represent a very broad and rich spectrum in this direction.

THE STRUCTURE OF THE BOOK The book is based on the following structure: • • • •

introduction; theoretical background; a guide through the 11 cases; 11 European cases.

The theoretical background presents the editors’ thinking about strategy, change management, and strategic approach to change management. This represents the framework at the basis of the entire work. The 11 European cases are presented with a similar structure: • • • • •

case overview and description of the context in which the case developed; description of the managerial tools introduced by the public management reforms; description of how, following the introduction of a new set of managerial tools, the change process is managed; description of the outputs of the implementation processes; analysis of the difficulties and identification of the drivers of the change processes.

The teaching notes are delivered separately in order to show to trainers and teachers how to use each case. Teaching notes include the following topics: position of the case, learning objectives, question discussion, case analysis, and further reference.

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PR EFAC E

T H E TA R G E T O F T H E B O O K Those who are interested in understanding how to manage change management processes are the target of this book. So the book is mainly aimed at: • • •

managers and politicians of local public administrations; post-graduate and executive students in public management courses; trainers, teachers, and researchers in public management.

The goal is to have a full portfolio of cases rather than a comprehensive theory about change. The basic idea is that the ability to manage change processes depends on individual skills and on organizational culture and sensibility. These skills have to be increased and practised; reading and analyzing our cases can help school the mind about change processes.

HOW TO USE THE BOOK The book can be used in different ways and perspectives. It is an extensive series of different case histories for studying what is happening as regards the introduction of managerial tools and practices in the public sectors within European countries. It is a comparative book about change management. It is a set of different cases which can be used individually for study, discussions or training. Teaching notes for trainers and teachers are delivered separately.

ABOUT TH E CONTR IBUTORS

Ruth Alas, PhD, is Vice Rector for Scientific Affairs and holds the Chair of Management in the Estonian Business School. She has written twenty textbooks and more than 100 articles on change management, fundamentals of management, human resource management and strategic management. She also teaches change management and her research focuses on large-scale organizational changes in transition societies. Ingrid Beutel-Menzel has focused her career on the German City of Coesfeld, where she works as director of strategic planning, human resources and organisation. Daniela Cristofoli holds a PhD in Business Administration and Management from Bocconi University, Italy and is a research fellow at the Public Management and Health Care Department of the Bocconi University. Her research interests include strategy, corporate governance and stakeholder management both in public and private sectors.

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ABOUT THE CONTRIBUTORS

Jürg Dübendorfer is Chairman of the foundation of the care centre (Pflegezentrum) in Baar and a member of the executive committee of the owner community for a new care centre and hospital of Kanton Zug. He was the Mayor of the municipality of Baar for 4 years. Robert Fouchet is Vice Rector of Paul Cezanne University Aix-Marseille III, responsible for fi nance and real estate, and Dean of the Institute of Public Management and Territorial Governance, Aix-en-Provence. Albert E. Hofmeister is the Chief Inspector (Head of Internal Audit) of the Swiss Federal Department of Defence, Civil Protection and Sports. He is also Member of the Executive Committee of the International Institute of Administrative Sciences (IIAS), Member of the Board of the European Public Sector Award (EPSA) and Founder and Honorary member of the Swiss Society of Administrative Sciences (SSAS). He was Assistant Professor in administrative sciences at the Swiss Federal Institute of Technology in Zürich. Paul Joyce is a Professor at Nottingham Trent University in England. His research interests include leadership, strategic management in the public sector and the effectiveness of modernisation in the public sector. He has written a number of widely used and well-received texts covering these aspects of his research. He has also published widely in academic journals. Professor Joyce has acted as an adviser and consultant in the public services, including providing advice to the Cabinet Office’s Regulatory Impact Unit on performance management and recently acting as a consultant to Nottingham City Council in the development of its corporate plan for 2006–2011. Joyce Liddle is Associate Professor of Public Policy at Nottingham Policy Centre, University of Nottingham, UK and editor


of the International Journal of Public Sector Management. She researches in the areas of local and regional governance, partnerships and networks within regeneration. She has a special interest in strategic and stakeholder management within the public sector, in general, and in particular within a changing governance landscape. She is also interested in the interface between public and private sectors, and is developing themes focused on knowledge and learning and complexity within partnerships for regeneration. Francesco Longo is Associate Professor at the Public Management and Health Care Department of the Bocconi University, Italy. He is also the Director of the Research Centre in Health Care Management of the Bocconi University. His research interests include health care management, public service provision, network and governance. He has written a number of books and articles about public management and health care management. Jan Mattiijs is Professor at the public management department of Solvay Business School (Université Libre de Bruxelles), where he lectures mainly in executive education courses for civil servants. He holds a PhD in management science and his main research and teaching fields are performance management, public enterprise regulation and strategy, and distributive issues in public institutions. Ioannis Oikonomopoulos is a practitioner in Greece with long experience both as politician and as senior public servant in Greek local government. He spent a number of years as Deputy Mayor of a Municipality in South West Greece, and also has various business interests. His experience in public and private sectors enables him to draw on a wealth of data, information ad evidence to work in collaboration with academics.

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Harald Plamper has a long career in science (Universities of Tübingen and Erlangen-Nürnberg) and in local management (deputy city manager of the City of Nürnberg). For five years he was CEO of a consulting cooperative for municipalities in Germany and Austria before turning to academia. Now he is active in international consulting, research (regional governance, local management reform) and teaching. He has written extensively and has co-edited several books on public mergers and on regional governance. Ruth Sepper is now Director of the Institute of Clinical Medicine at Tallinn University of Technology. During the large change period in the public health sector in Estonia she worked as medical manager and also as head of a hospital centre for internal medicine in the largest hospital in Estonia. Piet C.A. Severijnen worked as political and marketing researcher for local authorities in the Netherlands. He was a manager of departments for research, communication and social welfare. At the moment he is owner of an International Consultancy, through which he offers research and consultancy services to local authorities in Europe. His activities have led to numerous publications and articles focused on good practice examples of local government organisations, political decision making and citizens’ participation. Göran Sundström holds a PhD in political Science from the Stockholm University and is research fellow at the Stockholm Center for Organizational Research (SCORE). His current research is on public management policy, the Europeanization of nation states, the development of core executives, and the role of civil servants in a transformed state. Emil Turc is Senior Lecturer at the Institute of Public Management and Territorial Governance, Aix-en-Provence, Paul Cezanne University Aix-Marseille III.


Job van de Bovenkamp Ba is controller for the sector SOB (Municipal Development and Maintenance) of the City of Amersfoort and is head of the main department for Operational Management. Alfred Vernis is professor of Business Policy and Strategy at ESADE Business School. He holds a PhD in Public and Nonprofit Management from the Wagner School of Public Service of the New York University. In ESADE he teaches in the program of Public Management and the Department of Business Policy. He also directs the program of Nonprofit Management (in collaboration with Fundació “la Caixa”). He has published several articles and books in nonprofit and public-private partnerships.

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CHAPTER 1

MANAGI NG PUBLI C R EFOR MS EFFEC TIVELY: A STR ATEGI C CHANGE MANAGEM ENT APPROACH Francesco Longo

INTRODUCTION For a long time the managerial debate about public administration was about the boundaries and the scope of the state, the market and civil society, the reform schemes, and the new managerial tools we needed to introduce. Hede (1992) suggests three separated reform periods: the merit reforms (begun in the mideighteenth century), focused on abolishing political patronage; the equity reforms (1950s–1970s), aimed at guaranteeing equal opportunities for all citizens to be employed in the public sector; and the managerial reforms, aimed at introducing managerial instruments in the public sector. Hood (2001) and Rhodes (2000) add the market reform period, and Vigoda (2002) and Wettenhall Strategic Change Management in the Public Sector. Edited by F. Longo & D. Cristofoli Copyright © 2007 John Wiley & Sons, Ltd.

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(2003) suggest the community involvement period in which state and civil society mix together. Keast and Brown (2003) consider the managerial reform (the third period) more oriented to restructuring the internal operational framework of the public sector, while they consider the market and community reforms (the fourth and fi fth wave) more related to stakeholders’ and users’ expectations. Since we discovered that the reform process goes at an unsatisfactory speed, researchers started to look at possible systemic drivers able to improve change and to increase the innovation rate (Osborne and Gaebler, 1992; Joyce, 2000; Pettigrew et al., 1992; Borgonovi, 2004; Osborne and Brown, 2005). There was general agreement that the reforms designed were good, and the problem was simply that public organizations were reluctant to introduce them. “Most large public sector organisations seem to manage the tasks of writing mission statements and identifying who their clients and service users are. [. . .] Implementation activities are more challenging” ( Joyce, 2000, p. 1). So the debate started to focus on how to encourage public administrations to innovate, breaking down the barriers of their resistance. New Public Management (NPM) scholars suggested that this could be guaranteed by a good external pressure and incentive system, like public competition, quasi-market, public accountability, external fi nancial incentives, marketization (Hood and Scott, 1996), etc. But this seems not to be enough. Of course the external pressure can try to push the public organization to introduce something that has never been done before, but if the organization is simply not able to do it (because of their lack of culture, knowledge, experience, competence, and trust in innovations), there will be no chance of success. That’s why the literature has now begun to look more intensively inside the public organization. There is in fact a general agreement that we need to have a clear and balanced scheme for public reforms, that we need to

M A N A G I N G P U B L I C R E F O R M S E F F E C T I V E LY

introduce effective external incentives and accountability for innovation; but thorough and far-reaching reforms need fi rst of all to change the organizational culture, structure and strategy of public organizations to be successfully implemented. Reforms depend mainly on the change management attitude in the system. Change management is an internal function which requires specific skills pertaining to the organizational sphere. Since organizations change constantly, we can suggest that the skill for managing change pertains to the more general abilities we expect to find in managers. Managing complex organizations in a dynamic environment means, in fact, to be constantly managing change. That’s why managers not only need to be able to design new strategies, new organizational structures, new managerial tools to face reforms but, above all, they must be able to introduce and to develop them. This means creating consensus and working on organizational culture, training people, creating knowledge management, selecting people internally, involving process reengineering, etc. (Doyle et al., 2000). There is a linear and continuous process from designing change through to implementing and evaluating it which, put together, is simply management. Deficiencies and failings in any one of these phases disrupt the others. To sum up we assume that: • • •

the effectiveness of reforms depends on many elements, but one of the most important is the management’s abilities; management mainly means change management; design, implementation and evaluation are just the different steps of the integrated change management process.

Since we want to discuss an effective framework for managing public reform, we should first classify reforms in order to have a clear definition of what we are dealing with.

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A C L A S S I F I C AT I O N O F P U B L I C R E F O R M S AN D C HAN GE MANAGEM ENT Public reforms relate to the general structure of a public sector or policy, or a business function of all the public organizations (like performance measuring, human resources management, etc.). They have a broad scope and are usually designed by an external authority through a significant political process. Change management deals with the internal implementation of organizational development or transformations. Changes can derive from internal decisions or processes or external pressure. They can involve political decisions or be more of a civil servant task. The impact of every public reform depends on the effectiveness of the change management process in every single public organization involved and in their networks. We can make various assumptions to classify public reforms. Looking at the purpose of reform, different kinds of innovation in the public sector can be seen. They can relate to:

• • • •

•

the role of public administrations and the boundaries between state, market and civil society; the reshaping of public administration and the allocation of public functions (e.g. decentralization and centralization); the introduction of administrative rules and proceedings; the identification of failings in public policies defining which actions have to be taken to contribute to a public interest, having a cultural and value background; the introduction of managerial tools, such as organizational structures, stakeholders’ control or evaluation systems, new marketing or finance solutions, etc.


The first two types of reform deal more with institutional building and have their implementation problems more in the political environment, but they still have to be prepared and achieved within the public organization. New administrative rules and proceedings can be begun by a legislative start-up driver, but then they have to become known and applied throughout the organization, so this change needs to be managed. The typical problems of public policies are in the implementation arena. Managerial tools need to be implemented too, after they have been tailored to the organization undergoing innovation, and this is the most difficult part of the work. For instance, the difficulty is not in choosing what should be the indicators for a performance evaluation system, but to apply the evaluation system. These other dimensions are crucial in many ways, but less important strictly for our purposes. As can be seen, public reforms are very diversified in their aims, but they all have a relevant implementation dimension, which makes change management fundamental. The ability to manage change often influences the real impact of reforms or, alternatively, the attention reforms have for an implementation approach determines their success rate. Internal organizational development processes differ in intensity. We can have changes or innovations in the public environment. “Change is a broad phenomenon that involves the growth and/or development of one or more of a number of elements in public services. [. . .] By contrast, innovation is discontinuous change” (Osborne and Brown, 2005, p. 4). In the former we innovate existing organizations by developing services and skills, in the latter we radically change structures, social targets, and service content. Of course change and innovation overlap. Lynn (2001, p. 196) divides change into five different levels: cultural environment (national and global), institutional (public choice), managerial, technical (primary work) and political

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assessment. This classification helps to illustrate that change creates a dynamic set of relationships that operates not only internally within each level, but also between the different layers. It also demonstrates how these broad global cultural changes influence the operation and management of public service organizations, but that national culture and public service institutions have mediated the type of change that occurred. Also, Pollitt (2003) considers that, to understand public change, we need to consider both general influences and the organizational context, divided into different dimensions contained in a multi-layered governance framework. Change can be planned or emergent. Change is planned when it is “the result of a systematic process of scanning the environment and determining the ways in which an organization must change” (Osborne and Brown, 2005, p. 25). Change emerges in an organization when it is brought about by “changes in its environment that are outside of its control” (Osborne and Brown, 2005, p. 25). Planned approaches suggest that it is possible to assess the environment and the organizational change needs, and to plan and implement them rationally. However, approaches that are emerging consider environment and organization too complex and dynamic to be rapidly and cheaply analysed; so the only managerial chance to steer change is to encourage and control the changes that occur autonomously, trying to lead them to the desired goals. Looking further into public reforms and change processes, what are their main features?

F E AT U R E S O F P U B L I C R E F O R M S A N D CHANGE PROCESSES Does change and innovation in the public sector result primarily from global pressure or do they depend on domestic, political, economic and social forces and drivers?


Global forces have a direct impact on national public services and affect the domestic political, economic and social trends. Welch and Wong (1998) suggest that there are global trends for public reforms. The domestic environment, the political agenda and landscape, the administrative paradigm and tradition, and national culture all have an important role with change and innovation. We have to look at the cross-fertilization of global and domestic cultural dimensions. But there is another element that could act as a key dimension for framing change: the contingent history and structure of each single organization. From a managerial point of view, outside influences and drivers are very important, and internal structure, culture and dynamics are the key elements we have to look at in order to design, manage and evaluate change. We have to assume a multidimensional model of organizational change including managerial, technical and cultural aspects in order to understand the different organizational dimensions in which change occurs (Patrickson and Bamber, 1995). Public organizations differ extensively from each other: they differ in their “geography”, size, mission, in the sector they belong to, and in their institutional level (supranational, national, regional, local, sublocal). They differ in their institutional history. They differ in their accountability systems and relations. They differ in their internal managerial and operational development rate. We have to learn to classify and analyse their contingent characteristics in order to assess their needs and possibilities of change. By comparison with private companies, what really makes change management different in the public sector is its multistakeholder perspective. In the public sector, each public stakeholder has its own legitimate expectations, which can differ from each other or can even be opposing. Some stakeholders have the perspective of customers or users of public services, others have the perspective of citizens, who

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are interested in public value. There are points of view expressed by both politicians, mainly interested in quickly achieving public consensus, and public managers, who are expected to be more interested in the long-term organizational and financial sustainability. There is also a contrast between the points of view of both public managers, whose standpoint on their organization is more generalized, and public professionals, whose stance is more related to specific and technical aspects. Every stakeholder has some power over changes and is able to influence the implementation rate and the reform’s shifts. It is not easy to summarize all these legitimate assumptions and to create a shared change design, able to acquire sufficient consensus to be really implemented, since each stakeholder often has enough power to veto the entire reform process. All these different dimensions also reveal to us the difficulties in evaluating public reforms. The institutional, administrative, political and managerial dimensions are all comprehensively present in public administration and each of them influences the outcome of reforms. Since they are constantly in a flux with each other it is very difficult to evaluate their specific contribution to innovation and change, and what really brings about socially important outcomes. For instance, if we have introduced a new system for evaluating the performance of public managers in a new institutional framework with slightly different policies, how can we separate these different contributions? Since there is no opportunity to defi ne the exact relationship between these different public dimensions and outcome modifications, the evaluation remains internal to the dimension we are analysing, for example, we can only assess if the performance evaluation system has been well designed and implemented, but we cannot exactly find out its external impact since this depends on many other factors. This is the uncompromising complexity of the public sector, and is the reason why it is such an interesting area to work in.


In this scenario what is the role of the organizational structure and the managerial tools for effectively implementing reforms and managing changes and innovations?

T H E R O L E O F T H E O R G A N I Z AT I O N A L STRUC TUR E AN D TH E MANAG ER IAL TOOL S IN REFORMS AND CHANGE PROCESS To design reforms or changes and to implement them effectively we first have to assess our organization to evaluate what are its skills, key areas and weaknesses. This reasoning brings some authors to suggest that the evaluation of the organization’s skills should come first, followed by innovations. From this point of view changes seem just a consequence of the organizational potentialities. In fact there are two different approaches to this issue. The planned change approach assumes that it is possible to assess the change need, to define strategic priorities in terms of social target outcomes, and to design the change process and lead the organizations to innovate. The learning approach suggests that the former framework has many weaknesses: •

•

some unexpected innovations can come from the environment, from politics, from higher institutions, and these cannot be precisely predicted; the decision process is too top down and not sufficiently motivating for the “street-level bureaucrats” who actually do the job.

Senge (1990) suggests that learning is the key to organizational survival and development: effective organizations should be creative

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entities that are skilled at obtaining information, processing it, and modifying their behaviour as a result of such information. Salaman (1995) thinks that learning organizations build a circular learning process into their organizational and operational behaviour. We think that it is not only possible but also necessary to integrate these two approaches. It is possible to plan for change in the public organization and to manage this process. But it is also important that the organization learns from this process, supports it and circulates it among all its sections. The learning organization can then produce, in a more bottom up and spreading process, a new plan for innovation or change. From this perspective, what do we need to assess in a public organization in order to prepare change and innovation, to make it possible and effective, to develop it into a continuous learning organization? There are many different dimensions and items which must be considered in order to understand an organization, its strength and weakness. First, we have to assess the institutional and political framework in which the organization is set. We have to analyse whether the organization is close or far away from the next election or from a major political inversion or instability. We have also to look at the political priorities and major suggestions that have been politically deliberated. We have also to evaluate the structural scheme, the quality and quantity of employees, the capabilities of the human resource, the organizational climate and history. We need then to assess the performance, recording all its dimensions: productivity, effectiveness, equity, efficiency, quality. What do we actually evaluate? We are looking for the potential to change, trying to understand which elements are structural in the organization, which others are dormant but can be developed, and which must be reinvented and innovated. Not everything can be innovated. We can only introduce the changes which the organization could expect and which can be


financed. The organization’s acceptance is crucial in order not to lose the collaboration and productivity of the traditional part of the staff and stakeholders. The fi nancial balance is often lost when innovation is just put on the top of an unmodified organization. Resources must be found, making savings in the rest of the organization or planning innovation connected to a good rate of financial return. To change an organizational structure we have to work simultaneously on different drivers: managerial development of internal forces, introduction of new competence in an acceptable percentage and employement of external consultants. None of these drivers is able to be effective alone. Internal development needs some external stimulus to be sufficiently thorough and consistent. It is impossible to introduce change simply with new forces brought in from outside: this is fi nancially impossible and unacceptable in the rest of the organization; consultants are expensive and at a certain point they leave. The difficulty consists of finding the right mix between these different change drivers, so that they match the specific features of the individual organization. What makes it even more difficult is the necessity to have a dynamic perspective – some changes that are not possible in the short term, but may reasonably become realistic and effective in the longer term. Under this strategic and organizational perspective how can we frame change management in the public sector?

A C O M P R E H E N S I V E S T R AT E G I C A P P R O A C H TO DESIGNING AND IMPLEMENTING R EFO R MS AN D MANAGI N G C HAN G E To design and effectively implement reforms and changes we need to balance many contradictory dimensions.

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First, we need to merge all the strengths of the approach planned to steer changes in the direction wanted with the emergent positive dynamics of the organization. Then we need to combine the environmental influences and forces together with the internal organizational features, weaknesses and strengths. Goals of change must have a high correlation with the external pressures and the organization’s capabilities. Third, we have to work simultaneously on different dimensions: the organizational structure and operations, the mission and the strategy, the internal and external culture. Fourth, the objectives have to fit with the different stakeholder perspectives, with the available resources, with the mission and the institutional and political legitimacy of the organization. Fifth, implementation needs a good balance between leadership, commitment from the middle management and involvement from the lower levels. We need participation but also decision, emerging processes and guiding leadership. Sixth, we need a sufficient level of consensus, but without demolishing the barriers of resistance, there is no way to change. Last, we need to set a direction, to indicate a path and to define goals and targets, but we also need to be able to adapt to the environment and to the internal emerging dynamics, in a continuous learning process. To sum up, to design and effectively implement reforms and changes we need a comprehensive strategic approach, as strategy can be defined as the position of a given organization in its environment, due to its culture, behaviour and relations. Strategy depends on the target and the services/products which are delivered (depending also on what is the relationship to the competitors), on the service providing model, on the financial portfolio, on the social relationships with the closest society and stakeholders, and on the inter-institutional gover-


nance. “The central challenge of strategy is to make desirable goals, external support, and organisational capacity fit together” (Heymann, 1987, p. 15). Every organization has a strategy, since every organization has its position in its environment: the strategy can be known or latent, deliberated or emerging. Strategic decisions have high returns because, according to Wilkison and Monkhouse (1994, p. 16) “strategic planning is a means to an end, a method used to position an organization, through prioritizing its use of resources according to identified goals, in an effort to guide its direction and development over a period of time”. How much room is there for strategic management in public organizations? The institutional goals of public organizations are so wide that it is impossible to reach all of them at the same time. For example, if we consider a local government, its task is to bring social, economic, cultural and environmental development to the community, but obviously with a fi xed amount of resources. There is such a gap between what should or could be done and the resources available that every local government has to defi ne its strategy, choosing priorities in targets and services, providing models and tax policies. The scale of changes in the public sector since 1980 is very wide, with very diverse solutions applied by similar public administrations. Introducing a strategic approach sets the mission, the goals, and an evaluation system focused on the measurement of performance gaps. This makes public managers more accountable to politicians: this theoretically gives more freedom to managers regarding the organizational structure, the allocation of resources, and the managerial tools to implement. When thinking about strategic planning, there are different areas to focus on (Ducan et al., 1995):

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• • •

the decision process; the content of the decision which expresses the desired future position of the organization; the planning tools.

In the first case we focus on the cultural and organizational processes which have been brought to the deliberated or emerging strategy. It can be more a top down or bottom up process. It can be more an internal process or an inclusive process involving most stakeholders, or even the population through community consultation. In the second case (content of different strategies) we discuss the effectiveness of different strategic decisions for reaching the institutional goals that public administrations set. In the third case (planning tools) we analyse the tools and techniques which have been used for the formal strategic decisions: to analyse the environment and the internal structure, to compare different potential futures of the organization, to evaluate the ability to implement the strategic plans. They can be more like social auditing or community consultations, more like SWOT analysis, or they can come from a marketing approach adapted to the public sector. The strategic goals set by an organization influence the actions, the organizational structure, the operations and the managerial tools we have to introduce and to develop to reach the future position wanted in the environment. Indeed, to reach a specific position in an environment (social target for the designed service portfolio, providing schemes, financial mix) we need to work around all the internal functions which influence the selection of citizens/users/clients, the design and the provision of services, and the fi nancial returns. This allows us to concentrate on the organization in order to implement the strategy wanted.


Starting from this strategic framework how can we design and manage a change management process for public organizations?

HOW TO D ESI GN AN D MANAG E A PROC ESS OF CHANGE We are focusing on the internal change management process of single public organizations and not on the reforms in a public system. The issue we are dealing with is how to implement successful change in a single organization, looking at the managerial perspective and managerial tools. The first step is to analyse and to find the border between what has to be retained and what can be changed in the organization. To be effective, the cultural, organizational and institutional power of the innovator must be stronger than the resistance. The resistance is not stable in the organization, but it is something that emerges depending on what is actually going to be changed. So it is a strategic choice to identify what is going to be innovated, since this determines the emergence of resistance. A good manager is one who defines a wide range of changes in order to deeply innovate his organization, without being so ambitious as to be stopped in the change process by the forces that are against his projects. The border between what can be changed and what must be accepted can only be defined with a contingency approach, depending on the history, the culture, the relationship, and the personal perspective of all the actors involved. In order to maximize the innovation rate we need to assume a dynamic perspective, because something that cannot be changed today could perhaps be changed in a few years’ time, thanks to the previous steps of the innovation process. For example, the natural turnover rate of employees makes it possible to change 20–30%

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of the human resources within a period of 5–7 years, while if we only consider next year, we cannot hope for more than a 5% turnover. Which components should be considered to design a change management process? There are different components to be considered in the change management design: • • • •

the choice and design of the managerial or policy innovations; the organizational incentives and obstacles; the actors’ relations and cultural framework; the process steps.

First of all, we have to decide which innovation we want to introduce in the managerial structure or tools, or in the policy for public services. This depends on our strategic analysis and decision. Obviously, making a good decision about what innovation is needed is essential for having a good implementation rate. We then have to introduce incentives in the organization for the ones who actively implement change and modify their organizational behaviour to be more coherent with the new organizational strategy. The incentives can be more resources (personnel, buildings, technologies, etc.) for the units which best succeed in innovation, or even higher salaries. The incentives can be symbolic by giving organizational awards or external visibility, or they can be connected to more organizational power. We can also use political or institutional visibility, correlated to shared cultural and social values. We also have to remove (if possible) cultural or organizational obstacles to change. For example, if there are no incentives for outstanding performance, but strong penalties for mistakes, this doesn’t help experiments and innovation. If there are resistant


managers in positions that are key to the innovation process, we need to move them to another unit, or to push changes through other organizational units. This brings us to analysing precisely all the players involved and to classifying them into relevant categories: the powerful ones and less relevant on one side; the enthusiastic and the resistant to change on the other. We have to build an organizational alliance with the powerful players, particularly involving the ones enthusiastic in innovations, and trying not to clash with the powerful resistant, in order not to block the innovation process. At the end we have to design the steps of the change process, having at least a mid-term perspective. “There are four key processes in public sector strategic change: preparing, leading, changing, partnering” ( Joyce, 2000, p. 9) which need enough time to be implemented. The planned steps of the change process have to guarantee some immediate results, coordinated with long-term results. We need some immediate positive effects to increase consensus, to enrich enthusiasm for change and to show the advantages of our innovations to those who are resistant. But we have also to look for radical changes which certainly need a long-term perspective. We have to balance these two perspectives. When we first introduce change we have to choose whether we prefer to start in few experimental units in which we can try and maybe succeed with more radical changes, or if we prefer to start with a more superficial change but encompassing the whole organization. In any case we have to design the change process for the long term, trying to define all the relevant steps. In the complex public sector, it is hard to fi nd cases in which we could implement a complete organizational change in less than 2–3 years. For example, a change process could be built on these steps:

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• • • • • • • • • •

conferences or workshops to spread awareness of the topics we are going to deal with; evaluation researches to analyse the situation we are in; building professional, managerial and political alliances on the issues that are going to be changed; political setting of the goals in the change process; technical design of the changes and innovations; training and coaching for the new scheme; first experimental implementation; first evaluations and generous applications of incentives for innovators; spread and growth of the implementation rate (wider or deeper); evaluation and rethinking of change needs.

Last but not least we have to understand that, when we start to design a reform, we are already in the middle of the change process. The announcement of an innovation, the beginning of an organizational analysis, for example by means of interviews, immediately strongly influences the work climate and the possibility to create consensus for the change. The content of innovation, of course, directly influences the potential implementation rate, depending on how far it is from the organizational story, from the in-house skills and from the impressions that will flow to the employees and their unions. Adopting this theoretical framework is the methodological background of the cases in the book. REFERENCES Borgonovi, E. 2004. Ripensare le pubbliche amministrazioni. Tendenze evolutive e percorsi di approfondimento. Egea, Milano. Doyle, M., Claydon, T., and Buchanan, D. 2000. Mixed results, lousy process: the management experience of organisational change. British Journal of Management, 11 (special issue).


Ducan, W.J., Ginter, P.M., and Swayne L.E. 1995. Strategic Management of Health Care Organizations. Blackwell Publisher, Cambridge. Hede, A. 1992. Equity reform in public administration: a longitudinal study of executive attitudes. International Journal of Public Sector Management, 5(1). Heymann, P. 1987. The Politics of Public Management. Yale University Press, London. Hood, C. and Scott, C. 1996. Bureaucratic regulation and new public management in the UK: mirror-image developments? Journal of Law and Society, 23(3). Hood, C. 2001. Public service managerialism: onwards and upward, or “Trobriand cricket” again? The Political Quarterly, 72(3). Keast, R. and Brown, K. 2003. Experiments in social diversity. In Anderson E. et al., Towards Public Value? Management and Employment for Outcomes Conference, Melbourne, 24–25 November. Joyce, P. 2000. Strategy in the Public Sector, A Guide to Effective Change Management. John Wiley & Sons, Chichester. Lynn, E. 2001. Globalisation and administrative reform: what is happening in theory? Public Management Review, 3(2). Osborne, D. and Gaebler, T. 1992. Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector. Addison-Wesley, Reading. Osborne, S. and Brown, K. 2005. Managing Change and Innovation in Public Service Organisations. Routledge, London. Patrickson, M. and Bamber, G. 1995. Organisational Change Strategies, Case Studies of Human Resource and Industrial Relations Issues. Longman, Melbourne. Pettigrew, A., Ferlie, E., and McKee, L. 1992. Shaping Strategic Change. Sage, London. Pollitt, C. 2003. Agencies, Apples and Pears: mapping the agency debate. Paper presented at the 7th International Research Symposium on Public Management (IRSPM), Hong-Kong, 2–4 October. Rhodes, R. 2000. New Labour’s civil services: summing up joiningup. The Political Quarterly, 71. Salaman, G. 1995. Managing. Open University Press, Buckingham. Senge, P. 1990. The Fifth Discipline. Doubleday, New York.

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Vigoda, E. 2002. From responsiveness to collaboration: governance, citizen, and the next generation of public administration. Public Administration Review, 62(5). Welch, E. and Wong, W. 1998. Public administration in a global context: bridging the gap of theory and practice between Western and non-Western nations. Public Administration Review, 58(1). Wettenhall, R. 2003. Three way categorisations, hybrids and intersectoral mixes in the governance equation. Asian Journal of Public Administration, 25(1). Wilkison, G. and Monkhouse, E. 1994. Strategic planning in public sector organisations. Executive Development, 7.

CHAPTER 2

A GUI DE TH ROUGH TH E CASE BOOK Daniela Cristofoli and Francesco Longo

The abundance of words written and spoken about various frameworks for innovating public sector organizations is not matched by an equal amount of discussion on the policies and the managerial tools necessary to implement them. Each reform for innovating public organizations activates a process of change within them, with all the resultant enthusiasm and barriers that such processes can bring about. In the end, the success or failure of a reform depends fi rmly on an individual organization’s ability to comply with it. By means of this European case book, we aim to provide instructors, students and also practitioners with an instrument for understanding how to deal with the difficulties affecting each change management process. The basic idea is that the ability to Strategic Change Management in the Public Sector. Edited by F. Longo & D. Cristofoli Copyright © 2007 John Wiley & Sons, Ltd.

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manage change processes depends on individual skills and organizational culture. These are skills that need to be practised and increased, and so reading and examining this case book can help focus the mind on innovation and change. This case book gathers cases from different public sector organizations in various European countries. The cases deal with the public sector at local level, involving both medium and large organizations: local governments, local authorities, local public companies, universities and hospitals are all considered. The cases also relate to different sectors: government, health care, university, utilities, sport, economic development, etc. What unites them all is that they are undergoing a change management process, with varying results. Table 2.1 is a guide showing what each case is about and how to use it, highlighting certain particular topics in change management processes. We aim to provide readers with a wide and diverse overview, enabling them to see the difficulties of change management processes in different scenarios and the impact of the various strategies pursued to overcome such difficulties. The case “the Brussels Port Authority’s container terminal: the ups and downs of public–private partnerships” by Jan Mattijs deals with the pros and cons of the public and private sectors working together, giving some insights into how to exploit these forms of collaboration. The case “Managerial changes at Estonian hospitals” by Ruth Sepper and Ruth Alas describes a plan to merge hospitals in Estonia, emphasizing how relationships between economic and political drivers affect the results of the whole process. The case “LOLF and changes in the French public sector. The case of Paul Cézanne University” by Robert Fouchet and Emil Turc concerns the consequence of a new Organizing Law over the Laws of Finance (LOLF). “Could a legislative change on the finance-accounting front usher in the turnaround that a succession of boisterous reforms was not able to bring?”:

Table 2.1

Guide to each case covered in this case book

Case

The Brussels Port Authority’s container terminal: the ups and downs of public–private partnerships Managerial changes at Estonian hospitals LOLF and changes in the French public sector: the case of Paul Cézanne University Political and managerial change in the city of Coesfeld Implementing EQUAL in Megara Municipality

Countries

Public organization

Level of the change management process

Focus of the change management process

Object of the change management process

To read

Belgium

Local authority

Managing the Port Authority

Managerial practices

Public–private partnerships

1 day before the class

Estonia

Hospital

Health care sector Managing hospital

France

University

Education policy Managing university

Policy Managerial practices Policy Managerial practices

1 day before the class 1 day before the class

Germany

Municipality

Managing local government


Greece

Municipality

EU funds Managing local government


Provision of health care services Relationships between the Ministry and the University Involvement of citizens in public decision making Obtaining funds from the European Union


Table 2.1

(Continued)

Case

Countries

Public organization

Level of the change management process Managing the relationship between local government and publicly owned companies Managing the relationship between local government and publicly owned companies Managing local government

Milan Municipality and the governance of municipal enterprises

Italy

Municipality Municipalityowned enterprises

Managing Barcelona’s Olympic heritage: contracting out sports facility management in Barcelona

Spain

Agencies for the provision of public services

Management by results. Its way from idea to dogma in the case of Sweden

Sweden

Municipality

Municipality of Baar: Speyer Award for Local Governance

Switzerland

Municipality


The integration of performance management into the management of the London Borough of Lewisham: 1994–2004

United Municipality Kingdom


Focus of the change management process

Object of the change management process

To read


Managing the provision of public services

During the class


Managing the provision of public services



Introducing management by objective practices Involving citizens in public decision making Performance management


Managerial practices and decision making Managerial practices


A GUIDE THROUGH THE CASE BOOK

this is the basic question. The evolution of Paul Cézanne University Aix-Marseille III (UPCAM) encourages the analysis of what is a surprising case of administrative reform; a case in which operational and progressive changes in budgeting and performance management may induce real shifts in managerial practices, in cultures and in the institution’s relations with its environments. The case “Political and managerial change in the city of Coesfeld” by Harald Plamper and Ingrid Beutel-Menzel deals with the introduction of new instruments to improve the governance principles in public decision making. In 2000 Coesfeld won the Speyer Award for its harmonious interplay between politics and administration. Why? This is the basic question this case attempts to answer. The case “Implementing EQUAL in Megara Municipality” by Joyce Liddle and Ioannis Oikonomopoulos is related to the participation in a EU programme by a Greek municipality. All the rules for joining the programme are followed, but is this enough to ensure the success of the programme? The case “Change management process in the city of Amersfoort” by Piet Severijnen and Job van de Bovenkamp Ba describes the process of a successful organizational restructuring and change management of an internal department, focusing on the drivers behind this success. The case “Milan Municipality and the governance of municipal enterprises” by Daniela Cristofoli and Francesco Longo deals with the results of the introduction of new managerial practises in public organizations. Milan Municipality pursues the reform through a programme of contracting in, contracting out and privatizing public services. Has Milan Municipality been able to change its way of handling relationships with the new agencies providing public services? The case “Managing Barcelona’s Olympic heritage: contracting out sports facility management in Barcelona” by Alfred

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Vernis, Lidia Garcia, Francesco Rubio and Koldo Echebarria also concerns the relationship between Barcelona Municipality and the agencies contracted to manage the sport facilities. How should the heritage of the Barcelona Olympic Games be exploited in order to satisfy public needs? The case “Management by results. Its way from idea to dogma in the case of Sweden” by Göran Sundström deals with the introduction of management by objective practices. Their application requested a learning process, but was the model adjusted on the basis of experiences of how it works in practice? If the learning process has failed, how can we understand this? The case “Municipality of Baar: Speyer Award for Local Governance” by Alfred Hofmeister and Jürg Dübendorfer concerns the involvement of stakeholders in public decision-making processes. New institutions and rules were set up. The drivers of this success are highlighted. The case “The integration of performance management into the management of the London Borough of Lewisham: 1994– 2005” by Paul Joyce deals with the integration of performance management into the management of a London local authority. The London Borough of Lewisham, in common with many other local government organizations, responded to these pressures for performance management by developing both its systems and its management culture.

CHAPTER 3

TH E BRUSSELS PORT AUTHOR IT Y’S CONTAI N ER TER MI NAL: TH E UPS AN D DOWNS OF PUBLI C – PR IVATE PARTN ERSHI PS Jan Mattijs

INTRODUCTION Since at least the year 1000, Brussels has had an inland port along its river, the Senne. It was not easily navigable and was complemented by a canal in the sixteenth century. The canal was expanded and its connections with other waterways improved over the centuries. Nowadays, the canal runs through Brussels and connects to the south-west with Wallonia and northern France, and to the north-east with Antwerp and Rotterdam. In fact, Brussels is part of a very dense and highly meshed waterway network. Port installations are spread all along the canal through Brussels. Eleven kilometres of wharves are spread along the two banks of the 14 km canal section belonging to the Brussels capital Strategic Change Management in the Public Sector. Edited by F. Longo & D. Cristofoli Copyright © 2007 John Wiley & Sons, Ltd.

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Figure 3.1 Left: the canal section for which the Brussels Port Authority is incumbent (map reproduced with permission of Port de Bruxelles). Right: the waterway network in Belgium and neighbouring countries (excerpt from “Inland waterway transport: a transport solution that works”, http://ec.europa.eu/tranport/iw/doc/2002_brochure_iw_en.pdf, reproduced with permission of the European Commission. Original map © by via donau)

region. The port authority’s reach is thus strictly urban, and is bounded by the borders of the Brussels city-region. The northeastern part of the canal can be accessed directly by sea-going ships up to 4500 tonnes; while to the south-west of the city centre, the canal is strictly an inland waterway for barges up to 1350 tonnes. The peak of the port’s water traffic was marked in 1971. From the 1970s to the early 1990s, the port went through a period of crisis, which was simultaneously due to competition by road transport and to neglect by the Belgian state. At the time, Belgium was in a regionalization process which would fundamentally change the attributions of the regions, ultimately resulting in the creation of a federal state with highly devolved powers. The national inland waterways authority which had historically managed the canals on the whole territory was broken up between the three regions, and the Brussels capital region had to take charge of the chunk on its territory. There was a period of hesitation in Brussels, where an important part of the political opinion wanted to dispense with a port

B R U S S E L S P O R T A U T H O R I T Y C O N TA I N E R T E R M I N A L

and to gradually close down any industrial activities located there. This tendency is compounded by the real estate pressure: in a capital city with closed boundaries like Brussels, there is tremendous pressure to use land for office or housing projects. At the end of the debate, there was a decision to preserve some industrial activity, for employment and transport policy reasons. The Brussels region established its own port authority in 1993, which took over part of the former national society’s obligations and personnel (105 persons), but with a completely new legal structure, ownership and management team, led by Charles Huygens. Huygens has remained director-general in charge since 1994. The new “Brussels Port Authority” is a sui generis enterprise under public law, and has its own legal personality and assets. Its shares are owned mainly by the Brussels region, directly (56%), or through a regional economic promotion and public investment fund (BrinFin, 3.85% of the shares). Minority shares are owned by nine municipalities, primarily the city of Brussels (35%) and eight other (holding together 5.1% of the shares). Accordingly, the board is composed mainly of political representatives from the Brussels region and from the municipalities. Its legal structure is based on that of Belgian private “anonymous” corporations. The legal framework is laid down in a regional law (ordonnance) of January 1993 establishing the port authority, but also in its articles of incorporation or bylaws (statuts), in so-called “work instructions” (cahier des charges) and finally in a performance contract. While the other incorporation texts have not been significantly revised, the performance contract is meant to be revised every five years. The second performance contract was agreed in October 2002. Since its peak of over 10 million tonnes of traffic1 in 1971, the port’s traffic had dwindled to 5.1 million tonnes in 1993, 1

Own traffic: traffic that gets loaded or unloaded in Brussels, as opposed to transit traffic which merely uses the canal through Brussels to steam from other ports to other ports.

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both because of competition by road transport and because of the failure of traditional bulk transport industries located in Brussels (Carcoke, a blast-furnace coke processing plant located in the north of Brussels, closed down in 1993, causing a loss of 428 000 tonnes that year alone). Bulk liquid fuel transport was also dwindling fast (see Table 3.1 in Appendix). As can be seen from the table, this downward trend was since been reversed.

C H A L L E N G E S A N D S T R AT E G I C I S S U E S The legal and (quasi-)contractual hierarchy setting up the port defines a number of fundamental objectives and obligations. The various documents are not perfectly consistent, and some “missions” are rather anecdotal, but essentially the port’s public service missions can be summarized in three broad categories: mobility, economic development and waterway management. They are reflected in the port’s mission statement (revised 2002): Our objective is to manage and develop in an optimal way the harbour activity, within the framework of our management autonomy. In other words, we intend to contribute to a diversified economic and social development within the Brussels-Capital Region. We also want to contribute to a sustainable mobility by intensifying the use of the waterway and by promoting transport intermodality. We intend to promote, within our institution, a corporate culture based on values of encouraging initiative, co-operation and collegiality, and to develop an ethic of responsibility. Our role as civil servants is to serve the community every day. This corporate culture must generate the vital quality of our services, which will be the best guarantee of development for the Port of Brussels.

These general missions were translated into more operational objectives, both in the regulatory instruments and in the port’s


first management plan; they were contained in 28 articles of the first performance contract (see Table 3.2 in Appendix) and 54 projects in the port’s 1997 management plan. In the second (2002) performance contract 12 performance indicators (PIs) have been isolated and linked to a financial incentive (Table 3.3 in Appendix). An important feature of the port’s missions is that the port “doesn’t touch cargo”: it has no handling or stevedoring 2 activity of its own. Therefore, there are no dockers among its own workers, but only technical personnel in charge of the maintenance and operation of its infrastructure (manning locks and lifting bridges, maintaining the wharves, etc.). Since Brussels is a seaport, it is open 24/7, and navigation facilities must be offered: ships have to be piloted, moored, etc. So there is also a harbour office and navigation personnel. Waterway traffic is not the only transport activity taking place on the port’s domain. In fact, whereas around 6 million tonnes are handled by the waterway, a further 12 million tonnes are handled by land transport (train and lorry). The port gets only a minor part of its revenues from the waterway traffic it manages. About one half of the port’s revenues come from (mainly regional) subsidies that compensate its public service missions. The other half comes from own revenues.3 Navigation dues have been reduced to a symbolic minimum, and mooring, pilotage, towing and boating assistance account for less than 10% of the port’s own revenues. The rest of the port’s own revenues come from rents paid by concession holders (lessees) on the port’s estate (see Table 3.4 in Appendix). But on these 2

A stevedore is a port facility operator who facilitates the loading and discharging of vessels; generally employs dockers and various equipments, like cranes. Also known as longshoreman. 3 It should be noted that in the fi nancial accounts of Table 3.4, not all subsidies are marked as such in the fi nancial incomes; some are included in the “other operating incomes” category.

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real estate activities, the port has competitors (both private and public, like regional property development societies). Its capacity to raise revenues is furthermore restricted both by the limited size of its property, and by the very long-term concession contracts it offers to its industrial lessees (3 × 10 years, sometimes longer). The only really specific assets the port has are its waterfront estates, where vessels can moor and enterprises can directly load or unload. In the concession contracts for such estates, there is usually a minimum traffic clause, under which the port authority may end the concession if certain waterway traffic levels are not reached. It should also be noted that this takes place on very small grounds. Says Charles Huygens: Small is beautiful, as the saying goes, but sometimes it’s difficult. When I tell my colleagues that we have 18 million tonnes of traffic on 64 hectares of installations, they hardly believe me. Dunkirk gets 35 million tonnes on 2000 ha, Paris 23 million tonnes on hundreds of hectares. But the limits of the region are there: 19 municipalities is a fact we have to learn to live with. (Translated from a quotation in the newspaper Le Soir, 11 August 1999, p. 23)

Finally, the port’s administration was carved out from the former national canal society, and dominated by an engineer’s culture. One of the fi rst actions of the new management team was to set up a marketing and a sales department. The structure obtained was a classical functional structure (see Figure 3.2), but with mixed project teams to drive the various strategic projects. All of these objectives and constraints gave rise to strategic issues summarized in a set of seven “paradoxes” in the 1997 management plan:


Total staff: 121 persons General direction (9)

Administrative dept (16)

Figure 3.2

• • • • • • •

Commercial and legal dept (12)

Marketing and development dept (9)

Harbour office (23)

Head of security

Technical dept (41)

Finance dept (9)

Simplified organization chart of the port, 1999

a public service in the context of globalization; a source of blue-collar work in a white-collar city; ecological rationality in a market environment; modernize under a budgetary constraint; a local regionalized waterway within trans-European networks; the need for a new culture; focus our identity in a period of innovation and new tasks.

One of the strategic priorities that was soon pursued by the port’s direction was that its own waterway traffic had to be expanded, in particular for those cargoes generating the most added value for the regional economy. This meant that rather than pursue the growth of the gross tonnes of cargo loaded or unloaded, one had to look for transports which generated handling revenues, employment, and economic activity in the region. The value added by different types of cargo was impossible to measure directly, but a proxy measure can be obtained by weighting the cargo volume according to its nature: liquid bulk, dry bulk, miscellaneous and containers. This “port added value indicator” is the first of the 12 PIs which carry incentives in the port’s performance contract with the regional government (Table 3.3 in Appendix). The evolution of this weighted volume is shown in Table 3.6 in Appendix, which displays a steady growth since the 1990s.

33

34


T H E C O N TA I N E R T E R M I N A L P R O J E C T The idea of setting up a container terminal is hardly novel or original. It had been present even before the creation of the Brussels Port Authority in 1993, and is a logical conclusion of the market trends in waterway transport, where container shipment, and more generally “unitized” cargo (as opposed to bulk cargo), has been on a steady rise in Europe. Similar handling facilities were being built, e.g. just 10 km upstream, in Vilvoorde. Containers are obviously a “high value-added” cargo, since packing, moving, and unpacking them are all tasks that generate jobs. So they carry a high weight, both in the calculation of the port’s financial incentive and in evaluating the use of the waterway by various concession holders. Each “twenty-foot equivalent unit” (TEU, i.e. a conventional measure of a small half-length container) is counted by the port as 7 tonnes of miscellaneous cargo, which in turn is weighted four times as much as dry bulk. So any container traffic creates a significant rise in weighted traffic to the port. But the port authority did not want to go it alone, as it considered first that it was to stay clear of being an operator itself, and second that it wanted private fi nancing for the infrastructure and partners to bring know-how in matters of transport, which was not the port’s business. A two-tiered structure was devised accordingly. First, there would have to be an infrastructure society where the majority would belong to the Brussels Port Authority, which by law may not hold minority shares. This first firm was to be called BruPort Invest, or BPI. Second, there would be a service society, which would hire personnel to man the crane and handle the containers, and organize train, lorry and barge traffic (notably shuttles to Antwerp and Rotterdam). BPI would buy the crane and build the tarmac. It was to get its revenues from leasing its facilities to the service provider. In this structure, BPI is a pure legal instru-


ment. It has no operating costs and serves to collect the fi nancing of the infrastructure and to dispatch the revenues accruing to it. The service provider, who would rent the facility, would be a strictly private business, in which the port authority would not be involved. In a separate move, the port managed to obtain a c300 000 subsidy from the European commission (PACT programme) for the promotion of intermodal transport. This expressly relied on the fact that the project included railway transport. The total investment for the project was forecast at around c2.7 million; this was to be borne by the BPI partnership.5 The gantry crane alone cost nearly 60 million Belgian francs at the time, i.e. around c1.45 million. The remainder went to reinforce the tarmac so that it could bear weights of up to 6 tonnes per square metre. Additionally, the Belgian railways were expected to improve the rail connections to the terminal, though a rail connection already existed, but with a relatively short loading track (300 m). On the resources side, the port would hold 51% of BPI’s capital of c1.1 million. The private partner(s) would contribute the rest. The remainder was to be fi nanced by debt and European subsidies. The projected investment is summarized in Table 3.7. As far as operational income is concerned, BPI (the investment society) was to get its revenues from renting out the facilities to BTI (the operator) for around c200 000 per year (which would in fact be billed back to the port authority), and by collecting a fee of c5 per square metre (c3 in the first year). The 5

Excluding a supplemental investment of about c4 million, which was done on the grounds behind the terminal to reinforce the covering there, in the event of a later expansion. This investment was borne by the port authority alone and entirely fi nanced by a regional subsidy in 1999 and 2000. There was also a supplemental investment on the walls of the terminal’s wharf, which was directly related to the terminal project and done by the port alone (not by BPI).

35

36


Table 3.7

Investments for the container terminal

Investment (BPI)

Cost (in thousand euros)

Tarmac Gantry crane

1250 1450

Funding Capital Debt EU subsidy

1100, of which 560 by the port authority 1200 300

concession rent that went back to the port was a “normal” price for naked estate, calculated according to the size of the concession and its (premium) location. The c5 per square metre were meant to pay the investment in tarmac and the crane. The port had calculated a business plan for BPI under which the return was rather weak, especially when accounting for the reinforcement of the wharf walls which the port had financed separately. According to the port authority, this was “not a problem”, explaining that the investment in the intermodal container terminal was motivated and justified strategically, and not only by a strictly private return calculus. The port’s public service mission to increase waterway traffic, encourage a modal shift away from trucks, and develop the added value of cargo justified a lower private financial return. A call for expressions of interest was published in the Official Journal of the European Communities in early 1999. A number of offers were expressed, and the port’s management interviewed candidates. A serious candidate was evicted because he wanted complete control of the ground and was not interested in a railroad terminal. The port, on the other hand, wanted to keep control over the crane through a majority share in BPI, the investment society that would construct the infrastructure. Furthermore, the port also wanted to secure an international reach


Inter Ferry Boats

Egis Projects

Brussels Port Authority

Smet SA 24.5%

24.5%

51%

33% 33% 33%

BPI BruPort Invest (Owns crane and tarmac)

BTI Brussels Terminal Intermodal (operator)

Ownership and % shares held Contractual relationship (rental)

Figure 3.3 Chart of BPI and BTI shareholdes

and image for the terminal. Other contacts were taken, notably in France with a French company, Egis projects. In the end, a consortium was formed involving three partners (Figure 3.3). The partners involved can be described as follows: •

•

•

Egis projects is a French company, part of Groupe Egis, itself part of C3D which belongs to the public holding “Caisse des Dépôts et Consignations”. Groupe Egis is a big French company busy in engineering, infrastructure project finance and infrastructure servicing. Smet is a small, privately (family) owned stevedoring and shipping company already working in the Brussels port since the 1920s. It has its own loading facilities and warehouses, but no container handling facilities. It is located just beside the terminal. Inter Ferry Boats (IFB) is a subsidiary of the Belgian public railway company (which owns 89%), created to ensure intermodal connections between rail cargo and sea and inland navigation. As such, IFB has some wagons of its

37

38


own, hires cargo trains, organizes regular cargo shuttles inside Belgium, and is a full shipping services provider towards European destinations, together with business partners in which it holds shares (notably CNC, a French container forwarding company, and Haeger & Schmidt, a German inland shipping company). IFB already operated a number of container terminals in Belgium and in France. Despite its very maritime name (and history), its main activity is land transport; waterway transport is catered for by business partners. Egis had already been involved in harbour projects, but this remained a marginal activity into which it diversified, rather than a core business. The container terminal was seen as a further step in this new activity, for which Egis had created a separate division, Egis Ports. Its manager, Pierre Guérin, had a vision for providing infrastructure support and services (feasibility studies, conception and planning, etc.). This vision corresponded to the need felt by Huygens and his team for a European-sized partner for the container terminal. Smet was obviously interested in offering the possibility of handling containers to its (potential) customers. For instance, it had a prospect of handling a significant traffic of steel coils from barge to train, and had no heavy-duty crane to handle that load. Although the steel coils were no containers, the container terminal’s gantry crane could handle this. But Smet was too small to guarantee sufficient container traffic on its own to use the terminal to its capacity. Inter Ferry Boats (IFB) is the key player in this structure. First, the use of a railway connection made the Belgian railway company’s involvement necessary in one way or another. It was felt that involving IFB (a subsidiary of the railways) was a better way to get proactive collaboration by the railways to develop the


terminal. Furthermore, IFB was the only partner with a real national and international logistics activity. At the time, contacts were under way between IFB and a big international container forwarder, which also raised the hopes of a quick growth for the terminal’s traffic, beyond IFB’s existing business partnerships with Haeger & Schmidt and CNC. When asked about the reasons for its involvement in the project, IFB’s then general manager quoted the modernization dynamics of the Brussels port, a “good feeling” for the project and IFB’s own interest in making its traffic grow. From the description of those partner’s activities, it becomes clear that a transport and logistics chain can be broken down into potentially dozens of steps, which could in principle each be carried out by different persons who all have their specific jobs: packagers, container rental, retail land transporters (national or international), forwarders, railroad companies, stevedores, warehousing, inland shipping, high-sea shipping, etc. Obviously, then, the whole transport and logistics business is about finding the right degree of vertical integration in this chain (and the right value chain) to serve a specific market. There is a balance between the service, economies of scale and power of coordination of fully integrated providers and low cost and simplicity of structure of small, more specialized players. To further complicate the matter, at various points along this chain, the transport mode can be shifted (e.g. from boat to lorry, lorry to railroad), and the choice of the correct modal mix and location of the transfer site also determines the cost and performance of the proposed transport service. The container terminal can belong to this logistical chain in a variety of different ways, depending on the choice of the partners. And the very narrow profit margins on the transport activities mean they are very sensitive to cost differences, leading to strong competition between operators and between locations. Cargovil in Vilvoorde, just north of Brussels, among other con-

39

40


tainer terminals, is thus a direct competitor of the Brussels terminal. A key factor for the quick development of the traffic at the terminal was that it should be used not only to serve the needs of the waterfront businesses for shipping, but also for concentrating or dispatching traffic in the whole of Brussels and even beyond. Only this would allow the terminal to have regular barge traffic, and hence to convince a growing number of shippers to use container traffic as a transport mode. A virtuous circle had to be created whereby regular traffic would draw more customers to the terminal, and more customers would mean a guarantee of regular traffic. Two studies had been carried out beforehand and had shown such a potential to exist, so this virtuous circle was more than just wishful thinking.

O P E R AT I N G T H E C O N TA I N E R T E R M I N A L : F R O M S TA R T- U P T O F A I L U R E . . . A N D R E S TA R T The infrastructure was indeed constructed, according to plan, cost and delays. Egis and IFB accepted to invest in the infrastructure in order to access it as operators, and thus contributed c270 000 each to BruPort Invest’s capital. Smet was not asked to contribute to the infrastructure, since it was accepted that as an SME, this was not within its financial possibilities. The container terminal was inaugurated in early June 2001, and rented to the operating joint venture, BTI. BTI was a small firm with a capital of c1 116 000, where each of the partners had only liberated c124 000 (c744 000 were subscribed but not called). As foreseen, IFB was the crucial partner to put in place regular container shuttles and attracting traffic to the Brussels terminal. However, it turned out that railway traffic to the port


Figure 3.4 The terminal. You can see the gantry crane with railroad tracks running under it, and its cantilever reaching over the wharf and the ship (photograph reproduced with permission of Port de Bruxelles)

dwindled, rather than grew, between 1999 and 2003. And the terminal’s activity never really took off. Waterway traffic was scarce, and there was only very limited container traffic in 2002 and 2003. BTI made a c99 000 turnover from June 2001 to December 2002. It should be reminded that BTI had to pay the concession fee and the surface fee to BPI, amounting to nearly c300 000 per annum. In fact, most of BTI’s equity was used to pay those fees, though they were paid irregularly, and payments were stopped in February 2002. BTI never had personnel of its own: neither to man the crane (on the few occasions where it was needed, a crane driver from IFB came over from another terminal), nor to work the market in any way. This situation was looked upon with increasing nervousness by the port, as it was its first such development project. It had put a lot of hope in this venture, and had advertised it as a symbol of its dynamism. It therefore felt that, as the port authority’s marketing director put it, “Our credibility was at risk.” The other

41

42


two associates looked on helplessly. Smet was too small to provide any significant turnover to this platform, and the steel coil business it had hoped for never materialized. Egis was not really in the transport business; it was there as an infrastructure management partner, not as a transport operator. It tried to help with business contacts, but this was too limited to have significant effect. In a further development, Egis reoriented its corporate strategy and wanted to withdraw from the port infrastructure business, and the head of the ports division left the company. During successive meetings of BPI’s board in late 2001 and all of 2002, the lack of traffic was repeatedly stressed by the port’s management, who asked for remedial steps to be taken. Whereas just a year earlier, very optimistic forecasts were made by IFB, now nothing seemed to happen. The port’s management experienced all this as a let-down by IFB. It felt that there had been no marketing of the Brussels location by IFB, no active canvassing of local demand, and that more generally the Belgian railways had not fulfi lled their promises to improve the connections to the port of Brussels. Worse yet, the port complained that potential customers (firms located in Brussels) had been channelled away from the Brussels terminal by IFB. IFB, however, had other preoccupations and priorities. First, there had been major changes in the Belgian railway’s and in IFB’s management. This ended a glut of external growth and in the new strategy of the railways, all its subsidiaries were asked to make a profit or face being divested. This applied notably to IFB, whose repeated losses and hapless investments came under scrutiny in the press. In response, IFB concentrated on Antwerp and had to balance its own operational efforts in its search to improve traffic growth and to get itself out of red digits. From this point of view, other locations appeared much easier to work and were more attractive than Brussels. Brussels, in the final analysis, appeared more and more as a secondary location and deadwood for IFB.


In a meeting of BPI’s board in February 2003, the port took the initiative and ended the leasing agreement between BTI and BPI. A settlement was found with BTI whereby a fi nal payment of c130 000 would compensate all the rents still due, up to October 2002. This effectively paved the way for BTI’s bankruptcy. It was accepted as a fatality by the other partners, but created a row with IFB, who in the beginning refused to withdraw from the infrastructure society, BPI. This could be a problem, since there was little luck of attracting a competitor if IFB remained an owner of the infrastructure. Egis had accepted to withdraw immediately for a symbolic euro. But it was only a year later that a settlement was found and the port became sole shareholder of the infrastructure society, after buying back IFB’s stake for c100 000. In early 2003, the port had already made contact with the CFNR, a French shipping company based in Strasbourg, and an agreement was soon found to have a regular barge shuttle with Antwerp, first twice, then four times per week. Under this agreement, CFNR is not involved in any shareholding, and is provisionally shielded from commercial risk by the fact that it pays a fee per handled container instead of incurring fi xed cost as the previous partnership had. Traffic is now picking up, reaching 12 000 TEU from January to December 2005. But that’s another story.

43

APPENDIX Table 3.1

Cargo traffic by category

(in thousands of tonnes)

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Agricultural products Food products Solid fuel Petroleum products Ores and scrap metal Metallic products Construction material Fertilizer Chemical products Miscellaneous Total own traffic Transit traffic Total waterway traffic

275 204 538 1.786 63 204 1.080 0 16 2 4.168 2.127 6.295

261 222 110 1.559 63 169 1.094 0 16 3 3.497 1.593 5.090

284 235 18 1.446 58 146 1.156 0 10 0 3.355 1.490 4.845

232 203 10 1.435 53 225 1.344 6 0 0 3.508 1.615 5.123

276 236 87 1.535 61 137 1.301 0 5 0 3.638 1.186 4.824

323 257 60 1.410 53 185 1.283 0 0 0 3.571 1.299 4.871

396 205 8 1.168 60 181 1.396 0 0 0 3.414 1.550 4.964

462 241 6 962 82 109 1.731 0 0 0 3.592 1.844 5.436

372 247 4 918 74 66 1.773 0 0 0 3.455 2.445 5.900

372 236 3 1.154 91 98 1.718 0 2 1 3.675 2.823 6.498

356 221 2 1.211 131 80 1.752 0 0 0 3.752 3.197 6.950

294 177 2 1.235 150 85 1.901 0 0 0 3.844 2.733 6.576

337 241 1 1.276 168 116 2.120 0 1 19 4.279 3.436 7.715


Table 3.2 Titles of selected articles from the fi rst performance contract (1994–1999), describing the port’s obligations (translated by the author) Articles 4–11: Management of the port authority, covering: use of regional funds, self-supporting investments, fi nancial equilibrium, optimizing incomes, economy and quality management, investment planning, and HRM. Art. 12: Expansion of the port’s estates. Art. 13: Construction of new warehouses. Arts 14–16: Waterway and infrastructure maintenance, urban integration of the wharves and waterways. Arts 17–19: “Commercial objective”: obtaining new concessionaries, in priority those who satisfy a number of criteria: waterway use, fi nancial soundness, added value, products, investments, job creation, urban planning consistency, etc. Art. 20: Develop waterway traffic. Art. 21: Pricing of the concession rents. Art. 22: User satisfaction. Art. 23: Market research on competitors (in three sectors: other ports, other private and public industrial estate providers, and other transport modes). Art. 24: Improve fi nancial returns by developing complementary activities. Art. 25: Build a positive regional, federal and international image. Art. 26: Adapt to “substantial changes” in the environment. Art. 27: Carry out the public service missions, especially: contribute to the region’s mobility policy, to boat and waterside safety, to flood prevention and control water quality and environment on its estate.4 Art. 28: Help with waste transport over the waterway to the incineration facility. Art. 29: Promote firms which create low-qualification jobs and evaluate the jobs created through the port’s activity. Arts 30 and 31: Set up a management plan, communication and approval, mandatory contents of the plan. 4

It is highly unusual that a port authority has at the same time to take care of maintaining the waterways (dredging) and to a certain extent to manage excess used water from the city. This, of course, stems from the exclusively urban reach of the port.

45

46


Table 3.3 Performance indicators linked to a fi nancial incentive in the 2002 performance contract. Dashboard of the fi nancial incentive indicators (Art. 47.2.4 of the 2002 performance contract). Waterway management OBJECTIVES

INDICATORS

1. Increase the economic value of the flow of goods transported over the waterway 2. Promote the settlement of fi rms which privilege waterway transport. 3. Increase the proportion of maritime traffic with respect to river traffic

Keep the economic value of the flows, as measured by its port value-added indicators, above its reference year (2001) level. Increase the absolute value of the minimum guaranteed volumes specified in the concession contracts with respect to its 2001 reference level. At least, keep the growth of the proportion between maritime and inland waterway traffic with respect to the reference year, i.e.: ratio Maritime traffic / Own traffic >5.00% for 2003 and 2004; >5.25% for 2005; >5.51% for 2006; >5.79% for 2007. Keep the number of days with navigation interruptions caused by unpredictable causes below 120 hours per year. Achieve the annual dredging objective of 40 000 m³, as specified at annex 5 of the performance contract, or less if the allotted fi nancing is insufficient.

4. Minimise the duration of navigation interruptions. 5. Guarantee an optimal navigation on the whole regional waterway Estate management OBJECTIVES

INDICATORS

6. Increase the available area

Keep the rate of vacant land and usable buildings below the reference year, as measured by the vacancy rate multiplied by the number whole unoccupied months, i.e. a vacancy rate of 1.55% for land and 1.96% for buildings.


Table 3.3

(Continued)

OBJECTIVES 7. Relative land occupation intensiveness 8. Clean up the Carcoke area and make it available 9. Promote the development of jobcreating activities

INDICATORS Keep above the ratio of the two fi rst European inland ports (Paris and Duisburg) with respect to reference year 2001, based on EFIP’s data. Achieve at least 80% of the port’s annual programme according to the established plan and the details that shall be laid out in the specific Carcoke covenant. Keep a positive 3% ratio between the evolution of the employment in the port’s estate and in the region for the sectors that are represented on the port estate, as compared to reference year 2000.

Management of the port authority OBJECTIVES

INDICATORS

10. Train the port’s agents on management

Keep the training investment in the fields of quality management, ICT and environmental management, as measured by the average annual number of training days by agent, above one half day. Set up a measurement system for the satisfaction of the port’s enterprises and verify a year-on-year improvement. The satisfaction rates have to be positive and improvements have to be measured for the years 2004, 2005, 2006 and 2007 with respect to the reference year. Balance its current account for the previous year.

11. Increase the port’s positive image

12. Management performance

47

Table 3.4

The Brussels Port Authority’s fi nancial accounts, 1999–2004

In c Year

Assets 1999

2000

2001

2002

2003

2004

69 229 980 385 923 68 279 569 58 637 880 113 522 587 703 8 940 464 564 489 560 000 4 489

66 762 061 132 063 65 968 733 59 380 521 156 325 474 155 5 957 731 661 265 660 001 1 264

21 056 026 0 1 994 821 1 959 233 35 588 17 550 160 1 400 951 110 095 90 286 006

24 440 864 0 3 579 476 1 373 322 2 206 154 20 769 613 17 765 74 010 91 202 925

FIXED ASSETS Immaterial assets Material assets Estate and buildings Machinery Furniture and rolling stock Assets under construction Financial holdings Shares Guarantee deposits

51 925 959

66 482 224

67 898 040

51 919 455 48 303 434 123 003 443 599 3 049 419 6 504 6 504

65 917 413 62 845 814 105 435 395 603 2 570 561 564 811 560 000 4 811

67 333 551 63 492 963 95 090 573 568 3 171 931 564 489 560 000 4 489

70 165 177 316 689 69 283 999 61 857 104 101 188 367 614 6 958 094 564 489 560 000 4 489

LIQUID ASSETS Claims over one year Short-term claims Commercial Other Financial investments Cash and bank balances Prepayments and deferred income TOTAL ASSETS

28 077 043 371 840 1 320 054 463 989 856 065 26 243 182 105 147 36 820 80 003 002

30 961 509 0 951 127 744 669 206 458 28 110 407 1 580 622 319 353 97 443 734

24 928 113 0 2 730 452 1 629 786 1 100 666 21 931 184 31 034 235 443 92 826 152

20 803 423 0 3 255 324 1 733 387 1 521 937 17 353 294 47 455 147 350 90 968 600

In c Year

Liabilities 1999

2000

2001

2002

2003

2004

EQUITY Capital Issued capital Uncalled capital Appreciation revaluations Legal reserves Available reserves Cumulated profits and losses Capital subsidies

53 283 468 2 166 422 2 169 800 −3 378 10 417 804 122 625 338 267 0 40 238 350

56 890 408 2 166 422 2 169 800 −3 378 10 417 804 216 980 435 134 1 746 124 41 907 943

56 825 297 2 166 422 2 169 800 −3 378 10 417 804 216 980 442 146 1 879 340 41 702 605

57 542 964 2 166 422 2 169 800 −3 378 10 417 804 216 980 448 624 2 002 424 42 290 710

58 844 397 2 166 422 2 169 800 −3 378 10 417 804 216 980 450 666 2 041 231 43 551 294

59 368 287 2 166 422 2 169 800 −3 378 10 417 804 216 980 452 422 2 074 597 44 040 062

PROVISIONS For majors repairs and maintenance Other risks and costs

12 234 794 11 868 445 366 348

14 268 542 13 902 194 366 348

16 231 586 15 121 557 1 110 029

15 238 010 14 127 982 1 110 029

14 830 985 13 720 956 1 110 029

17 671 589 16 077 908 1 593 681

DEBTS Longer than one year One year at most Longer than one year maturing Accounts payable Received prepayments Taxes Wages and social security due Other debts Accounts of regularization TOTAL LIABILITIES

14 484 740 8 095 758 5 942 466 807 065 2 702 392 121 641 461 932 367 991 1 481 444 446 517 80 003 002

26 284 784 10 627 087 15 251 379 1 136 551 3 635 545 115 121 448 152 384 187 9 531 823 406 318 97 443 734

19 769 269 7 514 507 11 890 885 3 112 580 6 292 220 157 303 457 222 383 636 1 487 923 363 878 92 826 152

18 187 626 6 290 909 11 578 166 3 446 219 5 470 158 187 985 522 485 470 495 1 480 823 318 551 90 968 600

16 610 624 4 995 872 11 409 048 3 806 710 4 977 753 114 190 425 919 446 921 1 637 555 205 704 90 286 006

14 163 049 3 662 909 10 332 887 4 133 688 4 827 373 97 064 483 076 625 509 166 177 167 254 91 202 925

Table 3.4

(Continued)

In c Year TURNOVER Sales Other operating revenues Total operating income FINANCIAL INCOME Revenues from fi nancial assets Other fi nancial incomes: Capital subsidies Dredging subsidies Sponsoring Debt service subsidy Other Total Financial income Non-recurring revenues TOTAL INCOME

Income 1999

2000

2001

2002

2003

2004

4 934 981 4 985 709 9 920 690

4 986 839 5 348 882 10 335 721

5 211 175 5 250 731 10 461 906

5 337 305 4 908 322 10 245 627

5 399 527 5 440 197 10 839 725

6 243 032 4 879 259 11 122 291

492 686

1 025 240

1 307 001

693 571

125 727

45 525

2 894 959 2 135 038 99 157 1 214 592 6 6 836 438

2 963 100 670 334

2 956 966 570 155

3 031 196 2 354 989

3 027 127 2 354 989

3 196 941 2 389 637

1 212 663 249 5 871 586

1 210 637 0 6 044 759

1 208 510 1 539 7 289 805

1 139 021 1 813 6 648 677

1 172 535 1 340 6 805 979

0 16 757 128

0 16 207 307

0 16 506 665

33 356 17 568 788

0 17 488 401

57 016 17 985 285

In c Year Cost of goods sold Goods and services bought Wages, social security and pensions Depreciation and revaluation Revaluation of bad commercial debts Provisions for risks and expenses Other operating expenses Financial expenses Financing costs Other fi nancial expenses Non-recurring expenses Provisions for risks and expenses Other non-recurring costs Annual profit TOTAL COSTS

Costs 1999

2000

2001

2002

2003

2004

13 465 117 1 800 043 4 668 816 3 769 604 202 213 2 071 577 952 864 458 955 448 926 10 028 1 591 154 1 487 361 103 792 1 241 903 16 757 128

13 850 858 1 982 872 4 692 405 4 172 128 97 517 2 033 749 872 188 419 103 409 586 9 516

15 893 882 4 628 372 4 984 662 3 874 631 72 478 1 963 044 370 695 463 382 454 813 8 569 9 173

17 025 440 7 817 331 5 419 135 4 035 679 147 295 −993 576 599 576 411 754 402 999 8 755 2 033

17 190 718 6 980 682 5 906 901 3 974 899 204 918 −407 025 530 343 256 669 248 178 8 491 166

17 731 317 4 001 516 5 906 735 4 281 584 105 444 2 840 603 595 433 218 846 218 784 62 0

0 1 937 346 16 207 307

0 140 227 16 506 665

0 129 562 17 568 788

0 40 849 17 488 401

35 122 17 985 285

52


Table 3.5 Market shares of transport modes in Europe (source: Table 3.2.2, European Commission (2004) “European Union Energy & Transport in Figures”, Directorate-General for Energy and Transport in cooperation with Eurostat, URL: http://europa.eu.int/comm/dgs/ energy_transport/figures/pocketbook/2004_en.htm) Modal split in %

1970 1980 1990 1991 1995 1997 1998 1999 2000 2001 2002

Road

Rail

Inland waterways

Pipe-lines

Sea

34.7 36.3 41.9 42.3 43.0 43.0 44.0 44.0 43.2 44.0 44.7

20.0 14.6 10.9 9.8 8.5 8.7 8.4 8.1 8.2 7.9 7.7

7.3 5.3 4.6 4.5 4.4 4.3 4.3 4.2 4.2 4.1 4.1

4.5 4.3 3.0 3.3 3.1 3.0 3.0 2.9 2.8 2.8 2.8

33.5 39.4 39.6 40.0 41.0 41.0 40.2 40.9 41.6 41.1 40.8

Performance by mode for freight transport: EU-15 (in 1000 mio tonne-kilometres)

1970 1980 1990 1991 1995 1997 1998 1999 2000 2001 2002 1995-02

Road

Rail

Inland waterways

Pipe-lines

Sea

Total

489 720 976 1010 1124 1180 1249 1287 1319 1344 1376 +22%

282 290 255 234 222 239 239 236 250 241 236 +6%

103 106 107 107 115 119 122 122 128 126 125 +9%

64 85 70 79 82 82 85 85 85 87 85 +3%

472 781 923 955 1070 1124 1142 1197 1270 1254 1255 +17%

1410 1982 2332 2386 2613 2744 2837 2927 3052 3051 3076 +18%

Table 3.6

Cargo type and own traffic weighted by added value

(in thousands of tonnes)

1993

1994

1995

1996

Dry bulk Liquid bulk

1.505

1.472

1.594

1.559

1.447

1.435

432

436

0

0

Own traffic

3.497

Traffic weighted by added value a

3.754

Miscellaneous Containers

a

1997

1998

1999

2000

2001

2002

2003

1.668

1.673

1.846

2.229

1.535

1.408

1.166

962

2.196

2.141

2.202

2.322

2.612

918

1.154

1.208

1.235

1.276

479

435

483

413

0

0

0

0

401

345

380

330

287

376

0

0

0

0

0

15

3.355

3.508

3.638

3.564

3.425

3.592

3.458

3.675

3.740

3.845

4.279

3.698

3.990

3.920

4.076

3.888

4.155

3.880

4.047

3.925

3.883

4.602

The weights attached to the types of cargo are as follows: dry bulk = 1; liquid bulk = 1/3; miscellaneous and containers = 4.

2004

CHAPTER 4

MANAGERIAL CHANGES AT ESTON IAN HOSPITALS Ruth Sepper and Ruth Alas

INTRODUCTION The Estonian Health Project was started in 1995 to support health care reform initiated by the government. Analysis showed there were 78 hospitals providing over 10 000 hospital beds in Estonia. Most of the hospitals were over 20 years old and generally in poor condition. The project supported the health care reform, initiated by the Estonian government, by offering recommendations regarding the future hospital network based on the best practice in the European Union. The final report of the project was produced in April 2000, and was called the Estonian Hospital Master Plan 2015 (EHMP). The task set by the EHMP included reference to the main Strategic Change Management in the Public Sector. Edited by F. Longo & D. Cristofoli Copyright © 2007 John Wiley & Sons, Ltd.

56


influences in modern health care delivery in Western countries. Emphasis was placed on the hospital networks. There were very clear recommendations with regard to the future catchment areas and the organization of the hospitals within each area. The EHMP proposed the establishment of four main catchment areas or regions in Estonia: Northwest, Northeast, Southwest and Southeast. Each catchment area should have a hospital structure, which provides for a regional/university hospital (in Tartu and Tallinn) and/or central hospitals (in Haapsalu, Kuressaare, Narva, Paide, Rakvere, Viljandi and Võru). It also recommended that the implementation of this structure be linked to the benchmark/ standards for clinical performance. Planned costs and capital assets should be achieved by 2015. The financing of the public health care system in Estonia is based on health insurance tax revenues delivered via the Estonia Health Insurance Fund (EHIF), which provides nearly 90% of all financing. Health care expenditures in relation to GDP in Estonia amount to approximately 6% of GDP (Figure 4.1). The figure is higher compared to other Baltic states; e.g. the respective figure in Latvia was 4.4% in 1999 and in Lithuania 5.3%. However, the figure is below the average for European states (8.5% in 1997).

7.0%

6.3%

6.0%

6.1%

5.5%

5.0% 4.0%

6.2%

5.5%

5.9%

6.6%

4.5%

3.0% 2.0% 1.0% 0.0% 1992

1993

1994

1995

1996

1997

1998

1999

Figure 4.1 Health care expenditure as a percentage of GDP in Estonia

M A N A G E R I A L C H A N G E S AT E S T O N I A N H O S P I TA L S

T H E N O R T H E S T O N I A R E G I O N A L H O S P I TA L NERH background The foundation North Estonia Regional Hospital (NERH) is a legal body established on 24 July 2001 from the merging of seven state-owned hospitals in Tallinn. According to the general aims of the EHMP 2015 and conclusions detailed in the business plans for the North Estonia Regional Hospital (NERH), the merging of seven previous hospitals generated significant minimizing of the capital costs by achieving a capital space standard of 95 square metres per bed (instead of 120 square metres per bed as envisaged in the EHMP). Legally the NERH is a foundation, which has supervisory boards as well as management boards. The supervisory board is the body representing the interests of the founders. The management board is the body responsible for strategic as well as day-to-day management of the organization. The NERH is a regional hospital in the sense of the EHMP. A regional hospital is a body providing high-level special medical services. The hospitals merged in the NERH form one of the largest health care institutions in Estonia. The hospital is currently situated in several buildings in Tallinn and employs over 2 800 employees. The consolidated turnover of these merged hospitals was c32 million in 2000. Their consolidated operating result was a loss of c1.77 million in 2000. The NERH holds many strong trademarks in Estonian medicine (Mustamäe Hospital, the Cancer Centre, etc.) and employs the best-qualified physicians in the country. It aims at becoming the leading hospital in Estonia providing a full range of medical services. The merger of seven state-owned hospitals was performed to comply with the provisions of the Health Care Act, which prescribes that hospitals shall be established as foundations

57

58


or limited companies under private law. The NERH is a foundation. The founder of the NERH is the state.

The change period According to the EHMP The merger of seven of Tallinn’s hospitals started in 2001 with the formation of the NERH. Managerial changes occurred throughout all managerial areas – a new vision, mission and strategy were worked out, human resources were revised via a publicly announced personnel search to locate the best specialists (physicians, chief doctors, chief nurses), the structure of the organization was completely reorganized as a result of which four principal divisions began managing the main functional units (internal medicine, surgery, diagnostics and psychiatry) and the financial operations and budgeting were consolidated using an info-technology supported financial programme. It is worth noting that, during the initial stages of the merger and the consequent changes, a negative fi nancial performance of about c2.6 million was expected for the next budgeting period. However, political and/or financial support for the changes arising from the EHMP was still extended to the NERH in 2001.

Outside the EHMP Public opinion about the changes and health care reform in general plays a significant role. The most substantial opinion groups include the patients, the general public and the medical staff. In principle, opinions and expectations differ greatly among these opinion groups. The patients and the general public are


mostly concerned about the quality of and access to medical services. Explanations why previously planned changes by EHMP were reconsidered can be found in Jesse et al. (2004) where the authors point to negative publicity surrounding the plan, and how the steps taken by specialist organizations to evaluate and develop separate plans got support from such negative publicity. The political reaction was revealed in 2002 with a new Development Plan for Estonian Hospitals (DPEH). Official support for the DPEH by the government came in 2003. The DPEH was positioned as a plan applying EHMP in practice. In the DPEH document the aims of that plan were similar to EHMP aims: (a) to ensure access to medical care; (b) to optimize expenditures for setting up and operating the hospital network; (c) to ensue sustainable development of the hospital network. More detailed reasons for producing new plans were given by the leaders of the Estonian Health Project 2015 to the public and medical specialists in 2003. The author alleges that application of EHMP has been limited because: (a) the plan focused on final aims instead of transition processes, assuming that the Estonian state could manage the changes necessary; (b) the plan only focused on acute medical care with no attention to care of mental disorders, tuberculosis and long-term and rehabilitation care; (c) the plan did not take into consideration traditional regional centres and logistics between them; (d) this proposal was only based on medical quality and economic efficiency, with no attention to regional interests to restore existing hospitals.

59

60


Reading the evaluation of EHMP it is worth noting that treatment and diagnostic quality of medical services are the main topics and approaches of modern medicine. All efforts given to new technologies, treatment guidelines or operational changes always acquire a quality dimension. In addition, modern medical quality is always associated with efficiency; new technologies allow more out- than in-patient care, more day care with less invasiveness, etc. In the aims of DPEH, a typical feature showing resistance to changes is described in sentence (d), and the critical note at (a) refers to the scepticism about the managerial quality in the Estonian medical system. However, these are not the reasons for changing the health care strategy of the country. The new political direction was revealed when a new type of hospital, called a local hospital, was included within the hospital network. These political decisions resulted in a situation where the previous plans to close local hospitals were jettisoned and these local hospitals continued as active treatment hospitals within the hospital network. Such political decisions necessitated the financing of these hospitals for the continuation of their health care services as well. The deviations of direction in the EHMP led to the next political steps in 2004. It is well known that demand for medical services is rising year by year as are the costs. A calculation of the needs for hospitals in Estonia highlighted that the financial resources available for medical services are critically limited and delivery of them among actively performing hospitals is impossible without levelling the status of all physicians working at the hospitals. However, in the beginning of the changes in 2001, the hospitals were classified according to service standards; regional/ university hospitals operate in compliance with higher levels of health care service, and then there are other lower levels. Accordingly, health care professionals were hired at higher salary levels than the personnel at other hospitals. Standardizing salaries in the model for financing hospitals was the next political manoeuvre,


which derailed the EHMP and would inevitably lead to a reconsideration of the entire Master Plan. Further complications have arisen because of the failure of communication channels particularly in certain sections of the merged hospital. Some of the larger units in the hospital involve numerous hierarchical levels, and thus there is a need for an efficient communication system to ensure that staff members are informed about all aspects of the reform process. Although this was noted as a priority from the start, failure to create such efficient communication channels has jeopardized the success and financial viability of aspects of the reforms.

THE NERH FORMAL REFORM PROCESSES In order to consolidate and downsize services within the NERH, in conjunction with a transition to average lower lengths of stay (ALOS), and with greater use of day stays and ambulatory procedures (in line with good practices in OECD and EU countries), the business case for NERH was analysed for different options: •

•

•

•

as an option, doing nothing could not achieve any significant alterations in the existing hospital or service structure, and so it was quickly put aside; the option to build a new so-called “Greenfield” entity was put aside as unrealistic because of the investment requirements; also, doing the minimum, for example simply rationalizing the management opportunities created by the single entity of the NERH, would not create any change to the acute service configuration nor to the clinical support facilities; the option known as the Master Plan B assumed the consolidation of NERH activities at the Mustamäe site, once the new facilities were built for the hospital. Other NERH sites

61

62


would be disposed of after such consolidation. This option assumes that ALOS can be reduced to 4.5 days translating into a reduction in the number of beds to 598. The management team proposed choosing the rationalization option in the short and medium term and the Master Plan B in the long term. The supervisory board decided to approve this option as the strategic development plan for the NERH. Thereafter, it was decided by the NERH managerial board that the preferred development strategy for the NERH was to pursue rationalization activities during the initial period of stabilizing the organization, and once the changes had been successfully implemented throughout the organization and the fi nancial state stabilized, to plan and pursue the Master Plan option to achieve optimal size.

TH E CHANGE MANAGEM ENT PROC ESSES I N T E R M S O F S T R AT E G I C O B J E C T I V E S , A C T I O N S A N D R E S U LT S The NERH strategic objectives were: (a) to achieve a steady improvement in treatment quality and growth of patient satisfaction; (b) to increase market share in special health care and to offer a wider range of special services; (c) to achieve an efficiently managed organization for which the consolidation and downsizing of services within the NERH were aimed. In order to fulfi l these three strategic objectives the managers of the NERH discovered the following critical success factors.


First, as an organization providing medical services, the main issue and the basis for success in the future is to achieve the best treatment quality within the country. This issue relates to three directions of change and management: (a) employees, (b) patient satisfaction, and (c) working environment. The most important part of the management of these changes towards generating a new vision of treatment quality was working with personnel – the doctors, nurses and other specialists. The NERH is an intellectual organization, and its principal capital resource is human capital – the employees providing the medical services. In order to make changes in that direction (a) a new structure (principal and support processes), (b) a personnel policy, (c) a client services rearrangement and (d) renovations were planned as the managerial tools for these changes. For this purpose, an appropriate change management programme was introduced covering critical areas like communicating the change rationale, achieving employee participation and motivating them to act. The objective of the change management programme was to guarantee that the whole organization understands and acknowledges the new corporate objectives and was willing to fulfi l them. Second, in order to achieve the second strategic objective of the NERH – an increase in its market share – it is critical to increase brand awareness through certain marketing activities stressing the high quality of treatment at the NERH. Besides public opinion, the close and mutually beneficial relationship, not only with the Estonian Health Insurance Fund EHIF, but also with all other health care institutions, e.g. general practitioners, polyclinics and other hospitals, is essential. The introduction of new specialist areas to the NERH portfolio allows further enlargement of its presence on the Estonian health care market. Third, in case revenues come under pressure and competition becomes fiercer, efficiency becomes a more and more important factor while achieving competitive advantage. Increasing efficiency can be divided into two wider areas of optimization – core

63

64


processes and support functions. Constant process analysis and optimization are extremely important under a cost reduction programme as it enables the use of resources in a more efficient way. Processes in accordance with predetermined conditions and specifications are of utmost importance in terms of both cost as well as quality. To meet established standards, a new process of internal control was introduced.

A new personnel management system This issue of treatment quality is associated with three directions of change and management in the NERH – employees (Table 4.1), work environment and patient satisfaction. The main resource for providing medical services is the personnel – doctors, nurses and other specialists. Highly qualified staff members are the key to ensure a hospital’s service quality. The personnel policy and new motivation system must ensure that the personnel are continually involved in professional development and are willing to offer the high quality service. In 2000, personnel expenses made up approximately 50% of the hospitals’ total revenue in the merged NERH. To achieve successful personnel management, the following processes were planned: Table 4.1 Distribution of NERH employees in October 2001 Employee group Doctors Nurses Nurses in care taking Administration and other employees Total

Number of employees

Percentage in whole staff

419 1073 725 597 2814

15% 38% 26% 21% 100%


• • • • • • •

creation of a new structure to merge the different hospitals’ workload; analysis of the labour demand and standardization of the workforce; creation and implementation of job descriptions for all positions; recruitment and selection principles; payment and motivation systems (remuneration and bonuses included); training and development system; evaluation and career system.

Merger, analysis of labour demand and standardization of the workforce Analysis of labour demand and the standardization of the workforce started directly after the hospitals merged. Existing procedural principles, documents and development plans were taken as the basis for further analysis. To start with, both medical and support staff were identified, analysed and optimized for the new structure. Implementation of the new structure was one of the fi rst difficulties managers faced (Figure 4.2) – the previous concept organized all medical staff into small, specialist-based departments. However, the new structure organized many small departments, providing different medical services, into large divisions based on treatment method. The positive side of this new structure became evident in the rationalized use of hospital beds and in a deeper medical synergy between different medical specialities leading to (1) increased efficiency and (2) better quality of medical services. The negative side of this consolidated structure was reflected in the personal posts held by leaders. As a result of the restructuring, many managers in the previous structure were

65

Supervisory Board

Head of the Management Board

Member of the Management Board Medical Services

Clinic of Internal Medicine

Member of the Management Board Quality assurance, personnel management

Surgery Clinic

Diagnostics Clinic

Member of the Management Board Development, marketing, client services

Anaestheseology Clinic

Psychiatric Clinic

Physiotherapy Centre

Neuro Surgery Centre

Radiology Centre

Anaesthesia Centre

Outpatient Care Centre

Internal Medicine Centre

Head and Neck Surgery Centre

Pathology Centre

Intensive Care Centre

In-patient Care Centre

Cardiology Centre

General Surgery Centre

Laboratory

Emergency Care Centre

Psychiatric Expertise Centre

Neurology Centre

Orthopaedics Centre

Dermatovenerology Centre

Cardio-thoracal Surgery Centre

Oncology Centre

Women Diseases Centre

Occupational Diseases Centre

Surgery Unit Sterilization Unit

Figure 4.2 Structure of the NERH by December 2003


demoted. Furthermore, some of them lost their managerial positions altogether in the new hospital. This resulted in some key personnel leaving, which subsequently caused instability elsewhere among the staff. For example, two highly respected surgeons worked in two different but merging hospitals. After the merge these two departments were formed into one large unit with only one chief surgeon. Although large centres with subunits and a high level of managerial independence were formed, it didn’t stop some opinionated leaders from leaving. Reducing the number of employees, in accordance with the personnel standard, was urgently required to stabilize the organization, and so the loss of particular specialists was unavoidable. Mostly these problems involved high-ranking specialists. However, the standardization of nursing positions had a very positive impact on subsequent efforts to make the work process more efficient. The planned foundation of an unfi xed hospital bed resource required nurse-specialists with a wide range of skills because no special wards were planned exclusively for certain medical services. This is quite a new and unique way of utilizing the available beds in Estonian hospitals and it created a lot of scepticism among doctors and nurses. Planning for flexible bed use was a long process that required considerable patience on the part of managers and other personnel. A large part of the managerial process was taken up with organizing the training necessary to prepare nurses for multiple medical services. However, the new structure facilitated the attainment of these qualifications and the successful establishment of the staff body.

Creation and implementation of job descriptions for all positions Previously, the job descriptions were largely insufficient for one large institution, and so a uniform system for doctors, nurses and non-medical personnel was developed. Interestingly, the forma-

67

68


tion of job descriptions had a positive impact on all personnel. This might have been because each employee worked together with their immediate superior to formulate their own new job descriptions. According to informal discussions among the staff this was taken as a precondition for arriving at a non-discriminatory payroll and personnel policy to suit each division within the hospital structure.

Recruitment and selection principles In developing personnel recruiting and selection principles in accordance with personnel projections, the NERH established these basic precepts: (i) leading top specialists must be in every specialist area, (ii) a certain number of positions should regularly be made available to young professionals, (iii) the number of nonmedical staff cannot exceed the established standard, and (iv) the established standards are strictly observed in every case. The competition process was followed with great interest both inside and outside the NERH. The candidates prepared very sophisticated CVs and took their job interviews during the selection activities very seriously. Also the competition was very high, sometimes more than five to six candidates applied for each post. In the case of top specialists and managers, special recruitment firms were involved. Transparency and fairness in the selection process were ensured by the Committee of Fair Selection, which had the right to approve or not approve the decisions made by the chiefs.

Payment and motivation systems The payment system in the NERH was very complicated. At the time of the merger, seven different individual and collective work


contracts had regulated the payment system. It was very difficult to describe the principles behind the previous system – as it would also have been to create a new, comprehensive and transparent system on the basis of the old one. Therefore in 2003, a project team was assembled in order to conduct analysis of the situation and form a new set of principles, on the basis of which they could propose a systemic and motivational payment system. Different teams carried out this task for nurses and for physicians. Both groups ended up proposing a simple, balanced and transparent payment system, which was ready for immediate implementation after being communicated to the personnel and approved by the board. However, by the end of 2004, a government decision to increase the minimum salary for medical employees forced the hospital to rearrange the cash flow expectations arrived at in 2003. This decision was made in the context of a rather dramatic environment, and the close involvement of the media heightened expectations of a salary increase, which evidently has been impossible to fulfi l. Inappropriate communication from top managers regarding the issue also misdirected the process. In 2005, the problem of a new remuneration and motivation system is still unresolved, and the potential for satisfying all parties is not very promising.

Training and development A precondition for a personnel development plan is being able to forecast the organization’s personnel requirements and assess qualification requirements. Medical personnel are well-trained specialists who are highly motivated for life-long study. So the responsibility for organizing further training was delegated to the medical staff themselves with the only restrictions being that they follow the strategic aims of the hospital and stay within budget resources allocated for

69

70


training. The only areas where the hospital organized training for the employees were in the areas of client services and management. The professional development of doctors was postulated as part of the NERH vision, mission and strategy and carried out through a training and motivation system. In terms of the training aspect, the result has been a flexible and effective system, and although there were insufficient resources, it worked well anyway due to good collegial understanding among the doctors. Motivation for continuous development was thought to be supported via the use of the payment system as the main driver. The first descriptions of the systematic handling of salary, remuneration and bonuses have now been distributed, but negotiations regarding its implementation are yet to reach a solution (see also “Payment and motivation systems”).

Evaluation and career system Career planning within the organization relies on the principle that all positions bearing administrative responsibility in the NERH should regularly be open for competition and that all employment contracts with managers of units, departments, centres and clinics are signed for a term of approximately 4–5 years. The basis for evaluation involves the position together with its attendant description of duties, responsibilities and essential prerequisites. In the NERH, employees are evaluated on the basis of an approval system. The main requirements are the transparency, regulation and stability of the system. The former state approval system will be replaced by an evaluation system for each of the clinics (internal diseases, surgery, clinical-consulting, psychiatry).


The approval of nursing staff and other personnel with similar qualifications should be conservative and comply with the foundation’s financial potential. A certain number of positions will also be announced for young specialists through open competition. Similarly, employment contracts are signed for a period of four years and the number of such positions in the NERH is approximately 10–20%. The approval system was developed by each of the main categories of employees. This should ensure that top specialists remain motivated, fluctuations in the numbers of personnel with average qualifications can be avoided and entry opportunities for young specialists in the organization made possible.

Patient satisfaction In order to achieve patient satisfaction with services given by NERH departments, additional training targets were planned for all personnel. Basic training in service provision was especially targeted for employees at reception desks, and in wards and polyclinics. The principle of internationally accepted good clinical practice was included in the plan. An important step forward was the implementation of a quality management system. In applying quality control principles, it was necessary to plan the mechanism to ensure that client requirements are incorporated into the service development/ quality control phases. Therefore, a system of patient satisfaction surveys was envisaged in order to monitor service fulfi lment. Finally, during the major transformations in the NERH, it was critical to stabilize the organization quickly to avoid frustration and resistance among the employees. Accordingly, it was vital to gain support for the change initiatives from the personnel.

71

72


The market situation showed that the potential catchment area for the NERH involves about 900 000 people requiring the provision of special medical care services. This covers the northern part of the country, which has a higher population density than other parts of Estonia. In addition, the good transport infrastructure in Tallinn and neighbouring regions was expected to stretch the catchment area of the NERH even further. The most challenging part of the rationalization plan was associated with the establishment of several new specialist areas at the NERH, which did not exist previously in the service portfolio of the merged hospitals. These services were supplied by central hospitals of the region and included nephrology, rheumatology, endocrinology and gastroenterology. No personnel were working in the NERH at that time in those specialist areas.

Working environment At the beginning of the change process, the general environment in each part of the overall hospital was noted as being unsatisfactory for both patients and staff. Conditions did vary between hospital buildings, but the general overview was that conditions were unsatisfactory. The EHMP stressed the urgent need for updating the hospital infrastructure with respect to area standards, hygiene facilities, ventilation, lifts, facilities for the disabled, etc. It was evident that without modernized environments, the NERH could not create a competitive advantage for the organization. Some preliminary changes, such as the relocation of the Occupational Diseases Unit to the Dermatology Hospital, were carried out in 2001. At the beginning of 2002, the main emphasis was on the centralization of the medical care services. The centralization process included either medical services or clinical support functions. The main target was to centralize the Mustamäe site. This hospital building was previously designed to provide almost


all active medical services. The management board created a detailed plan for centralizing the medical and medical support services in the largest complex at Mustamäe. This decision relied on the fact that most of the technical elements of the medical process were situated at Mustamäe (e.g. intensive care units, operation facilities, radiology). However, most of the core facilities have not been renovated since 1995 and even those renovations did not fulfi l modern requirements. Only a minimal number of wards have been renovated. Nevertheless, this part of the hospital was the only possible target for the rationalization plan. The implementation of the plan was delegated to the heads of clinics and directors of support services as most of the upper and middle management were already appointed in 2002 to guarantee a unified and comprehensive understanding of the implementation of the rationalization plan. According to the plan, the main directives emphasized were: (a) to dispose of highly depreciated assets and (b) to centralize similar activities. The following resulted from the implementation of these directives. Due to the very high level of depreciation, some existing sites could not be used for medical services and were planned for disposal (e.g. the department for tuberculosis at Kivimäe was relocated to the modern, well-equipped and specialized treatment building at Kose). The main activities concerned asset realization and transfer of medical beds to more appropriate locations. Difficulties started with patient logistics between Tallinn and Kose, which was situated 40 km from Tallinn. As the outpatients clinic remained in Tallinn, the coordination of patient logistics to and from the Kose department was delegated to the head of the outpatients clinic. The controlled treatment system that had been working in Estonia for many years involving ambulatory treatment of patients with tuberculosis provided considerable relief to this situation.

73

74


Due to the merging of such a large number of hospitals and the existence of similar medical services or even the doubling of services, it was decided that many of these services should also merge. This included both medical and support functions. In 2001, the main idea was to centralize the support functions and this was initiated in order to improve cost efficiency as promptly as possible. Accounting and the purchasing of medical supplies were the first areas to be centralized. On the medical side, the centralization of the endoscopy unit and the building of a central laboratory on the Mustamäe site were seen as the most important areas and these were carried out in 2002. Due to its central role in reducing ALOS in acute care hospitals, the planning and financing details for long-term care had to be worked out in line with the principles proposed in the EHMP (Table 4.2). Long-term care comprises a wide range of social services starting from the rehabilitation of patients released from acute care hospitals to basic social services and care for the elderly. However, these options, which were provided by the state or central hospitals in Tallinn, did not meet the requirements for the NERH. The long waiting list of patients from hospital wards needing rehabilitation was solved after the NERH opened a

Table 4.2 Data on in-patient medical services in the NERH, 2001–2003 Inpatient medical care

2001

2002

2003

Number of hospital beds Number of hospital admissions Acute or emergency admissions Average length of stay (ALOS) (Only in active treatment) Bed turnover rate Bed occupancy rate (%)

1 497 33 352 43 11.5 7.9 22.3 70.1

1 344 34 353 44 10.3 7.6 25.6 72.4

1 470 40 617 37 9.3 7.3 27.6 70.7


Table 4.3 General fi nancial figures for the NERH, 2002–2004

Working capital ratio Quick ratio Debt to total assets ratio (%) EBITA (EEK)

2002

2003

2004

0.9 0.7 21 33 020

1.3 1.1 21 64 146

1.8 1.5 20 29 095

70-bed ward for various types of long-term care at Keila hospital, which at that time also belonged to the NERH. As part of the merger, those medical services that until that time had either been missing or now needed to be added to the hospital were planned for the NERH. This included the procurement of private finance and the establishment of occupational health care for enterprises, thus supporting the business environment through the new law regulating occupational health in Estonia.

GAP BETWEEN THE PLANNED AND I M P L E M E N T E D S T R AT E G I C C H A N G E The political environment The NERH provides extremely important services for the entire public. Therefore, the fate of the NERH has been followed with intense interest by the political parties and politicians, the managers of the public sector and the interested citizens. Changes in the Estonian medical sphere started at the beginning of the 1990s, and the first results could be seen in the late 1990s and in the NERH in 2001. Changes have taken far too long and, in general, the medical care system in Estonia has suffered all kinds of difficulties. Citizens have registered their dissatisfaction with the

75

76


changes and their subsequent mistrust of the situation. They demand a reliable and stable medical service. From 2002, a new political direction, largely deviated from that of EHMP, was revealed. The “local hospital” was included instead of public institutions providing social care services. The NERH had been having difficulties providing aftercare and longterm care. This led to a long-term care department opening at Keila to fulfi l medical requirements for outpatients. It should be noted that political sensitivity to health care reform has also been identified as an essential factor in planning changes in the NERH. The business plan pointed to medicine as a politically sensitive issue, where change can be rather slow and decisions delayed. Another characteristic feature was the lack of sufficient cooperation between the state and municipal structures.

The economic environment It is well known that demand for medical services is rising year by year as are the costs. An assessment of hospital needs in Estonia highlighted the fact that the financial resources available for medical services are critically limited and delivery of them among active hospitals is difficult. To calculate future medical costs, an activity-based costing (ABC) method has been presented by the EHIF for calculating prices for medical services. A Disease Related Groups’ pricing model already revealed the difficulties in keeping physician salary levels at the levels indicated and investment amounts planned. At the beginning of the changes in 2001, hospitals were classified according to service standards; regional/ university hospitals comply with higher standards within the health care service. Accordingly, health care professionals were hired at higher salary levels than similar personnel at other hospitals. According to the new price list, the management of fi nances in the NERH will be more complicated than ever.


It is important to remember that economic factors for the NERH are linked to the availability of fi nances for health care, which is in turn linked to the general growth of GDP and, especially, the stability of the health care fi nancing system. The next most important factor in this area is the potential for investing in new treatment methods, technologies and pharmaceuticals. Technological development requires optimal use of investments and requires ever more fi nances for the acquisition of new medical equipment. To date, developments in technology have a direct influence on job satisfaction among the workforce in the NERH.

The internal environment of the NERH To summarize the general managerial change process so far in the NERH, it must be said that the time taken for these major transformations was too long. This factor is, in fact, extremely critical for achieving success. The awareness of the need for change and the readiness to undertake change varied greatly between employee groups, and this heightened the potential for miscommunication and mistrust of managers. It is vital to gain the support of the personnel for change initiatives; however, the aims and expected results of the change process were not communicated clearly enough to the personnel. The urgent need for a better policy and strategy for internal communication within the merged hospital still exists. This activity was neither highlighted nor stressed sufficiently in the rationalization plan of 2001, and remained unresolved at the end of 2004 and beginning of 2005. The internal communication system was also incapable of supporting the change processes sufficiently. The new structure included four very large clinics where information had to move down through at least four levels to reach its target. Access to

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information was said to be poor causing mistrust of the managers among employees and a resistance to change. In 2003, a new structural unit, the anaesthesiology clinic, was established. This new unit was detached from the previous clinic of diagnostics. The creation of that unit was not part of the rationalization plan. The process of hiring specialists through open competition was followed with great interest among employees both inside and outside the hospital. Although people were very active in competing for these posts, frustration at not winning the desired post was not uncommon. The reason for that, at least in part, was the belief from Soviet times that no position was comparable and getting a job was a certainty. However, there was positive feedback about this competition from those who were successful, whose self-confidence and readiness for change increased. These newly selected employees created a positive basis for the management of change in each of the departments. However, competitive recruitment in the NERH occurred together with a certain amount of selective headhunting. This was manifested especially in the recruitment of staff for new specialist units for the NERH. Unpleasant attacks by the media and misinformation provided to the EHIF by competitor hospitals showed the urgency of the need for consolidating all medical service providers in the north of Estonia. It is to be noted that this is still incomplete.

H O W T O M A K E T H E S T R AT E G I C CHANGE SUCCESSFUL By the end of 2003, all the changes that had been part of the planned rationalization in the NERH had been completed. This had resulted in the stabilization of the hospital’s fi nances and its capability to invest in the organization’s physical assets. However, new political pressure on the financing of the health care sector


at the end of 2004 may lead to a reconsideration of previous development plans. This may in turn lead to the adoption of strategies associated with the professionalism of medical personnel and the hospital’s strategic capital. So far the NERH’s management team has assumed that critical success factors are activities, issues or processes that should be carried out, attended to, or implemented in a way that creates a competitive advantage for the organization. These critical success factors have been and will continue to be associated with employees, the working environment, including technology and equipment, and patient satisfaction. Success in these areas should be realized via a clear corporate vision and steady strategic objectives.

REFERENCE Jesse, M., Habicht, J., Aaviksoo, A., Koppel, A., Irs, A. and Thomson, S. 2004. Health care systems in transition. European Observatory on Health System and Politics, 6(11).

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CHAPTER 5

LOLF AN D CHANGES IN TH E FR EN CH PUBLI C SECTOR. TH E CASE OF PAUL C ÉZ AN N E UN IVERSIT Y – AIX- MARSEILLE I I I Robert Fouchet and Emil Turc

INTRODUCTION Within the French public sector, accounting for up to 50% of the national income, modernization and change have become over time a veritable pipe dream. The successive reforms, programmes, and tools intended to increase the effectiveness and efficiency of public services have done nothing more than confirm the popular proverb “plus ça change, plus c’est la meme chose”.1,2 That *The authors wish to sincerely thank UPCAM’s members who have contributed with their involvement and comments to the production of this study. Special thanks are due to Jacques Bourdon, UPCAM’s Chancellor and Honorary Vice Rector, for his valuable insight and continuing support to the authors’ research efforts. 1 The rationalization of budgetary decisions (RBD), participative management, quality approaches . . . 2 “The more things change, the more they stay the same.” Strategic Change Management in the Public Sector. Edited by F. Longo & D. Cristofoli Copyright © 2007 John Wiley & Sons, Ltd.

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is why in the conservative world of public administrations and establishments, the 2001 vote on a new Organizing Law over the Laws of Finance (LOLF) did not cause any major stir.3 However this law, whose application in 2006 seemed so remote at the time, is now drawing increasing attention. Could a legislative change on the fi nance-accounting front usher in the turnaround that a succession of boisterous reforms was not able to bring? From this point on, we can anticipate an affirmative answer. Under the impetus of the Prime Minister, a series of experiments were put into place as early as 2004 in all public sectors, including higher education. Hence, the evolution of Paul Cézanne University Aix-Marseille III (UPCAM), is worth analysing as a surprising case of administrative reform. A case in which operational and progressive changes in budgeting and performance management led to real shifts in managerial practices, in cultures and in the institution’s relations with its environments.

U P C A M ’ s O R G A N I Z AT I O N AT T H E O U T S E T OF LOLF REFORMS When the Ministry of Education included Paul Cézanne University in the LOLF experimental plan, both the ministry and UPCAM employees expected changes in the organization’s operations and governance systems. UPCAM’s characteristics at the outset thus reflect what needed or was to be changed at the time. However, given the dependence of social systems on early conditions of development, UPCAM’s initial governance and operations, its size and complexity must also be examined as potential factors of the change processes themselves. 3

Loi Organique sur les Lois de Finance (LOLF). A dedicated website is proposed by the Ministry of the Economy, Finance, and Industry: http://minefi.gouv. fr/lolf.

CHANGES IN THE FRENCH PUBLIC SECTOR

Inertial trends and resistance to change are, for instance, often associated with the size and complexity of social systems. And back in 2004 Paul Cézanne University had them both. Located in the southern French cities of Aix-en-Provence and Marseille, UPCAM is a major public establishment of higher education. Its weight is considerable in the French university landscape. The university hosts 23 000 students, of which 3000 are foreign students, 850 teachers and researchers, and 980 administrative personnel. It accommodates varied disciplines, social and exact sciences: law, economics, management, political studies, mathematics, physics, and chemistry within its eight Faculties and Institutes. Also included are 42 accredited laboratories and 10 doctoral schools. Created in its current form in 1973, the university brings together two entities with strongly marked identities: the Faculty of Law and Political Science of Aix-en-Provence and the Faculty of Science in Marseilles. The Faculty of Law, created in 1409 by Louis II of Aragon, has a long tradition of self-management, with a strongly institutionalized culture and practices enrooted in the social and economic realities of the region. The more recent Faculty of Science has specific management practices justified by budget-intensive research. Thus, in spite of the legal restructuring, the power of these two components in 2004 still weighed heavily on university life. The university’s governance system had been restructured a year before the events in order to suit the demands of the university autonomy law. The president was to be elected henceforth by three councils: the Administrative Council (CA), the Council of Studies and University Affairs (CEVU), and the Scientific Council (CS). Each of these councils intervenes on decisions concerning their area of competence. For instance, the CA must vote annually on the university budget. The president also composes a cabinet made up of vice-presidents and projects supervisors. A secretary general is in charge of the entire administrative

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organization of the university (fi nances, human resources, registrar, etc.). However, the president remains the main university authority – he carries the entire responsibility concerning UPCAM operations. He alone is entitled to decide on university expenditures. His role as financial authority is only counterbalanced by the edict of 1959. An accounting agent dependent on the Ministry of Finance exerts ex ante control over the regularity of all expenditures. The 2003–2004 judicial restructuring brought UPCAM into closer alignment with higher education laws and ministry regulations. Yet, in spite of this procedural and codified organization, the management of French public universities includes by tradition a substantial informal dimension. Paul Cézanne University is no exception to this rule. The reason is the weight of history. Before 1968 the national system was governed by deans at the head of powerful faculties. The university was reduced to a formal administrative level regrouping the faculties and placed under the control of a rector. It had no real decision-making power in a system controlled by three central protagonists: the minister, the faculties and the academic profession. UPCAM still preserves traces of that structure. This informal governance character is reinforced by the existence of a twofold layer of legitimacy. Elected by their faculties, the deans and institute directors legitimately claim a right of influence on the decisions concerning their establishments, akin to the equally elected president. Being aware of the existence of these legitimacy layers and their potential intersections, the president decided to circumvent potential confl icts by formalizing a signatory delegation hierarchy. He aimed to build a coherent architecture of budgetary demands and legal competences of each delegate in order to properly execute the budget. Through his decision, the president recognized decision makers on secondary


expenditures and, most of all, sought to promote collaboration as a central decision-making value in the university. The initial configuration of the governance systems also bore significant impacts on the university’s operational systems and processes. The information systems are heavily involved. Back in 2004, few tools were capable of exhaustively collecting, processing, and communicating information in a university perceived as adjacent to its faculties. Data concerning the university’s overall accounts were often partial and sometimes unobtainable. Moreover, decision making suffered from the lack of clarity in its information systems. As the university was partially decentralized, its services (HRM, finance, student services, etc.) existed both at the central and the faculty level. Their competencies overlapped and their communications were mainly directed towards local power holders. For instance, the absence of hierarchical relations between the central and the faculty HR services produced gaps in information consolidation and the coordination of operations. As a consequence, the central offices turned in time into technocratic advisors for faculty services. These realities defined UPCAM’s matrix structure and functioning. In effect, the university could be fundamentally defined as a matrix, within which the columns reflect the university hierarchy with its eight components (training and research units – UFR), whereas the support functions are positioned in the rows (registration, paramedical means, documentation, international relations, student mobility, student life, information technology, financial-accounting services, human resources, estate-custodial and general secretarial services). However, the operation of this matrix was firmly dominated by only one of the two management axes: the formal hierarchy inscribed in columns. According to the head of human resources, the various faculty support services were “the personnel of deans and directors” who also constituted their immediate hierarchical references. Hence, the

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crossover information systems were deficient or absent and university-level projects were mainly coordinated through the informal networks of the people concerned. Only registration and financial services benefited from structured software programs (APOGEE and JEFYCO, respectively). The informal side of governance systems was thus instrumental for the university’s everyday operations and management.

A H I S TO R I C A L AC C O U N T O F U P C A M ’s E X T E R N A L G O V E R N A N C E R E L AT I O N S Recently entered in the vocabulary of the private sector, the term “corporate governance” denotes “the set of mechanisms that delimit the powers of top managers and influence their decisions, [. . .] that ‘govern’ leadership and define their discretionary space” (Charreaux, 1997). Of course, the concept may also be applied to public establishments, recognized as they are for the multitude of actors involved, the frequent interventions of tutelary authorities and the ensuing complexity of financing. However, in the public sector, these problems are fairly regulated by law. In effect, the general evolution of the French university system results from three successive normative acts. The impact of the fi rst act was not limited to the university sphere. It concerns an edict of 2 January 1959 prescribing the managerial and accounting codes of the state, as well as the mechanisms upon which the state budget was established. The system was based on the notion of “credits”. State expenditures were broken down into chapters and, at ministry level, into articles, paragraphs and subparagraphs. The ministry endowed each public service and administration with credits that they were authorized to consume in order to accomplish their public interest missions. According to this logic, each institution had fulfi lled its missions as soon as the credits were consumed. It mattered little


if performance management was sought and implemented as long as credits allocations were seen as optimum. As a result, universities were long perceived as the offspring of central administration. The ministry held the central roles. It dealt with financial allocations, decided over the university missions and represented the main authority. Hence, university management was based essentially on regulations and procedures issued by the ministry – the bureaucratic spirit and external control had become permanently established. However, the repeated deficiencies in the financial management of public establishments, as well as the lack of efficiency and efficacy in public services, prompted the legislator to look for stronger institutional accountability. In the case of universities, the direct hierarchical link to the ministry was abandoned in favour of university autonomy and tutelary relations.4 The establishments gained the legal right to oppose the decisions of protecting authorities. This reform initiated a dialectic decentralization/centralization motion. Decentralization, since university presidents stopped being appointed by the minister and were elected by peers. They were surrounded by three councils (administrative, scientific, of higher studies and of studies and university affairs) with whom they oversaw teaching resources, restructured the curriculum and defined teaching and research policies. Centralization also favoured by the development of information systems promoted by the ministry (Apogée, Nabucco, Sanremo) that allowed outgoing reports and facilitated national consistency in research and budgeting.

4

The principle is clearly pronounced in the law of 26 January 1984, whose 20th article specifies that “scientific, cultural, and professional public establishments are national establishments of higher education and research, enjoying legal existence and responsibilities, as well as pedagogical, scientific, administrative and fi nancial autonomy”.

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However, in terms of governance and financial functioning, the end results of this policy were limited. The autonomy is only partial, especially as regards the nomination of teachers, the number of positions provided, or programme accreditations. All of these management levers are retained by the ministry. Furthermore, the autonomy has a paradoxical effect on the financial practices of the establishments. In spite of the encouragements to set up formal objectives and better accounting and budget practices, no notable change was recorded. Autonomy seemed paradoxically to “drown” these incentives. The practice of credit consumption remained fi rmly set in universities. However, the overall decentralization trend was strengthened in 1988 when establishment contracts were set up. Drawing on the law of 1982 concerning planned contracts, these multi-year agreements formalized the links between the universities and the ministry of national education.5 As it happens, the agreement involved commitments from each side for occasional projects regarding such things as equipment, multimedia training, or improvements in student services. The university became an effective actor of the dialogue with the ministry’s republican powers. Notably, it stopped receiving each year non-negotiable and preassigned subsidies and benefits. Instead, a share of up to 20% of its endowment was integrated as negotiated budgets spread out over four years. In return, the university was obliged to make explicit long-term choices concerning its functions and future. Thus, the contracts transferred part of decision-making responsibilities to university level. In terms of governance changes, the expectations related to contracts are still high. In the fi rst place, contractual agreements include external evaluations intended to develop intra-university decision making and dialogue. In this respect, the National 5

The full text of French Laws are available on the governmental website http://www.legifrance.gouv.fr/.


Committee on Evaluations (CNE) created, along with the Conference of University Presidents, a committee that prepares the follow-up and performance criteria and indicators. Although university results can be rarely translated into monetary values, one can try to give a “meaning” to daily operations and bring out a measure of the value added across elements such as: number of graduates, the rate of success, commitment to qualitative progress, programme renewals, new pedagogical methods, international accords, research contracts, etc. Pragmatic evaluation and planning would induce the university to institute internal dialogues in order to make decisions and settle on formal policies. In the second place, contracts force the university to have better selfawareness, better management, and better planning. Strategy development needs instruments for performance management. Universities are incited to reform their financial and accounting processes along results-oriented logics. It is notable that this third regulatory wave did not achieve fundamental changes in university operations. The value of contractual commitments is often contested; the state itself isn’t always up to honouring its pledge. In any case, not all the decrees for implementing the law had been published as for 2004. Finally, the evaluation results in significant biases. The pertinence of indicators is questionable, their defi nitions are changed unexpectedly, and their credibility is diminished. It could be argued that, for most universities, budgets continue to be seen as credits, budgeting is unchanged, and contractualization remains, above all, an affair of politics and resource squabbles. UPCAM’s 2004 budget illustrates in a very concrete manner the effective influence of the reforms on financial practices (Figure 5.1). The university continued to employ a single-entry budget layout (receipts and expenditures). According to UPCAM’s LOLF supervisor, each spending position was associated with an accounting code that “corresponds to nothing”, if not to a line of credit (see the case of contractual employees’ salaries). The budget

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Receipts

Expenditures Operations

Operations

Charges

Products

Contractual personnel

Contractual personnel

Capital

Capital

Construction

Subsidies

Professors – Researchers

Extra-accounts

Admin. personnel Establishment contract

Professors – Researchers Admin. personnel Establishment contract

Figure 5.1 Budget by destination in Paul Cézanne University

systems are disconnected from daily management, and only obey one rule: balance. Otherwise, budgets are revised. For instance, the 2004 budget (c50 095 154) was corrected three times in April, September and December 2004, a fact that reveals the “elasticity” of the budgetary envelope. Finally, a special representation is reserved for state endowments recorded as “extra-accounting” information (salaries for employees managed by the ministry, establishment contracts, etc.). This strongly suggests the university’s limited influence on its own budget and its dependence on external authority. LOLF DESCRIPTION Although the events described in this case coincide with the initiation of Bologna processes and the restructuring of European higher education curricula, the decisive change-triggering factor is UPCAM’s integration into the LOLF experimental plan. What is this law and why does it carry such importance? As a result of a parliamentary initiative sanctioned by the nearly unanimous vote of the National Assembly and the Senate,


the new Organizing Law over the Laws of Finance (LOLF) no. 2001-629 of 1 August 2001 represents the most recent financial constitution of France. In determining the resources and the charges of the state, it replaced the edict of 1959 as of 2006. The two texts bear fundamentally different philosophies and a comparative presentation can be instructive. The edict’s core concepts are expenditures (“means”), and a priori planning and control. According to this regulation, state budget conception rests on the fundamental distinction between “elected services” and new expenditures. The fi rst correspond to expenditures already discussed in previous years; these are analysed and voted en masse by the Assembly at the beginning of budget talks. Their renewal is considered normal, or else the delivery of public services would be endangered. By contrast, new expenditures are discussed one by one, this scrutiny is justified by the fact that the following year they would become “elected services” in their turn. From that moment on, state expenditures are broken down into chapters and distributed, at ministerial level, to administrations, establishments, and public firms. This budgeting system is based on hypotheses of perfect rationality and an unlimited trust in the state management capacities. However, in the long term it generated multiple drawbacks (Figure 5.2): • •

•

•

continuous budgetary inflation; absence of long-term political thinking caused by partial budgetary votes and the incapacity to attribute precise costs to specific state policies; inexistent motivation to look for improvement and efficiency in public organizations. Action is based on logics of “means” and credits expenditure. Controls are made over the regularity rather than the legitimacy of public expenditures; decreasing efficacy of public action given parliament’s limited capacity to evaluate performance.

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Block

Elected services

…

…

Article I…

…

…

…

Paragraph I…

…

…

…

Subparagraph I…

…

…

…

Chapter II

…

…

…

Expenditure 1

New Expenditure 2

Vote

New expenditure …

Public policy no.1

…

…

Absence of performance

…

New

Vote 2

indicators

Chapter I

Vote 1

…

Public policy no.…

Figure 5.2 Structure and vote of the state budget (and of its institutions) according to the edict of 2 January 1959

This system is fundamentally reformed by the upcoming law. In effect, the LOLF is oriented towards three essential points: • • •

changes in the presentation and vote rules of the country’s annual laws of finance; strengthening of information systems and better control of the parliament over public finance; the fast development of public accounting.

The first objective is contained in the design and voting procedure of the national budget. The budget is reorganized around the finalities of public policies. It will include an analysis of the outcomes expected and achieved. Clearly, the budget is structured on three levels: missions, programmes and actions (see Figure 5.3). The 40 or so missions cover the larger areas of state policy. They are debated and voted


… …

Programme I…

…

…

…

Action I…

…

…

…

…

…

Public policy no.1

Public policy no.2 Mission II

…

…

…

Evaluation criteria

Mission I …

Vote

Vote

Vote

…

Figure 5.3 Structure and vote of the state budget (and of its institutions) according to the LOLF

on by parliament. The missions are apportioned over about 150 programmes that set the structure of responsibilities. Each programme includes a coherent set of actions entrusted to supervisors by the appropriate ministers. These supervisors receive a packet of global and fungible credits that allow them to choose the best adapted means for their objectives. Moreover, the 500 or so actions detail the outcomes of the programmes. The actions are accompanied by a battery of indicators that allow for the fi rst time a systematic evaluation and planning of public policy. This new structuring favours the double accountability of parliament and public servants in the establishment and the execution of budgets. It instates a management dialogue between the two protagonists, which has to be sustained by the second objective of the law: the reinforcement of information and control systems. Henceforth, the state will require considerable information on its financial and estate positions. Information collection will be ensured by the adoption of double-entry accounting with rules similar to those of private firms. In order for these accounts to be “steady and sincere” they will be subject to certification by

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the Court of Accounts.6 Parliament will be more narrowly associated to budget execution throughout the year by way of notifications on regular credit movements. Amendment rights are enlarged as a member of the Assembly may propose, within a mission, the reallocation of credits among the various programmes initiated by the ministries. This leads to the law’s third objective, which is the enrichment of information, of accounting, and control. The new feature in this law is to make the fundamental distinction between the budget itself and the state’s accounts. As a matter of fact, the passage from the edict of 1959 to LOLF rules is much like a shift from simple-entry bookkeeping to double-entry bookkeeping. Also, at the outset of each year’s Law of Finance project, an annual projection of performance will be jointly delivered (presentation of actions, associated costs, objectives pursued, previous results and the expectations for the years to come, and measures). Thus, government and parliament alike may choose realistically their strategic aims and performance targets (the annual performance projection – PAP). Of course, they can only proceed by mobilizing the administrations. They must also take into account the results obtained in the previous years (annual performance report – RAP).

A N T I C I PAT E D E F F E C T S O F L O L F R E G U L AT I O N S O V E R T H E P U B L I C SECTOR LINKS Today, preparations for the adoption of the new law have reached maximum intensity in the central government services and 6

The Court of Accounts is the institution exercising external subsequent fi nancial control over the formation, administration, and use of the fi nancial resources of the state and of the public sector.


administrations alike. The new budgetary systems are fi ne tuned in the light of recent tests and begin installation in the varied divisions of the public sector. However, one of the most important lessons retained to this day is the necessary evolution of the relationships between the central administration and public organizations. These can be structured mainly around three central concepts: strategic aims, dialogue, and accountability. First, the achievement of public policies is dependent on the strategic coupling of the two main levels involved in the LOLF. The relationship between the central government and local public actors will, from now on, be governed through strategic objectives. These aims are to ensure the autonomy of administrations and decentralized services. No expectations are set concerning detailed activities or credit consumption. However, it belongs to local actors to take advantage of the globalization of credits and the subsequent freedom margins in order to conceive and implement the actions best suited to their strategic aims. Second, strategic coupling may only succeed through information sustained by dialogue between the two actors. Given the length of state responsibility chains, the crossover between political and management decision making takes on a crucial weight. Or, the linking chain is the programme director. He contributes both to the design of strategic choices under ministerial authority, and to their implementation along with operational personnel. The budgetary reform thus calls for reorganization around intermediary axes. Their success depends on the quality of both upward and downward information streams. Third, the law reinforces the accountability of public sector agents. Henceforth, the system of budgets, planned indicators, and action implementation will be aligned with evaluation. The political responsibility before parliament of the programme heads will be extended to the operational level. Management delegation will only take place in exchange for the commitment of lowerlevel public servants to achieve specific operational objectives.

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For all these lessons, one cannot prejudge the global future quality of relationships across the public sector. The wide variety of organizational arrangements of administrations, central and decentralized establishments will initially induce a multitude of adjustments and governance systems. Therefore, it would be safer to perform specific analyses from case to case. However, these institutions must expect their roles and vertical relations to evolve towards more room for strategic decision making, higher accountability, and increasing evaluation and institutional dialogue.

EXPECTED CHANGES IN U P C A M ’s M A N AG E M E N T First, LOLF reforms must increase budgetary autonomy. University finances must evolve from “means”-based to “finality”-based budgeting. UPCAM must be able to negotiate global budgetary envelopes according to its strategic ambitions and the objectives handed down by the ministry. The allocation and management of intra-budgetary resources would become a university prerogative. A wide breach with the traditional administrative logic is thus created: parts of workforce costs could be harnessed and used for fi xed capital investments and vice versa. It was also announced that the ministry would eventually loosen its control over human resources, which would allow UPCAM to negotiate henceforth its global workforce costs rather than job numbers. The aim is to give the university complete control over its salary mass. Second, LOLF implementation should transfer part of the ministry’s human resource management levers to the university. The latter could be immediately granted total management of its contractual teachers and support staff. Thus, UPCAM would handle recruitment and payment with no outside intervention.


Moreover, even though ministerial management continues for permanent personnel, their figures will be included in the budget in anticipation of larger room for manoeuvre. A new system of provisional management of employment posts and skills (GPEC)7 was eventually mentioned. Third, LOLF must induce a just and sincere vision of financial accounts and the adoption of performance-oriented budgetary practices. Thus, a first operation should consist of the clarification of university accounts in order to be certified by 31 December 2004. UPCAM would take into account all the remarks submitted over time by the controlling organisms, and whose recurring neglect has led to growing accounting irregularities. Also, there’s need for a renovation of accounting practices and the adjacent information systems. This concerns mostly the budgetary integration of real estate and of course its monetary assessment. It also concerns the adoption of depreciation and provisions practices, of stock evaluation, and the clarification of any movements of intra-university benefits. UPCAM must improve its management accounting and instate precise follow-ups based on balanced scorecards.8 In corollary, information systems must be updated and made reliable in order to reflect proper accounting information in real time. It is the wide gap between these expectations and the reality of cultures and practices in public management that presages the radical change of university affairs.

7

GPEC (Gestion Prévisionnelle des Emplois et Compétences) consists of the design, implementation, and survey of politics and action plans aimed at: (a) reducing in anticipation the gap between the fi rm’s needs and human resources (both jobs and competencies) according to a previously settled strategic plan, and (b) involving the employee in professional evolution projects. 8 Balanced scorecard: a conceptual framework for translating an organization’s vision into a set of performance indicators distributed among four perspectives: Financial, Customer, Internal Business Processes, and Learning and Growth.

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THE CHANGE PROCESS The entry of Paul Cézanne University in the LOLF programme was the key trigger of organizational transformations. However, one might argue that change events started with the fi rst contacts that were taken outside UPCAM. Establishment selections and power games were closely intertwined. The first notable events of the change process involved therefore the Ministry’s Director of Higher Education ( JMM). During a meeting of the French Conference of University Presidents (CPU), he announced his intention to launch the experiment in four higher education establishments. Identified and consulted by JMM, the four were immediately “appointed volunteers”, according to one of UPCAM’s top managers. This curious expression deserves of course clarification. In effect, seen from the inside, UPCAM’s appointment is a no choice situation. The Administrative Council was not called to pronounce over the matter, and it probably took the “normalcy” of the tutelary relationship to avoid a general outcry. However, the president and his counsellor (RF) carefully pondered LOLF’s positive side. The reform was an occasion to innovate in a framework where trial and error weren’t banned. A two year start in advance also required adaptation and corrections, and avoided urgency. Moreover, fi rst-wave experimenters were expected to complete better negotiations with the ministry over university budgets and strategies. Conditions would probably change for the second wave of reform. Clearer prospects appeared with the official launch of the programme. On April 2004 an interministerial delegation came to Aix-en-Provence and performed a one day presentation of the LOLF. The delegation was particularly large. The Ministry Director of Higher Education was present, as well as his close collaborators, and 10 representatives from the Ministry of Finance and


their decentralized agents (the General Public Bursar – TPG9). The university personnel (teachers, researchers, and staff ) and main governance actors (president, vice-presidents, deans, secretary general, the accounting agent) were all present. The law, relatively unknown at the time, was presented along its general lines. However, it soon left room to university stakes and consequences. Greater budgetary autonomy, increasing human resource levers, and better accounting and performance management were thoroughly detailed. In the end, ministry representatives remembered the experimental character of university transformations. The programme would be an opportunity for bottom-up innovations and changes in management practices. In effect, nothing was formalized as yet by the ministry, and if the law was published its application decrees were still unavailable. This special day’s impacts were mitigated though. The size of the audience and the number of speakers incited few open interactions. According to the human resource manager, the heterogeneity of the audience made impossible the optimal adaptation of language and discourse to audience. The message was dense and often technical, accessible only to accounting and finance personnel. It was only after the delegation’s return to Paris that deciphering and discussions took place and questions began to emerge. They grew to be a priority for the follow-up of university reforms. However, this “LOLF day” is a milestone in personnel memories. Seen as the departure point of the reform, it represents more than anything the launch of a challenge. That of a

9

Trésorier Payeur Général: the exclusive institutional state accountant. Held responsible before the Court of Accounts for public sector accounting. Collects direct taxes, controls and pays the state’s expenses, and cashes in many nonfiscal revenues of the state. Assists the Court of Accounts in controlling local collectivities and administrations.

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university traditionally grounded in regulatory and hierarchical cultures, a university that engages in a wide and guideless experiment surveyed by two ministries. It is a “snowball” change, started in questioning and tests, amplified and ending with fullblown reforms. The change process architecture includes retrospectively three phases, punctuated by two groups of events in the autumn of 2004 and the passage of 2004–2005. The first phase begins with questioning and uncertainty. Sense making and political games are dominant, whereas change interventions are designed. Communication events mark the first inflection point. They launch the first collective efforts and ministry deadlines. The second phase ends with the transfer to and validation by the ministry of the first university budget in its new framework (second inflection point). As for the third phase, it continues still. Centred on corrections and further developments, this stage keeps up the innovative and reformative spirit of previous events.

First stage: preparation In the aftermath of the “LOLF day”, sense making was the prime and major difficulty. The president and his collaborators wondered about the direction of ministerial requirements, the necessary plan and interventions, and the university’s future. A central notion arose. The heart of LOLF reforms should be management accounting and budgeting. The premises of these systems – account certification and formal strategy making – drew immediate attention. The first commitment the university made consisted of accounting and budgeting improvements. University balance sheets needed to retrieve a “certifiable state” by 31 December 2004, in case these accounts were presented to an accounting auditor.


The task was prodigious; it entailed a historical check-up of the accounting records of the university and all its faculties. The president decided to install an LOLF Committee. A LOLF manager was appointed to it (RF). His competence in public and private management, as well as the trust and friendship that tied him to the president, were strong recommendations for the job. The university accounting agent also joined in. Immediate action was taken. The committee started interpreting, elaborating and shaping ministerial recommendations and eventually drew a fi rst draft of the change process. The main items included: (a) the 2004 set-up of depreciation and provisions policies, (b) 100% conformity to accounting norms, especially in what concerned the bills and benefits exchanged by faculties and central services, and (c) the accounting of assets (particularly realty and stocks). The tasks were complex. Though provisioning for bad debts and legal costs was a simple accounting operation, the set-up of depreciations brought in difficulties. If most of the university’s buildings belonged to the state, what was the meaning of depreciations? Besides, realty values were unknown and calculations blocked. The state’s Service des Domaines10 had to be called in and perform realty assessments. Even more of a problem were the internal debts. Accounting irregularities come in as heritage in the university world. Forgotten historical decisions, administrative tardiness, mutual services incorrectly recorded, or incorrectly attributed budgetary restrictions were frequent; the deficiencies of the public accounting system, the imperatives of daily management, and centralist administration saw to it. Each faculty director or dean inherited 10

Service des Domaines: placed under the authority of the Ministry of Finance, this institution alone is competent to assess state property. It may eventually proceed to the administration, sales, and purchases of state objects and realty.

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in time a managerial history of which he had no knowledge or responsibility. Or, bringing the accounts up to date, recalling these operations, and reporting them on the 2004 budgets even retrospectively would have induced severe upset, mutual disbursements, and reshuffl ing of power bases and interests at stake. These matters were acknowledged by the president in his appointment of the LOLF manager. In a status-based cultural context, RF was a professor and researcher and had the legitimacy to go over the accounts and discuss as equals with the deans and directors. Moreover, the certification would bring along debtsrelated political decisions. Erasure or sanctions have heavy consequences. One might think that a certification interval spread out over six months was not haphazard. The renewal in the autumn of the university’s decision-making organisms of the two most powerful faculties created better power configurations for the revision of accounts. The summer of 2004 was also dedicated to the formalization of UPCAM’s strategy. This step was fundamental for the subsequent changes; in good management logic the analytical budget is but a numbered translation of strategy. Disregarding the statutes and regulations that limit the executive office to merely the president and the vice-presidents, JB decided to widen strategy making to all faculty directors and deans, the university project managers, the secretary general and the accounting agent. Thus were initiated the recurrent “government meetings”, days dedicated to debate, reflection and decision. The formula attained two significant results. First of all, these meetings helped define and settle common objectives. Thus, in the absence of a formalized strategy on higher education at the ministerial level, the group decided to retain three strategic axes: internationalization, promotion of student life, and crossdisciplinary training. The second advantage of these meetings, less instrumental but as significant, was to reaffi rm and appropriate the university as a collective process. By bringing together


the deans and the representatives of the central services, this process renewed the president’s message of trust and openness.

Second stage: reform through . . . operations?! Two major events marked the arrival of autumn and the beginning of a new phase at the university. The two events were the wave of elections in the major UPCAM faculties and the communication on the new strategy and change. Management’s intentions and planned activities gained visibility, triggering debates and, most of all, giving sense to previous events. Staff members reacted positively. The impulse and mobilization thus created were instrumental in the context of end-of-theyear deadlines. The wave of elections refreshed the management teams of the most influential faculties. The newly elected deans and directors immediately joined in the “governance meetings” and set up within their faculties small LOLF-dedicated teams consisting of the assistant deans, the financial assessors, and the faculties’ fi nancial managers. When management skills were required, the LOLF manager occasionally lent his support. Free of political stakes, of the historic interests and responsibilities of their predecessors, the new deans were able to calmly negotiate budgetary corrections. This was most remarkable in the case of the faculties which inherited and discovered large deficits from the past. Their deans immediately acknowledged the situation and, in bilateral negotiations with RF and JB, played the game of truth and problem solving. Compromises were quickly found by writing-off debts and rectifying faculty budgets, even at the price of temporary cost-cutting. The certification process was achieved with the last 2004 budgetary revisions in December: the university budget was raised by 15% in order to correctly integrate and clarify the

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situation of internal debts and payments. Only one point remained. The lack of realty assessment by the Ministry of Finance induced partial and insufficient depreciation accounting. Unless there could be ministerial and regional dialogue with the Service des Domaines, these assessments will continue to leave a dark cloud over the certification of university accounts. With the faculty elections, the announcement of university strategy was the second event that marks the turning point. Issued right after a period of obscured development of the change process, this announcement was helpful and reassuring. Nevertheless, communication content and diffusion were limited. In terms of impact, however, the restructuring of the “government meetings” was far more important. Switched from a formula of irregular brainstorming to that of monthly meetings, they became a discussion forum for LOLF events and, above all, a forum for change planning. The key term of this new stage is the analytical budget (LOLF budget). Guided by analytical accounting, it introduces the notions of revenues and expenditures architecture from which financial ratios can be computed. These architectures required, however, increased efforts university-wide: the expenditures had to be broken down into programmes, actions and subactions along more or less artificial rules. Besides, given the LOLF context, the expenditure architecture was imposed by the ministry, who left little room for manoeuvre concerning the perimeter (content) of each action and the choice of subactions. Only revenue architecture was left to the establishment’s own initiative. Finally, a fundamental characteristic of the LOLF budget is “global cost”, signifying that the budget would now be integrating all the means and resources of the university, both budgetary and extra-budgetary, thereby creating a global envelope in which all the faculties must operate and coexist. The LOLF Committee decided to apply the analytical budget along a formalized process: (a) the creation of multi-year global


strategy, (b) definition of the general budget architecture, (c) procedures description, (d) defi nition of supports for the budget, the balanced scorecard, and reports, and (e) the definition of financial indicators. As soon as the budget was in place, the budgetary procedures would consist of: (a) defi ning the annual objectives, (b) computing the budget, (c) evaluating the indicators, (d) the Administrative Council vote, (e) data reporting to the ministry, and (d) updating. The Committee also considered the option of a quarterly follow-up as part of the management accounting. It would be based on financial management charts regularly issued by faculties, and aimed at analysing divergences and taking any corrective actions. Starting October, change dynamics accelerated. As a result of the restrictions and multiple duties of participants, the actions drifted from the original plans and gave way to the emergence of a new procedural structure. This was most visible in the impossibility to complete and approve the 2005 analytical budget by the end of the year. According to a member of the LOLF Committee, it would have taken a definition of the strategic plan’s actions and subactions by mid-summer in order to collect the data for a fourth semester budget forecast. Or, although the “government meetings” had defined and announced UPCAM’s strategy in September, the structure of actions and subactions were not provided by the ministry until November 2004. In fact, the relationships with the Ministry of National Education were seen by many as sources of constrictive delays, unforeseen difficulties, and emergency feelings. With a subactions structure settled in January, the analytical budget was held up until the beginning of 2005. This delay could have significantly hindered UPCAM’s operations, if a budgetary security option had not existed. Either by simple habit or by deliberate choice, the 2005 budget was also established “by means” following the traditional procedures. Issued by the faculties, harmonized by the financial managers and

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the “government meetings”, this budget was approved by the CA on 14 December 2004. Only three members of the council voted against it stating that “the target indicators [were] absent from the presentation [. . .] whereas they were supposed to be the big LOLF novelty”. However, despite its barren presentation, this version already included the global envelope principle. The employees’ reactions to this phase of the LOLF reform were in contrast. Exposure, involvement, seniority, and functions influenced their perceptions, attitudes, and behaviours to change. However, the case seems to be stronger for fi nancial, human resource, and management personnel, as well as the members of the workgroup on the management and control of teaching resources. Central to the LOLF reforms, changes in fi nancial practices include in the first place the development of specific objectives and indicators at both the university and faculty levels, and the forecast of budgetary expenditures and incomes. However, this work was apparently undertaken in unorthodox ways. Contrary to the classical approaches in change management – using temporary change interventions – the LOLF budget was created and “pushed through” the organization along the operational activities of the actors concerned. These actors are mainly the members of top management and the project managers along with, exceptionally, the finance assessors and the administrative directors. The operational approach in UPCAM’s change management seems defensible on three standpoints. First, the limited communication over the change project contributed to the growing employees’ perception that this reform concerned essentially the top management. For part of the personnel, the reasons for change are still a mystery. The financial and accounting faculty personnel’s lack of involvement might also be explained by poor skills in management accounting and performance control. Besides, their integration could only have passed through crossover university projects, a formula that proved unfortunately to


be inefficient in the past. We are thus reminded of the vertical management axis that dominated UPCAM and generated difficulties in transversal faculty actions. Consequently, the action perimeter was best maintained around the members of the larger “governance meeting” who were already mobilized around the LOLF budget. Moreover, the operational change approach is visible in the parallel construction of traditional means and LOLF budgets. Traditional operational and information transmission procedures for budgeting played a significant role in the diffusion of the new rules. They helped avoid the rejection that is associated with most novel management tools. Despite these precautions, the operational development of LOLF changes was made fragile by factors linked to ministerial and internal information systems. The unavailability of information slowed down and discouraged the actions of participants: “when you are daily into it with people who do their best on machines that don’t react, it gets very dispiriting” (LB, secretary general). Besides, despite the obvious need for information systems interoperability, the ministry recommended no reliable systems, making way for uncoordinated university experiments. For instance, the recent installation of UPCAM’s pay software induced long-lasting trial-and-error processes. Also, the creation of the LOLF budget was parallel to certain faculties’ BMD reform, thus generating more delays and urgency-induced workplace stress. The importance of staff costs in UPCAM’s budget put the focus on the HR managers of the university and its faculties as significant players in the LOLF reforms. Three themes are linked to this category of employees. The first is including extrabudgetary personnel within the global envelope. The second is linked to the LOLF structure. Following the ministerial recommendations concerning the actions of teaching and research (bachelor, master, doctorate, research, documentation, knowledge diffusion, real estate, and performance management) and “student

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life” actions (direct aid, indirect aid, medical and socioeducational aid, performance management), as well as an ensuing 30 subactions, the HR managers had to assure a justified breakdown of personnel charges in analytical accounting. Third, with the creation of the global envelope and the ministry’s promises on human resource decentralization, these services had to provide methods for professional management of employment posts and skills (GPEC). The interventions of the HR managers encountered difficulties. A significant barrier was the inexistence of centralized information on payments, due to the historic autonomy of the faculties and the resultant multiplicity of pay-processing centres. Information problems emerged as well when the operators discovered that the software could not handle the allotment of expenditures on the six levels required by the ministry; only four levels could be detailed. Furthermore, the lack of pre-eminence between the university and the faculties’ human resource departments systematically obstructed global coordination. To get around these difficulties and meet the deadlines of the budgetary process, unexpected and temporary solutions were found. Thus, the General Public Bursar (TPG) was asked to provide precise and reliable information concerning professors with extra-accounts pay. This collaboration was fragile though; it was not specified among the duties and priorities of the TPG. At its end, and in expectation of transversal management software, the university HR manager called on the Rectorate. On the other hand, the central HR services badly needed faculty–university links in order to fi ll in the LOLF budget forms accurately. The HR manager decided to create and support informal and regular exchange networks. Their reinforcement came through actor specialization; one person emerged as the informal university reference in a certain area (e.g. payment-budget-State) and was regularly called on by faculty employees. In the end however, the HR manager was pessimistic about GPEC tools (“a sea serpent”). In effect, the ministry continued to jealously


preserve too many management levers: recruitment, payment and promotion continued to be structured by the rigid statutes of public servant codes. The control of teaching resources was another mission closely related to LOLF reforms. This track was opened in order to ensure the performance management and follow-up of teaching resources in a context characterized by (a) an increasing complexity of registration following the BMD reform and the set-up of customized student trajectories and (b) the ever richer information needed for the construction of LOLF budgets. The project manager needed to elaborate the balanced scorecards, define the indicators, define a common vocabulary for the training programme, evaluate and forecast the teaching time, check on the effective time, analyse the gaps and set in corrections. The project is still growing. Supported by both the political will of the university’s CA and the specialized software APOGEE, it benefits from significant project management vectors.

Third stage: end and follow-up . . . Starting at New Year, this phase of the reform comes with a partial release from budgetary urgency. Though they occur at different dates, both budgets – the traditional and the LOLF ones – are approved and sent to the ministry. It is time for consolidation and improvement of the new budgetary process: the evolution of practices is analysed, successes and errors are assessed. Following the ministry’s suggestion, UPCAM’s reform lessons should be applied extensively to the sector of higher education. However, some projects and change tracks continued. Reflection over the control of teaching resources called for a restructuring of information systems. But it was management supervision through balanced scorecards that drew significant attention. This new practice would complete the analytical budget and set the stage for comprehensive management control.

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The creation and development of balanced scorecards was headed by the cost accounting expert (SB) and involved all the financial directors of the university and of the faculties. The project took advantage of the university’s positive dynamics and a state-of-the-art project management approach. In effect, thanks to the support of university government, SB initiated a series of tête-à-tête interviews with the fi nancial directors. The identification of the chart’s indicators and their defi nitions thus conferred the opportunity to involve the financial and accounting personnel in the process and bring about feelings of ownership and commitment. The project also highlighted the utility and added value of the balanced scorecards. For the first time the finance personnel had its claim for management tools endorsed. Their demands had long been perceived by the university as the sole means to reinforce personal control and power basis. Once harmonization of charts with the budget structure was ensured, this phase opened the way to even more detailed scorecards. Their set-up and diffusion to users was supported by a synthesis report meant as a referential of management indicators and a breviary of frequent accounting malpractice. As change tensions fell to cruising speed, SB put an end to private interviews and instated regular teleconference meetings. These discussions further allowed assessing and correcting the errors and difficulties of the users. However, despite the positive prospects, the success and duration of these management practices remain to this day subjects for speculation.

O U T C O M E S , E X P E C TAT I O N S A N D CONCLUSIONS UPCAM’s reform is still open. It’s time today for reflection and anticipation. Have there been improvements, successes, failures? Will the other universities follow?


The answers of university personnel to these questions converge. They note in the first place the pervasiveness of changes induced by strict budget constraints. As the HR manager put it, “this is the best of constraints to ensure behavioural change”. A constraint that is itself a practice increasingly followed in the university world. The case is even stronger in faculties where the old management traditions are replaced: For 600 years “intendancy had to follow”. Except that now “intendancy follows no more”. Intendancy would follow with an aim, not just to fi nance uncontrolled and inconsistent expenditures. These are no longer the trivial expression of university liberalities. ( JI, fi nancial assessor)

This shift in operations reforms the university culture. But its effects go further. A legitimate system of dialogue and negotiation between faculties emerged. Bound by an unstretchable common budget, the faculties learned to dialogue, to work together, and to make decisions guided more and more by shared and coherent aims. Moreover, the system became more transparent. While an informal “murkiness” was traditionally recognized as power stake and source, the LOLF reform shed light on university operations and initiated reliable management control. The potential for further managerial developments is best expressed by UPCAM members’ expectations. They translate both the impetus built into the reform process, and the frustrations linked to barriers to change. If the ministry appreciated and encouraged the university’s results, its missed promises dismayed UPCAM members. Although LOLF processes are set up and operational, the ministry keeps up the historical modes of fi nancing and budget negotiations are close to zero. A feeling of unfairness prevails as the increasing transparency of the university is not counterbalanced by greater transparency in ministry decisions.

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The law is also a source of recurring concerns. The unchanging statutes of civil servants and the often confl icting accounting regulations prevent the evolution of financial and human resource practices. There’s hope that LOLF reforms may underline the growing inconsistencies and eventually impel the Assembly to look into the matter. Also, in the opinion of many university managers, the next stage should bring changes in university financing. With access to credit and devoid of regulated fees, the university will at last consider freely and responsibly its strategies and future.

CASE REQUIREMENTS • • •

•

•

Identify the change tracks of UPCAM’s reform and describe them briefly. Enumerate and analyse the external factors of the change dynamics. Analyse the flows of communication dedicated to change. Do you think change marketing would have been adequate in UPCAM’s case? Does UPCAM’s reform fit a classical change management pattern, or did it develop through current operations? Develop a “point/counterpoint” argument. You are the president’s LOLF manager. On ministerial request, you must make a presentation of UPCAM’s LOLF experiment to the Conference of University Presidents. Prepare your slides. Do not forget to underline and detail changes in managerial practices.

REFERENCE Charreaux, G. 1997. Le gouvernement de L’enterprise: Corporate governance, théories et faits, Economica, 421–422.

A P P E N D I X 1 : O R G A N I Z AT I O N A L C H A R T O F PA U L C É Z A N N E U N I V E R S I T Y Vice-presidents

President Accounting Agent

Cabinet of the President

Secretary General General Administration

Delegate Project Supervisors Project managers : Apogée/Jefyco/LOLF Public Relations

Steering Unit Administrative unit for students and training Registrar Office for Student Affairs Apogée Human Resource Management Budgeting Accounting services Audit and Management services Service of means and facilities Purchase and public markets Hygiene and security

Common Services

Common documentation services Common university service for professional orientation and information International relations Partnership and external relations Pole for continuous training Agency for university valuation University – Business partnerships Preventive medicine Research management Information systems management Logistics and Realty Common services of the scientific campus Service for the social actions of university personnel

Reproduced by permission of Paul Cézanne University

Attached Administrative Establishment Institute of Political Studies

FACULTIES Faculty of Law and Political Science Faculty of Technical Sciences Faculty of Applied Economics Institute of Business Administration (IAE) Institute of Public Management and Territorial Governance (IMPGT) Institute of French Studies for Foreign Students University Institute of Technology

APPENDIX 2: OUTCOMES OF THE 2004 LOLF REFORMS – 38 INTERVIEWS W I T H E A R LY E X P E R I M E N T E R S F R O M A L L P U B L I C S E C T O R S Primary performance improvements subsequent to LOLF

• Redefi ning organizational missions: • Improvement of the social-economic policy effectiveness: • Improvement of management effectiveness: • Improvements in service quality: Main improvements in management cultures and professionalism • Development of management control: • Better management of salary mass: • GPEC development: • Better accounting and use of policy costs: • Development of performance measures (management charts, etc.): • Adoption of client-oriented approaches: • Stronger shared commitment for organizational objectives: • Reinforcement of management survey: • Management responsibility: • Stronger agent responsibilities: Total

Effects of LOLF experiments None

Poor

Moderate

Significant

Essential

No response/ No object

15% 15%

12% 27%

31% 27%

31% 12%

4% 0%

8% 19%

0% 4%

0% 4%

23% 58%

46% 19%

23% 4%

8% 12%

4% 0% 23% 23% 15%

12% 0% 19% 19% 8%

19% 15% 12% 15% 4%

38% 31% 27% 31% 46%

23% 42% 12% 8% 19%

4% 12% 8% 4% 8%

42% 15%

8% 4%

15% 19%

8% 50%

8% 8%

19% 4%

19% 23% 19% 16%

8% 4% 15% 10%

19% 23% 15% 21%

38% 35% 35% 32%

8% 8% 8% 12%

8% 8% 8% 9%

(Source: “2004 Experimentations: First outcomes and lessons” – Department of Budgetary Reform – Ministère de l’Economie, des Finances et de l’Industrie – http://www.Minefi.gouv.fr/lolf ) Reproduced by permission of Paul Cézanne University


APPENDIX 3: GENERAL ARCHITECTURE OF TH E LOLF BUDG ET (E XC ER P T ) Programme 1: Higher education and research No.

Actions Budget ref.

Title

1

101

Bachelor

2

102

Master

3 4

103 106

Doctorate Research

Subactions JEFYCO ref.

Title

1011 1012 1013 1021 1022 1023 1031 1061

Initial training Continuing training Apprenticeship form Initial training Continuing training Apprenticeship form Doctorate Natural sciences, biotechnologies, and health Mathematics, STIC, micro- and nano-technologies Physics, chemistry, engineering Sciences of the earth, universe, and environment Humane and social sciences Cross-disciplinary research Documentation Scientific and technical culture

1062 1063 1064

5 6

105 113

Documentation Knowledge diffusion

7

114

Realty

8

115

Performance management

1065 1066 1051 1131 1132 1141 1142

1143 1151 1152 1153 1154 1155

University Press CPER programmes Actions of the Ministry of National Education – Security and maintenance Logistics Global university management Operational management Management of international activities Training Information and communication technologies

115

116


Programme 2: Student life No.

1

Actions

Subactions

Budget ref.

Title

JEFYCO ref.

Title

201

Student life

2011 2012 2013

Direct aid Indirect aid Medical and socialeducational aid Programmes management

2014

(Source: Archives of the LOLF Committee (1 January 2005)) Reproduced by permission of Paul Cézanne University


A P P E N D I X 4 : A N A N A LY S I S O F T H E 2 0 0 5 LOLF BUDGET Structure of operating revenues

Other current products 18.0% Operating subsidies 49.7%

Own resources 30.0%

Financial Non-cashable products 1.8% products 0.5%

Structure of operating expenditures Unpaid charges Financial and Purchases (depreciation) and stock exceptional 5.8% charges 0.1% variations Other current operating expenditures 11.7%

11.3% External services 27.8%

Personnel 43.4%

Structure of expenditures broken down by actions Documen- Student life tation 3% 1.0% Research 11.5%

Knowledge diffusion 0.3% Training (B, M, D) 33.0%

Performance management 20.8% Realty 30.8%

(Source: Archives of the LOLF Committee (12 December 2004)) Reproduced by permission of Paul Cézanne University

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CHAPTER 6

POLITI CAL AN D MANAGERIAL CHANGE IN TH E CIT Y OF COESFELD Harald Plamper and Ingrid Beutel-Menzel

In 2000 Coesfeld won the Speyer Award for its harmonious interplay between politics and administration. Why?

INTRODUCTION In the German tradition of “Selbstverwaltung” (i.e. local autonomy) any city can take up any subject it regards necessary. The city also executes most of the laws coming from the national or subnational political level of Germany’s federal system. Traditionally, the citizens regard city hall (and not a branch office of the Land or of the national government) as the only place for the

Strategic Change Management in the Public Sector. Edited by F. Longo & D. Cristofoli Copyright © 2007 John Wiley & Sons, Ltd.

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delivery of public services. But they also blame city hall for any problem in the city. The tradition in German local government gives the Council, in addition to its statutory powers, executive or administrative powers. Often routine decisions have to be brought to the Council, and ideology and party affi liation can be more important than sound reasoning, qualification and merit. As is often stressed in literature, Germany was a late-comer in terms of administrative reform. In the early 1990s the German municipalities were the first in Germany to begin with reforms that deserve this name, whereas the German Länder and the national government were lagging behind. The explanations are quite simple. First, the ongoing financial crisis was felt first in municipalities (in Duisburg since the 1970s) with the effect that municipalities were forced either to cut back services, lower the quality of services in order to balance the budget or incur huge debts and allow the dilapidation of public property. Second, the fall of the Iron Curtain in 1989 and German Unity in 1990 seemed to be ample proof that the German system functioned well. Many public managers from the west had gone to the east for implementing the old western system. Why then change? The reform in German municipalities followed the “New Public Management” framework, adapted from the Dutch city of Tilburg and promulgated since 1991 by KGSt, a consulting cooperative of German and Austrian municipalities. KGSt coined the term “Neues Steuerungsmodell” (new steering model) instead of New Public Management.1 Unlike reforms in other countries like New Zealand or the United Kingdom, the German reform was not mandated by higher levels of government. It was a “grassroots movement” initiated mainly by municipal top managers and in

1

The Swiss instead coined the term “Wirkungsorientierte Verwaltung” (impactoriented administration).

POLITICAL AND MANAGERIAL CHANGE

a few municipalities by politicians. The first to initiate reforms were those cities that had experienced the fi nancial squeeze most. Their goal was rather simple: stretch the tax-mark and later the tax-euro. Consequently, efficiency was the first and primary goal of the reform. Effectiveness and, with it, strategic considerations came in later. As in any grassroots movement not all municipalities entered the reform path or proceeded uniformly. Quite a few reforms were stopped or just evaporated. From 1993 on, KGSt published reports for its member municipalities and took up the questions as they surfaced in the cities with reform activities. Besides KGSt as promoter of managerial reform, the Bertelsmann Foundation 2 had become one of the important promoters of such changes. “Cities of Tomorrow”, a network of more than 10 cities from Europe and other continents, was formed around Christchurch, New Zealand, and Phoenix, Arizona, USA, winners of the Carl Bertelsmann Prize in 1993 for good local government. Soon this network had gained a strong reputation and was influencing the reform movement also in Germany. German academia had initially turned a blind eye to the reform. Many academics criticized the “Neues Steuerungsmodell”, few were participant observers and fewer still were active promoters. Because of this resistance thorough evaluation is lacking and views about results and shortcomings differ widely. The fi rst more thorough evaluation is from 2007. However, one academic initiative turned out to be viable – the Speyer Quality Award. Initiated in 1992 by two professors of the post-graduate German School for Administrative Sciences in Speyer, the Award was supposed to foster reform in Germany. As a bi-annual contest it was widened in 1996 to include Austria and Switzerland. With the support of the three national governments this contest and the award have drawn some attention to 2

Bertelsmann is one of the global players in media and publishing.

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reform in the public sector. The seventh contest took place in 2005.3 In recent years New Public Management initiatives seem to have lost their importance, and some academics are calling for a paradigm shift from management to governance or from economics to social sciences.

THE CITY OF COESFELD Coesfeld is a medium-sized city of about 37 000 inhabitants in the more rural area of northern Nordrhein-Westfalen close to the densely populated and industrialized Ruhr-Gebiet (formerly coal and steel) and the Netherlands. Coesfeld has a long and rich history in trade and at the end of medieval times was a member of the League of Hanseatic Cities. The ensuing decline was the result of diverse quarrels between the Dutch and the Spanish in the sixteenth century and of the Thirty Years’ War in the seventeenth century. Afterwards Coesfeld developed to become a regional centre. The Second World War saw Coesfeld subjected to heavy bombing raids and up to 80% in ruins. It was rebuilt according to the old plans after 1945. Today Coesfeld’s economic condition is relatively good, and the unemployment rate is below the national average. Crafts, light industry and agriculture abound and shopping is also important. The ratio of inbound to outbound workers is positive: more people come to Coesfeld for work than leave it for work. The city is not poor compared to other municipalities in Germany and especially compared to those in Nordrhein-Westfalen.4 The 3

The interest in the contest has risen dramatically. In 2007 the contest was widened to all European countries as the “European Public Sector Award”. The Speyer School, EGPA and Bertelsmann Foundation manage the award. 4 This Land has suffered heavy losses in its industrial base of coal and steel and also textiles.


city’s tax base is better than the average, though it has gradually eroded during the last 10 years. Coesfeld has grown not only in population but also in size. In 1975 the independent city Lette was incorporated into Coesfeld. The demographic situation is similar to most German cities – fewer and fewer young people and a growing population of senior citizens. Because of immigration Coesfeld expects to have a stable population base till at least 2015. The governance of Coesfeld follows the constitutional prescriptions of the Land Nordrhein-Westfalen. In 1999 the city changed to the American mayor system with the mayor elected directly by the people. The mayor acts as head and member of the city council and is CEO. Until 1999 the city had adhered to the British city manager system with the honorary mayor elected by the city council representing the city and the city manager running the city administration (also elected by the city council). The city council had 44 members with a traditional majority of the more conservative CDU (Christlich Demokratische Union). The up-to-now two directly elected mayors have their political home in the majority party. Despite the continuing dominance of the CDU the entire council plus the mayor conducted business in a rather harmonious manner. Most decisions were taken unanimously or with majorities reaching far beyond the CDU. However, the election in 2004 changed the composition enormously. The up-to-then not active Wählergemeinschaft (election initiative) Pro Coesfeld now ranks second and has pushed the Social Democrats to third rank. This new group challenges the harmonious way of doing politics in Coesfeld. The city administration has about 320 employees. The traditional organization centred around a functional division of labour. City hall was rather antiquated with old furniture, few computers and traditional processes.

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TH E R EFO R M GOAL S AN D PRO C ESS ES “Neue Besen kehren gut” (i.e. new brushes sweep better). In the early 1990s young managers were added to the top management team. Their idea was a complete overhaul of the city administration. Rainer Christian Beutel, later city manager, then mayor of Coesfeld, was one of the “neue Besen”. He comments: When I came to Coesfeld in the early 1990s I immediately realized the necessity for reform. I found in city hall old furniture, outdated office tools and fractured processes. I knew Coesfeld to be a conservative city, but conservative to me did not mean antiquated. In 1993 two colleagues, who had started with me and were also reform-oriented, and I took part in the KGSt-Kongress in Hamburg where New Public Management in the form of the Tilburg-Model was propagated. We were impressed, and in the evening after a few beers we agreed to start with reform. The initial conditions were not easy. Employees were somehow willing to change but at the same time hesitant since they had previously been hindered in changing their work. After starting with the reform, we were surprised at how quickly the employees’ attitudes changed. Most valuable were the open ears we found in the city council. The heads of the two major parties, CDU and also SPD, were very progressive and wanted us to start.

Apart from the KGSt-Congress 1993 in Hamburg and the presentation of the Tilburg-Model for better and efficient public services there is no direct and communicated explanation as to further causes. One can only state the fact that the top management was in favour of it. Their main topics were: • • •

better rules of the game in the relation of politics and top management to bring in more efficiency; initial activities for high quality services for citizens; consolidation of its finances through budgeting its administrative units.


The inspiration for all city councillors came first hand from Tilburg. Following an invitation to city hall the former controller of Tilburg told of the reform in this city and its successes and urged Coesfeld to act quickly but cautiously. Two days after the presentation the city council, on advice of top management, voted unanimously for the reform and mandated a medium-term programme and, as first initiative for 1995, a new budget – different in its form and different in the budgeting procedure. The main subject of the first programme (decided three months after the initial vote) from 1994 to 1998 was a new balance between council and top management. The council agreed to concentrate: • •

on strategic matters and stop dealing with the details of day-to-day-business; on control of the activities of the administration.

After intense discussions by all players involved (moderated by an outside consulting company) the administration changed its structure in 1998 and the council reduced the number of committees to five according to the rule “one administrative unit, one budget, one committee”. The city manager received many responsibilities that formerly had been taken up by the council. The city manager compensated these new “powers” by regular reports to the council – be they formal or, even more so, informal in bi-weekly meetings with all top politicians of the city. Obviously, a lot of trust had already been established between council and management and also across party lines. The reform process was accompanied by one central committee of the city council and implemented by one project group in the administration under the supervision of the chief fi nancial officer and with the operational responsibility lying with the head of the city manager’s and later mayor’s staff. A representative of the employees was also member of the project group.

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The change within city administration and council was accompanied by a visible change in service delivery. Like many other cities Coesfeld bundled often-requested and easy-to-deliver services in a one-stop unit called “Bürgerbüro” (i.e. citizens office). The first programme was a success, as all planned activities had been realized. So the city council and top management felt free to conceive a second programme for the years 1999 to 2004 with 11 topics of wide array not only limited to additional aspects of New Public Management. Again all councillors voted for the new programme. In 1999 Rainer Christian Beutel, then city manager, was elected mayor of the city by popular vote in the new constitutional structure as member and head of the city council and as CEO. More than before the city engaged in activities in conjunction and collaboration with other cities. Coesfeld was an active member in the Bertelsmann-Modellkommunen-Projekt. All citizens could participate in “future workshops” discussing and defining long- and medium-term goals that the city should pursue. These workshops were supported by the Bertelsmann Foundation. Community and solidarity and more generally quality of life should be fostered in four policy areas – social affairs, economic development, cultural affairs and education. The city was supported by interlocal project teams developing a set of strategic reports. • •

The first workshop took place in April 2000 with 50 citizens as participants (plus city councillors, managers, etc.). The second workshop took place in June 2001 with about 70 citizens as participants. This workshop could draw on opinion polls from all cities participating in the Bertelsmann Project and could draw on the work of the interlocal project teams.


•

•

A special forum in June 2002 with 120 participants provided information on demographic change and its implications for Coesfeld. A third workshop in July 2002 could draw on measured indicators in regards to quality of life in comparison with other cities of the Bertelsmann-Modellkommunen. Strengths and weaknesses were highlighted and strategies developed for improving the life of citizens.

Valuable suggestions came out of these workshops that were taken up later on by council and management. One of the most important results of these workshops lay in the increasing regard afforded to the demographic factor by all Coesfelders, especially the city councillors and the top managers. The results that had been initiated by this project are remarkable: • •

• • •

because of demographic change, zoning was added for additional nursing homes; in economic development, an additional Saturday market was set up enhancing the attractiveness of public indoor and outdoor spaces and enlarging an indoor shopping area called Kupferpassage; in social and youth affairs, a new skating park in public – private partnership was created; in education and culture, more personal computers to schools partly sponsored by businesses were provided; environmentally, a new design for Borkener Strasse, Promenade as a bicycle road was elaborated.

It is important to stress the fact that the city heeded the proposals of the citizens, as long as they were financially feasible. In 2003 Rainer Christian Beutel left the city to become CEO of the new “Gemeindeprüfungsanstalt (Local Government Audit

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Commission) Nordrhein-Westfalen”.5 Heinz Öhmann, also devoted to reform, was elected his successor. His preferences should have been highlighted in a new third reform programme for the years 2005 plus. This programme was supposed to be presented in the first half of 2005. Whether the city council in its new composition would accept the new programme was and is an open question.

TH E R EFOR M ACTIVITI ES In the last section we provided a history of the reforms in Coesfeld. In this section we shall outline in detail the contents of the programmes.

First programme Change of budgeting procedure: input-based budget The reform began in 1994 with the change to a top-down process of budgeting. After having reached some clarity on the future income, funds were appropriated in lump sums to the budgeting units which had received almost sweeping latitude in spending the money. They could change between personnel expenditures and commodity expenditures and they could save funds for the following year. This new budget was still an input-based cashaccounting budget. The first effect was most interesting. Different from the previous years the units in 1995 spent less money while providing the same services as before (in the course of 1998 it was possible to compensate a dramatic fall in income through a reduction of expenditures by nearly 80%). Positive side-effects 5

In 2007 be went on to become head of KGST.


were shorter budget deliberations in the city council, a higher satisfaction by the unit heads, and the rise of cost consciousness with the employees. Structure of administration Like most public entities in Germany Coesfeld was structured functionally according to the competences of its employees (these were exemplified in job descriptions with a far-reaching division of labour). The structure was deeply hierarchical. Of the 14 units some were quite small. In this structure full use of the potential of the employees and further decentralization of competences in relatively autonomous budget units were impossible. Between 1997 and 1998, after moderated deliberation of all players (politicians, top management, employees and employees’ representatives), a change was made to a structure of eight units along external and internal product lines. Structure of council committees At the same time the city council restructured its historically evolved committee system and formed three committees that dealt with the affairs of the eight administrative units. Every administrative unit dealt with one committee only. The interface between council and management was clear, doubled competences were ruled out, the workload could be reduced, the core competences (strategy and supervision) were fully used and trust could be enhanced. Politicians and managers were very happy with this new system. In addition to the three regular committees two special committees dealt with the affairs of the incorporated city of Lette (this was conceded to the city of Lette before the merger) and with the department of further education because of its regional scope.

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Division of competences between council and administration (citizens, council and administration)

Coesfeld was a place more of trust and less of tension in the relations between council and administration. Because of this a new balance of competences became possible. In many other cities this proved to be the moment of truth for the success of the reform activities. The city manager and later mayor received sweeping authority in all operational matters (all decisions on procurement, all personnel decisions with the exception of selecting the deputies of the city manager and later the mayor), and the council decided on strategy (took more time to decide on strategy!) and received reports on the state of affairs. Reports were given formally every three months and at year-end, but also informally in bi-weekly meetings between the mayor, his deputies in management and the top politicians. As decisions are not made in these meetings, participants refrain from power play (they can thus save their faces). For important matters the mayor and council organize informal meetings for all members of the city council and the heads of the different units of the administration. The city regards its twinning activities with cities from abroad as a good chance to foster good internal relations and build trust. The city manager and later the mayor have reserved special times for listening to citizens. They listen to their complaints and suggestions. Information is given to the citizens on all subjects of public interest, not only on those with a legal mandate for information. Public debates are recorded, published and put on the internet. Ralf Nielsen, chairman of SPD in the city council, comments:


The council decides on strategy. From the administration I do expect clear information and possibly alternatives to decide on. I really am convinced that the council’s job is strategy and the administration runs the day-to-day-affairs. This is not easy, because a councillor needs knowledge of the facts and trust in the administration that is necessary for good cooperation. Still, a good councillor has to keep eyes and ears open and must not rely only on the information given by the administration. As we are the minority in the council this attitude has often been contested. Shouldn’t we do the complete opposite? The new group in the city council, Pro Coesfeld, exemplifies this kind of total opposite. It argues on small details, something we left behind with the managerial reform in our city. Summing up: applying managerial reform is not at all popular.

Bürgerbüro (citizens office) Like many other cities in Germany, Coesfeld followed the city of Unna. In the early 1980s Unna had centred all of its oftenrequested and easy-to-render services into one department with employees fulfi lling multiple tasks that previously were administered by different specialized units. Service quality was enhanced, waiting time reduced, and a friendly atmosphere motivated citizens and employees as well. Shortly after establishing the Bürgerbüro opening hours were spread from 32 to 52 hours per week – this in a time when regular working hours for employees had been reduced.

Human resources From the very beginning Coesfeld invested in the quality of its workforce. Main areas were training of all leaders, especially top management, and of employees who were willing to moderate workshops in the many reform projects. In addition all changes

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have been accompanied by training for the new or changed positions. All employees in units in frequent contact with citizens received special communicational training. For employees working in social affairs, supervision was offered: employees could seek advice on a one-to-one basis when they experienced difficulties in their work with clients. The decision to internally qualify and motivate the employees instead of bringing in outside consultants turned out to be one of the guarantors for success. Employees soon came to realize that top management wants to work with them.

Second programme New in- and output-based budget and impactoriented catalogue of city services The positive effects of the previous budgeting initiative brought about a further change. Since 2000 output information has been added to the budget. For this a catalogue of all services the city is producing and delivering to its citizens has been established; it will be adapted according to the information needs of the decision makers in the city council, the administration and the general public. The vision is a contract-based system of running the city, with the budget as main contract of council and management, containing financial input and products in the quality and quantity according to the goals the city wants to reach.

Controlling The input-based budgeting system already made it necessary in the first programme to install a rudimentary controlling function.


Top management and the respective committees receive regular financial reports. Controlling then was enlarged with fi nancial reports and, in addition, output reports and impact reports. An early warning system similar to street lights indicates deviations of projected inputs and outputs. Detailed evaluations are not common in Coesfeld. Owing to the imminent change to accrual accounting (see below), a special controlling software was not installed.

Management by contracts Coesfeld has introduced contract management regulating all events from setting to reaching targets in a certain period. Products and expenses are contracted as well as the times and contents of the required reports. Contract partners can be found on all levels: • • •

city council and top management; top management and operational units; operational units and project teams or individual employees. The expected effects are:

• • • •

concentration on results; transparency; better leadership and at the same time more leeway; clarity about process among contract partners.

New accounting system This aspect of reform conforms with a general development at local level in Germany – the imminent change from cost accounting to accrual accounting. The initial report by KGSt dates back to 1995; opinions were divided between pros and cons, and the lack of good software was put forward as an objection. However,

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the Länder agreed in 1998 to seriously consider a study of the merits of a change and, fi nally, in November 2003, the decision was made to change. Now every Land is drawing up laws, and Nordrhein-Westfalen was the first to finish the law-making process in November 2004, and change can be expected in all German Länder by 2008 at the latest from 2007 on Coesfeld has a budget based on accrual accounting. Coesfeld has allocated the costs for its internal public works unit since 1997 and charged other units for having used its services. The efficiency of this unit rose remarkably. So it was necessary to take part in the reform of the accounting system and allocate full costs to all services and to all units. In the end the units of the administration shall compete with private enterprise in the market (this resembles competitive tendering introduced by Margaret Thatcher in the United Kingdom).

Quality improvement/interlocal performance measurement Quality management has been the underlying cause of many activities, especially as they are related to comparisons with certain services of other cities of similar size along four indicator sets: • • • •

doing well what you are mandated by law or by city council decision; satisfying customers; making efficient use of resources; having motivated and satisfied employees.

The comparison with other cities along these indicators in one field (passports, IDs and services related to moving from one place to another) allowed the detection of strengths and weaknesses. In the second programme quality improvement and inter local comparisons were spread to all services of the city.


The most innovative aspect of this activity was the use of oral or written opinion polls and of targeting citizens immediately after having used a city service. The views of the citizens had gained an importance that could not have been imagined five years earlier. So the city wants to use opinion polls regularly in a three-year cycle. A special hotline from 8 to 6 Monday through Friday and 10 to 12 Saturday is reserved for suggestions, complaints and wishes and a reply is guaranteed within five working days. Coesfeld also started to seek certification under ISO 9000ff and ISO 14001, when its sewerage treatment plant introduced an integrated quality and environmental management system.

Further change of organization – process reengineering The success of the initial change of the administrative structure opened the door to new processes: one person or one team should be responsible for one product. These teams and these persons had their eyes directed towards the citizens and their needs. Citizens should not have to go from one place to another in order to secure a service. This change should eliminate unnecessary steps and thus make procedures less time consuming and more efficient. Satisfaction of citizens is thus expected to rise. Coesfeld considered this a permanent activity.

Human resources development and qualification The concept is in some way an extension of the activities in the first programme. Further qualification is the key to an enhancement of the quality of work and the motivation of employees. In addition, annual and formalized get-togethers between employees

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and their direct superiors have been introduced for an agreement on future priorities, on active cooperation and on career prospects. To support these get-togethers a formal appraisal system of performance and potential for performance was introduced. Periodic opinion polls among employees also provide valuable information for superiors. Employees receive special awards for valuable proposals regarding the structure and processes of the administration. Working hours are more flexible according to administration needs but also according to the wishes of the employees. The work with employees and especially leadership will be incorporated into a code of good conduct enhancing organizational culture. Progress in and through IT In this respect Coesfeld is typical of any other small to medium size city in Germany. Coesfeld is connected with an IT centre that manages the big (and old) software programs. In addition Coesfeld has its own infrastructure which is more oriented towards the citizens. In the second programme Coesfeld has spread and enhanced the use of IT. Its presentation on the internet is enhanced and downloads will be possible. All space-related information will be kept in a geographic information system (GIS) and the new output-oriented budget will be in the system. City councillors shall have complete access to the system. Coesfeld is not superprogressive or extravagant, but shows high standards. Cooperation with partners A German peculiarity in the delivery of many social services should be explained. Traditionally these services, like assistance


for endangered youngsters, ambulatory or stationary services for senior citizens or aid for couples, families, and pregnant women, are given by non-profit organizations (often from the Protestant or the Catholic Churches) or by private companies. Municipalities pay for them with a pre-fi xed amount of money. Quantity and quality are not the primary local considerations. Coesfeld wants to reframe the contracts and combine quantity and quality of a service with a targeted price that the city is willing to pay. T H E R E S U LT S O F T H E R E F O R M PROGRAMMES The results so far have not been spectacular, but have been quite impressive. Here are a few examples. First, in a 1999 comparison with neighbouring cities on the relationship council–management, Coesfeld and another city received quite positive remarks: • • • • •

fewer sessions of council and committees; concentrated and compact decision-making process; less administrative work; less coordination of council and committee work; lower costs.

Second, Coesfeld is working with many partners and this cooperation can yield services for its citizens that other cities are not capable of: •

•

partners in city marketing have introduced unified opening hours for shops and public and private offices, and the city has adapted the schedules of public transport to the changed needs. Coesfeld has become a trendy shopping city; youngsters, disabled people and senior citizens receive many extra services that otherwise could not have been provided;

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• •

•

the city is willing to promote projects also fi nancially if they garner a lot of citizen support; citizen satisfaction (measured in interlocal comparisons) is high (higher than in other cities that have taken part in those comparisons); one example for citizen satisfaction – the Social Affairs and Housing Unit – changed the procedures for making appointments and therefore waiting time reduced, and ensured that one person would be in charge of the needs of one citizen. In general the citizen should receive the service after the fi rst encounter.

In general Coesfeld is long-term future oriented. It takes demographic change seriously into account and uses it as a basis for all aspects of decision making. Heinz Öhmann, mayor of Coesfeld, comments: Before coming to Coesfeld I was mayor of Hemer in NordrheinWestfalen. Here in Coesfeld I was surprised to meet such a cooperative team – not just cooperative with me, but cooperative with each other – and above all many intrinsically motivated employees willing to take over new and additional tasks. Maybe the identification of employees with the city is special to this area of Germany, but I am convinced that long-time cooperative leadership supported this special feature. We are proud of the many active associations and clubs. We are also proud of the new Citizen Foundation with 113 members and c133 000 collected by the end of 2004. On the other hand I fi nd more single-issue and less general civic engagement, and then a decision taken by the city council may turn out to be wrong: closing a school because of demographic change would be a wise decision, but I still have to fi nd a majority with single-issue citizens in protest.

Kerstin Schmidt from the Bertelsmann Foundation comments: We have monitored the different discussions inside management, inside the city council and especially those with the public. My lasting impression relates to the motivation and the engagement of


all participants involved. In comparison to other cities we had profound and forward-looking discussions. We have communally produced development profi les for following action arenas: education, demographic change, economic development, social affairs and have selected demographic change and education as priorities. For these we also have developed a catalogue of actions. Actually it was a relatively small activity, but it resulted in a clear action focus.

Rainer Christian Beutel, Öhmann’s predecessor, comments: Our success can be described by the proverb “Der Weg ist das Ziel” (The path taken is our goal). The change of mental attitudes of our employees was most important. And we were lucky in having started with budgeting our units: we were on time, and everything worked. City councillors were happy and managers as well. With interlocal comparisons in cooperation with the Bertelsmann Foundation we wanted to become more transparent. Things came to the surface that would not have been recognized without these comparisons and if recognized would have been difficult to communicate. Our employees soon regarded comparisons as a tool for improvement. Opening hours are a good example. We had fewer opening hours than other cities also taking part in the comparison. Our employees and not top management or the city council were the fi rst to propose longer opening hours.

W I N N I N G AWA R D S The Speyer Quality Award 2000 had several categories. In the category “Politics and Management” the Swiss municipality Baar (see the case in this book) and the city of Coesfeld received awards. The official explanation is as follows: 6 the city council has on the one hand withdrawn from deciding upon day-to-day affairs and on the other hand has focused on strategy. Because of

6

Shortened translation of this case by the authors.

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this resources have not been used and political and managerial leadership has been professionalized and enhanced. It is impressive how citizens, city council and management cooperate in order to get rid of typical weaknesses in German local governments. Cooperation between council and management is not only important for strategy but also for the ongoing reforms. The administration has been reshuffled and council committees have mirror-like functions. Consensus is built across party lines, the rules of the game are consensus oriented and followed by everyone. The willingness of the council to innovate and to experiment was important for formal and informal institutions geared for far-reaching improvements of the political administrative system. The mayor, the leader of the majority CDU group and the leader of the minority SPD group were present in the award ceremony and demonstrated their harmonious way of interaction. All three declared that political competition had not suffered due to their way of running the city and that the quality of the exchange of arguments had improved instead. When screening the municipalities willing to participate in Bertelsmann activities like the Modellkommunen-Projekt, Coesfeld was ranked first and praised for its managerial competence and the quality of services rendered by the city. Coesfeld was identified by television as “Coesfeld – ein Eldorado in der Dienstleistungswüste Deutschlands” (Coesfeld – Eldorado in the German service desert).

HOW TO MANAG E TH E FUTUR E? In 2005 Coesfeld is facing grave and serious problems: • •

demography; unemployment;


• • • • •

growing financial crisis; a reduced sense of community and less solidarity because of growing individualism; rising quality demands of citizens; higher turnover among employees of the city; more interactions between different levels of government.

Whether these problems will be mastered is an open question. The last election of the mayor in 2003 has signalled continuity, the election of the city council in 2004 seems to have changed the power balance established many years ago. The effects were not clear in summer 2005. The new third reform programme had not been published yet (even though the mayor had planned to do so), or discussed and decided upon. So far the mayor has not indicated his priorities. Some further comments by the leading figures may provide a full picture. Uwe Hesse, city councillor, chairman Pro Coesfeld: Citizens had the feeling that the data for the new development plan for our schools were not correct but that they had to be taken for granted and even more so that decisions had been taken already before the management had discussed the new draft with the parents of the children whose schools were up for closure. It is our impression that citizen involvement has been a farce. In the council we regard it as our duty to be very critical, and we believe that with our perseverance the city fi nds better solutions. For us it is very difficult to form a majority, because CDU, SPD and sometimes one of the smaller groups quite often join forces. The employees in the administration are very cooperative whereas the top management is more reluctant to work with us. None of us Pro Coesfeld councillors has experience in local politics and our councillors are not homogeneous. Fortunately we have quite a number of experts among our supporters whom we

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can rely on. We even will vote for the budget as drafted by the mayor and his top management, because we see a chance to get out of the financial misery in maybe two years. And we can show our fi nancial sincerity. Pro Coesfeld jumping on the reform wave? Yes, but on equal footing. Top management and my colleagues in the city council have to accept that we are very critical. For this reason we have been elected to the council.

Thomas Bücking, city councillor, Chairman CDU: At present we are in a very difficult phase. CDU has lost its absolute majority, and this is painful. Because of this we have a lot of debate in the party and in our group in the council, first of all about political items (should we close schools because of our declining number of youngsters, should we close an outdoor swimming pool because of our fi nancial situation) and secondly about our way of doing politics. Even before the election there was stagnation, because in a short period most of the protagonists in management had left or had become ill. Managerial reform has not been a priority on the agenda of our new mayor. I hope this will change and we will gain new momentum. We hope that Pro Coesfeld will jump on the reform bandwagon. Right now they are wasting our and the administration’s energies with motions dealing with minor details. I have the feeling that the number of employees who have been in favour of reform is declining again. They seem to regard Pro Coesfeld motions unnecessary work. Our “Coesfeld Model” of doing politics never was accepted by all city councillors (neither in my party nor in other parties), even though they all had voted for it. This model is based on long-term thinking and on our trust in the administration that it will provide us with the best information available to make good decisions and also will faithfully implement our strategic decisions.

Ralf Nielsen, city councillor, chairman of SPD: The citizens rarely realize that we have changed our way of doing politics. What the citizens see is a real improvement is the Bürgerbüro and actually we have received good marks for it.


Other than Pro Coesfeld I am convinced that our reform was good and that we have to go on. First of all we have to re-agree on the old agreement: the city council deals with strategy and the administration deals with day-to-day business. I hope that the mayor will be active soon. And I hope that the Pro Coesfeld group will soon join our agreement.

Heinz Öhmann, mayor: When I look at the work of the city council from today’s perspective I am inclined to become nostalgic because of the previous outstanding quality of our cooperation. Realistically I am not yet convinced that we will return to the trusting atmosphere prevailing in the council up to the last election when I could debate with leading members of the council any upcoming topic behind closed doors without fear of a premature public debate. I also found a high level of debate in the council on strategy – long-term thinking and acting and making changes as early as possible. Right now we are missing a clear strategic perspective, as we are discussing too many details. Our “old” and good culture is not yet sufficiently meaningful to our new members of the city council. They need experience and also training. I want to go on with reform and I am convinced that the employees will be active again. I want to concentrate on two activities: • •

Go on with the Kompass-Projekt of the Bertelsmann Foundation improving the quality of life in Coesfeld. Change to accrual accounting for better internal monitoring (a controlling unit shall assist me and my colleagues in management and the city council in reframing strategies).

Postscript Spring 20077 Almost two years have elapsed since the formulation of this case. A short look at the present situation in Coesfeld will show:

7

Personal opinion by Harald Plamper.

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• • •

the “grave and serious problems” still exist; since 2005 managerial reform has not progressed further. The planned third programme has not yet been presented; the work in the city council has become more difficult: Pro Coesfeld does not follow the old rules of the game. The informal meetings between mayor, his deputies and top city councillors do not function anymore as a platform for coordinated activities and discussions in the city council and in the management of the city. The representative of Pro Coesfeld may agree with a certain line of activities in the informal meeting, whereas the group may vote differently in the city council – this without having indicated the change in the decision-making process. Thus the political risks have risen tremendously for all groups involved, for the mayor and his deputies, for the political parties and their groups in the city council. Trust has been followed by distrust; publications of Pro Coesfeld still show a deep distrust of the mayor and his top management team; different proposals to meet informally for discussions about the work in the city council and about directions for the future of the city fell on dry soil: no positive reaction; city council and mayor received a major blow in a September 2006 referendum against a long-term traffic concept that had been discussed for three years and approved by the city council in February 2006. More than 90% of the votes were cast against the traffic concept (voter turnout about 25%). 䊊

䊊

䊊

•

In conclusion: cooperation in Coesfeld, once noted as outstanding, has evaporated. Managerial reform has not progressed further.

CHAPTER 7

I MPLEM ENTING EQUAL I N M EGAR A MUN I C I PALIT Y Joyce Liddle and Ioannis Oikonomopoulos

INTRODUCTION For almost two decades wide disparities between EURO regions have persisted. In 1970 the gap in GDP per head between the 10 richest and the 10 poorest regions was approximately 3 : 1. Since 1988 the European Regional Development Fund (ERDF), European Social Fund (ESF) and European Agricultural Guarantee and Guidance Fund (EAGGF) have been the most important structural funds aimed at reducing disparities across Europe. (George and Bache, 2001, p. 362).

Greece remains one of the poorer relations in the EU when measured on GDP per head. The country therefore has been able to bid for and receive significant euro funding including


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programmes aimed at improving employability of citizens by offering training schemes that will develop a variety of skills. EQUAL is one such programme that will be investigated throughout this case, by focusing on the municipality of Megara in West Attica, which engaged in EQUAL through its subsidiary, the Local Development Company of Megara (LDCM), to fight discrimination and inequality in employment. LDCM is one of 1100 local development companies across Greece, and these “arm’s length”, non-profit bodies, equivalent to UK quangos (quasi-autonomous, non-governmental organizations), work alongside a multitude of other public agencies, such as public hospitals, schools, cultural institutions, state banks and public enterprises to drive economic and social development. In using LDCM as a vehicle for change Megara became an “enabling authority” that intended to play a significant, effectively serving and coordinating role for the citizens, contextualized within the changing governance structures, in particular the realignment between government, local government, the private sector and civil society. EQUAL provided regions and communities in Greece with opportunities to form networks and alliances, so that they could self-administer and not have central government make decisions for them. In this context Megara Municipality saw the opportunity to engage in and become part of regional and national alliances to make decisions on its own behalf. Instead of waiting for central government to solve problems it was possible to take decisions on behalf of its own locale. Megara is an interesting case because, despite the many successes it brought, in terms of building up local authority staff skills and administrative procedures, improving the design of training programmes and ability to raise funds in future, raising the profi le of Megara and developing strong networks, the programme only produced training for 10 people and failed to result in employment for any of them.

I MPLEM ENTI NG EQUAL I N M EGAR A

However, the case does illustrate that it was possible, in the Greek context, to follow all EU procedures under Structural Funds, but nevertheless produce outputs very different from the expected ones.

GREECE AND THE EUROPEAN DIMENSION Greece is a parliamentary democracy, with a president, and a prime minister. Government affairs are conducted within a constitutional framework, and the monarchy was abolished after a referendum in 1974 (Loughlin, 1999). The Greek public sector accounts for 40% of the nation’s GDP and institutionally it is a multi-layered and complex structure. There are four successive layers of government in Greece. First, there are 19 ministerial departments of state, and second, decentralized and differentiated units of central departments are administered through 13 administrative regions. Third, the regions are subdivided into 54 prefectures, and the prefect is appointed by central government. It was an advisory body to central government, but recently some of these appointees have come from the municipalities, but there is little evidence of democratic control. Finally, the fi rst tier of local government is occupied by the municipalities and communities. The municipality, or “deme” had been created in ancient Athens, and to the present day the traditions of local self-governance have continued uninterrupted, with communes as “ethnic pockets where solidarity and traditions are key principles” (Tsinisizelis and Chryssochoou, 1996). Municipalities and community authorities are elected by the people (in the military junta these had been replaced by political appointees) and have more control over local affairs than local authorities in other countries. Greece was a fairly late member of the EU (it joined in 1981), not long after the Greek Civil War and the Dictatorship. The

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environment that had been created in the post-Second World War period continued to be one of clientilistic relationships between politicians and the populace. To join the EEC, later EU, appeared to be the only way out of the nation’s past. By becoming a full member of the EU, Greece would be capable of becoming a modern welfare state, in adopting structures, practices, and procedures in keeping with other peer member states. Once Greece became a full member of the EU, the traditional institutions for social security and social welfare were recognized as in need of reform. The whole of the Greek public sector was reformed and conformed to certain EU directives and principles, so that the country could enjoy the financial support from Structural Funds. These reforms created similar decentralized and delegated authority to the periphery from the centralized state. This was not a deliberate policy of Greek central administration, but as required by the EU. Regional and local authorities in Greece face a number of important challenges; some are common to all, and others are specific to a particular state. All are facing the effects brought about by globalization, the shift in economic and fi nancial processes to a global rather than national level, and the emergence of a new model of economic development with the local/regional as the focus of development. All European government strategies are now directed towards reconciling economic prosperity, social cohesion and environmental progress (OECD, 2001, p. 13) and there are a number of external drivers of change, identified by OECD (2001, p. 25), such as a greater focus on results, value for money, devolution of authority and enhanced flexibility, accountability and control, client and service orientation, introducing competition and strengthening capacity for developing strategy and policy. It is for some of these reasons that Megara Municipality, as will be shown in the next section, decided to create an arm’s length agency to help it achieve its overall corporate


objectives more generally, but assist in satisfying the requirements of the EQUAL Programme, more specifically.

M E G A R A M U N I C I PA L I T Y Megara is a community of over 29 000 inhabitants (2001 Greek Census). It is situated in the Prefecture of West Attica in southern mainland Greece. It is an average size municipality for the national standards. Its territory covers 325 square kilometres making it the second largest municipality in Greece. As part of the EU, Greece like all other states, is attempting to encourage implicit and explicit collaboration between the public and private sectors, as expected by the European Commission ( Jones, 1999). According to the national practice, that is the legal framework and the tradition, local councils are elected for a four-year tenure and they are constituted mainly of locally formed parties affi liated to the national political parties. Traditionally, local authorities have adopted a corporate approach, which enables them to provide a range of integrated services to meet the changing needs of the local community (Lawton and Rose, 1994). Up to the 1980s local authorities had operated as organizations that had few basic tasks to carry out. Actually their mission was to keep the community clean, provide water and sewage services, issue birth, death or other certificates and organize protocol festivities on national or religious occasions. They are “30% in profit and 70% in the red. The most successful are those in construction, and tourist development such as Rhodes, as well as those with cultural events and promotion at heart.” The mission of the current local administration of Megara is “To keep the citizens and external customers satisfied by keeping its pre-election promises.” The vision of the local authority is to be absolutely consistent on the commitments made public during the campaign preceding

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the election. One of the means to realize the said vision was the mayor’s decision to establish the Local Development Company of Megara (LDCM), which would play a supportive, efficient and effective role in this context. Consequently, a multi-objective type was approved so that a mini, flexible local authority would be available on demand. In this context, a multitude of objectives was included in the company charter. The time span of the life of the LDCM was set to 50 years in order for the company to be able to realize the largest possible number of its objectives. Its mission was decided as follows: “To provide all the necessary legitimate support to the local authority to realize its vision.” The LDCM in reality acted as the local government’s long arm as of its reasons of establishment and objectives. Its status is equivalent to UK quangos. It is a 100% subsidiary of the local government of Megara and it was established in August 2000. Even though it is a subsidiary of the major public sector, LDCM is identified as a completely private sector organization, a fact that has implications as to the way it operates. The main objective of the company is to have delegated to it the tasks that the local government cannot do.1 By establishing the LDCM, Megara Municipality attempted to encourage implicit and explicit collaboration between the public and private sectors. It was created in advance of the EQUAL programme because of the acknowledgement and recognition of current staff and other resource deficiencies, as well as the intrinsic qualities of arm’s length Local Development Companies. In general, LDCMs were created to assist local authorities in achieving certain objectives by overcoming the bureaucratic rigidity, capacity issues, and inertia of existing structures. Moreover, the time constraints set by the EU cannot be adhered to with existing local authority capacities. Within the given time restrictions and other resource needs of EQUAL, the LDCM became the vehicle for realizing Megara’s 1

Company Charter and Presidential Decree 110/1994.


contribution to the partnership, and it would have been impossible for the municipality to engage in EQUAL without the establishment of LDCM. LDCM operates in an unusual environment because, as an “arm’s length” local authority company, it is part of the public sector and must yield profit. Its initial start-up fi nance of 25 million drachmas (equivalent to approx. 48 000 GBP) was granted from the local council. Presidential Decree 410/1994, which governs all the issues relative to the local authorities, allows local councils to delegate construction works up to a value of 8 million drachmas (equivalent to approx. 14 600 GBP) without having to offer them for tender. The same Presidential Decree also allows them to delegate various studies and researches up to 3 million drachmas (equivalent to approx. 5500 GBP). This is a noncompetitive process, but the Ministry of Finance intends to tax LDCs with 35% of its profits. In this context the LDCM is determined to reinvest its profits so that the community gets the largest possible return on the investment it has made. LDCM operates in a highly sensitive political framework, and the tenure of the board of administration follows the four-year one of the local council and its composition reflects a political balance. An important element of local authority business, certainly over the recent past, has been the capacity to draw down European funding sources. Structural policy in Europe has provided subnational governments such as Megara with resources and opportunities in an emerging multi-level policy arena (George and Bache, 2001). The EU has made funds available to remedy the gaps or disparities between Europe’s regions. Greece, as one of the most disadvantaged regions of the EU, has been able to benefit from these initiatives. One such initiative is the EQUAL programme, and the following section provides a list of the types of EU funded programmes that Megara has become involved in. The EQUAL programme is further explained in the following section.

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T H E E U I N I T I AT I V E E Q U A L In Greece the EQUAL programme has been designed to support a horizontal approach to the policies and services to which excluded groups or those threatened with exclusion from the labour market will have access. EQUAL attempts to remedy some of the fragmentation and lack of coordination of the existing policies. EQUAL, funded by the European Social Fund, is complementary to existing policies for equal opportunities in the labour market. It is a tool aimed at the experimental application and diffusion of new ways of fighting discrimination and inequality in employment, and builds on a former EU initiative, EMPLOYMENT & ADAPT. The increasing rate of unemployment in Greece constitutes a problem in development and its form. Most of the unemployed national workforce are registered as long term, thus it is a structural problem. Long-term unemployment is related to serious social and economical consequences that undermine the future of employment and social cohesion. This is very true in remote and mountainous areas or the radically de-industrialised areas that are currently facing abandonment and environmental problems. In areas like these some categories of unemployed individuals, such as those of over 45 years of age or women, are long-term or permanently unemployed which creates severe consequences in local employment, development and cohesion. “Local societies with wide and long-term unemployment are facing the danger of their work force to lose its value in the mid term, just as the human body is weakening owing to the malfunction of its vital organs” (Rif kin, 1995). This is all happening in spite of all the measures taken in order to exploit the potential of local societies in the fields of the so-called “social economy”, which is in the environment, the social services and other service areas. The reasons as to why these conditions exist should be sought in the local conditions


and terms. The increasing importance of local action in matters concerning employment is now wholly recognized. It is now commonly believed that local societies are impotent to make good use of the local “sustainable” advantages in favour of employment and dynamically organize their defence and offence against unemployment. This is particularly true of the long-term unemployment for those parts of the population where unemployment tends to be a road with no return, making these individuals become the pariahs of social and economic life. “In spite of the recognised high importance of the local dimension in employment, there are still more obstacles. Their overcoming requires the cooperation of the local factors so that they jointly exploit their potential” (EU Resolution 7/4/00, COM2000). “Even though the local contribution to the solution of the unemployment problem has been for long considered as marginal compared to macroeconomic and structural strategies, nowadays it is more and more considered as acceptable” (EU Resolution 7/4/00, COM2000). Furthermore, “The local mobilisation is not the sole means of solving the problem but it constitutes a necessary prerequisite of any effective strategy” (EU Resolution 7/4/00, COM2000). EQUAL was focused on sectors like the social services, the environment and new technologies to safeguard sustainability in local development and create viable employment prospects. EQUAL attempts to deal with structural weaknesses by formulating: • •

a new dynamic pattern of “awakening” and mobilization of the local societies; a new “device” to facilitate access to employment for vulnerable groups of individuals who have been out of work for 12 months. The basic principles of accomplishing EQUAL are:

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• •

• • • •

developmental partnerships as binding and powerful agreements between organizations; internationality through the exchange of experience and know-how and the launching of joint actions on the EQUAL objectives; innovation as far as methods and procedures, objectives and action contents; empowerment as active participation of target groups in the selection and realization of the recommended involvements; mainstreaming the promotion of equal status between men and women; mainstreaming innovative approaches in the core of the national policies for employment. The general objectives of the programme are:

•

The development of employability through: facilitating access and return to the labour market of groups subject to discrimination; fighting racism and xenophobia in relation to the labour market. The development of entrepreneurial spirit through: facilitating access to the process of starting a business; the reinforcement of the social economy. The encouragement of the organizations’ and their employees’ adaptability through: progress of life-long learning and labour incorporation practices; support of companies’ and employees’ adaptability. The reinforcement of equal opportunities policies for men and women through: combining family and professional life; encouraging the abolition of professional discrimination; support of social and vocational incorporation of the asylum seekers. 䊊

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LESSONS LEARNED FROM PRIOR EU PROGRAMMES AND TRANSFER I N TO EQ UA L Since 1989 Megara has had a discontinuous participation in various EU programmes (Table 7.1) thus its experience has been minimal. Programme 1, based on a partnership between Megara and the Health Ministry, was deemed successful as 90% of the participant social servants found a job after training in the expanding social care sector for the elderly, in Megara and beyond. It demonstrates an early example of Megara’s participation in a network beyond the confines of the local authority structures. Programme 2 offered vocational training in IT literacy and skills, and for some participants this was their fi rst introduction to the use of information technology. It was difficult to evaluate this programme, due to the lack of sufficient records on tracking the destination of trainees on completion of the programme. However, partnership working was enhanced, as officers of the municipality were required to engage with education providers to design effective courses. This had an added benefit in raising the profi le of the municipality in responding to the needs of locally unemployed people. Programme 3 involved a census of the local gipsy population by the collection of primary data. Megara officials worked in partnership with the Sociology Department of the Athens Technological Institute (TEI) in designing survey questionnaires. Since then other research projects have been conducted. Before moving the discussion on to an in-depth analysis of Megara’s involvement in the EQUAL programme, it is useful to summarize how valuable these first three programmes were in providing good learning experiences. Did Megara become a more networked authority? What lessons were learnt from these earlier experiences? Did they allow the municipality to become an “enabling authority” that effectively responds to community needs?

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Table 7.1

EU programmes granted to Megara since 1989

1. 1989–1991 176 000 euros for 3 years

2. 1990–1992 440 200 euros for 3 years 3. 2 000 10 000 euros 4. 2001–2003 88 000 euros for Megara only 5. 2002–2003 No funding LDCM budgeted 10 000 euros 6. 2003– 4 988 994 euros

7. 2004– 58 694 euros

Post-secondary education training programmes for people working in the Local Government Social Sectors, with emphasis on those people working for the elderly. The 160 participants came from Megara and other areas, mainly from the neighbouring municipalities and the major area of Athens. Vocational training on the use of IT and office automation. 300 participants all of whom came from Megara. Census of the members of the local gipsy community and their living premises. EU Initiative EQUAL.

Learning Cities – R3L.

Urban development of the Meli municipal district, an area that accommodated refugees who settled after the 1922 collapse of the Greek establishment in Asia Minor. In cooperation with the Prefecture of West Attica, joint programme for fighting unemployment.

(Source: The archives of the Social Department of the Municipality of Megara)


The evidence suggests that prior to becoming involved in EQUAL, Megara had developed key capacities in its officers and staff to work with new partners in different networks. The trust that developed allowed the sharing of knowledge and resources, developing joint objectives, viewing problems holistically rather than partially and provided a foundation for future working arrangements beyond the municipality. As a result of these three programmes new networks and sustainable relationships for the future were created. Participation in these first programmes provided existing staff with a range of expertise in managing and administering EU programmes. It became obvious that teamwork was vital in order for the municipality to take full advantage of such programmes; however, these earlier programmes were located at a local level. Programme 5, which followed on from EQUAL, was a useful platform for Megara Municipality to engage in cross-national partnerships; “The Learning Cities” programme had as its main objective that member organizations would become a learning organization by stimulating learning among their citizens. The outcomes of this initiative were further networking and partnership arrangements with other participating local authorities within the constituency. The benefits of such engagement were to exchange knowledge in areas where good practice was evident in the respective municipalities. Programme 6 “Urban development of the Meli municipal district” was the largest programme ever granted to Megara, worth 4.7 million euros, to develop a deprived refugee neighbourhood of the town. Megara was selected and granted this programme owing to its maturity gained from its previous successful experience in administering EU programmes. Programme 7 in partnership with the prefecture of West Attica was a joint programme for fighting unemployment, and funded by the European Social Fund. The prefecture included Megara in its partnership well aware of its maturity and expertise in administering and managing EU programmes, as the EQUAL will demonstrate.

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M E G A R A’ S I N V O LV E M E N T I N T H E EQ UA L P R O G R A M M E Megara has, in the last three decades, suffered a gradual reduction of employment. Being on the edge of the Thriacion Plain, the most heavily industrialized area of Greece, the de-industrialization of the Plain has resulted in Megara’s unemployment rising to 14%,2 over 4% higher than the national figure which has been varying between 9 and 10%. In this context, the claim made in the programme description above where remote and abandoned areas as well as those that are radically de-industrialized fi nds full application in Megara. In the light of this research it is also necessary to take the perspective of Megara being a reticulist and enabler who “tries to assume the role of facilitating communication, negotiation and coordination by acting as a network manager” (Elcock, 2001, p. 139). From an employment point of view, EQUAL attempted to address the problems of the unemployed over 45 years of age and women. However, it is worth examining more fully some of the reasons why Megara chose to become involved in EQUAL, and in the following section we illustrate how the municipality worked in partnership with other agencies and organizations to facilitate the process. In order to be eligible for EQUAL EU funding, it was necessary for Megara Municipality to formulate a programme proposition in collaboration with a number of partners across public, private and NGO sectors. The particular proposition, Teliko Orio (Final Frontier), was created by 19 national network of partners from central Greece, including Megara, as shown in Table 7.2 but the authority also played a key role in leading and managing 2

Research conducted on behalf of the Municipality of Megara in 2000, which decisively contributed to the participation of Megara in the EQUAL programme Final Frontier.


Table 7.2

National partners in Teliko Orio (Final Frontier)

The Municipality of Levadia Central Greece and Thessaly Industries’ Union The Research Institute of the National Labour Union Charokopion University The Unemployed and Employers’ Information Bureau of Boeotia and Euboea Synergy Systems SA The Institute of Mountainous and Rural Economy ACME Educational Vocational Trainers Iridanos Vocational Trainers NET News Agency Man @ Work The Municipality of Megara The Municipality of Karpenisi Solo NGO Fokis Prefectoral Administration STAR SA The Municipality of Ag. Theodori The Union of Euboea Hoteliers The Holy Diocese of Boeotia and Levadia

a local network, including the Local Labour Union, Local Department of Ministry of Labour, Shop Owners’ Association, Professional Chamber, Agricultural and Poultry Farmers’ Cooperatives and Theognis Cultural Association. The Municipality of Levadia provided the inspiration for involvement in EQUAL as it was keen to form an alliance, and Telio Orio was the result. The main objective was to equip people in their mid-40s, who had been unemployed for 12 months, with the skills to get them back into labour market. The Central Greece and Thessaly Industries’ Union constitutes those representatives of industries that need specific staff, whereas the research arm of the National Labour Union carried out specific

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data collection. Charokopion University offered suggestions regarding equal opportunities and the Information Bureau and Employer’s Information Bureau collected and disseminated information but also brought together employers and unemployed individuals. Synergy Systems ran a software platform to facilitate partner exchanges but withdrew from the partnership due to budget constraints. The Institute of Mountainous and Rural Economies contributed by examining the roles and work activities of woodcutters, shepherds, timber fellers, chippers and resin producers, to help them to diversify their endangered jobs. ACME, a private vocational school, formulated the proposal with a number of players from Levadia. Iridanos Vocational Trainers provided instructors and teaching staff to implement the programme for trainees, whereas NET Newsagency and Man@work, a private recruitment agency, were used to publicize and recruit on to the programme. Megara worked closely with Karpenisi Municipality, a local authority located in a mountainous area and related to the Institute of M and R Economy (7). Solo was an NGO with experience in rural and mountain matters, and acted as the coordinating body for all rural and mountainous areas. NGOs such as Solo have a privileged position with central government, a concept that was unknown in Greece until five years ago. Fokis Prefectural is a second tier authority at the heart of Greece, which is surrounded by rural and mountainous areas. Ag Theoderi served as an antennae on relaying know-how on unemployed people in the Pelopenesse area, to the south of Megara. In addition the Hoteliers Union of Euboea provided advice on tourism and development, and the Diocese of Boeotia and Levadia was involved in lobbying on behalf of specific programmes for unemployed people. There is still deep integration between the Church and the Greeks, so it was deemed appropriate that the diocese would continue to lobby in this way.


O U T PU T S O F T H E EQ UA L P R O G R A M M E The outputs from EQUAL were quite different from those anticipated: at one level it was unsuccessful as research established that not one single person who received training found employment related to that training. Some individuals in the Megara area were trained in environmental or waste and recycling but there were no opportunities to use the newly acquired skills. The design of specific training programmers was effective, but the objectives at the outset were unclear, and on reflection, perhaps, we suggest that these individuals might have been better trained in other types of skills more suited to the labour market needs. Only 10 people were trained in Megara and they were given 400 paid training hours per person. However, on another level, EQUAL was very successful in various ways. First, it improved networking and partnership working, and raised the profi le of Megara. In this context Megara officers and elected politicians networked with peer people from all over Greece but, since the initial stages of EQUAL, they have also begun to network and cooperate with partners in the European Mediterranean, such as those in France and Italy. The municipality is now looked up to and respected by other local governments, prefectures and partner organizations due to the improved skill levels of administrative and bureaucratic staff, in particular in having the capacity to understand EU rules and procedures more fully, and in the ability to draw down further Structural Funds. The capacity to formulate viable and trustworthy propositions for the future will undoubtedly increase the levels of fundraising in the future. Officers of the municipality and elected members now have a much different view of cooperation within the EU, and far from seeing Eurofunding as a “cash cow” to be milked, there

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has been a recognition of the need to follow the correct procedures.

I N T E R P R E TAT I O N O F E Q U A L O U T P U T S As already explained, overall EQUAL was regarded as ineffective, as it did not directly create jobs. However, indirectly, the unemployed received relevant training to be included in their CV and sought employment outside Megara. Employers’ representative organizations did not know much about the programme because the municipality was not very effective at publicizing EQUAL. Instead they blamed the local employment bureau, a department of the Ministry of Labour (OAED), as untrustworthy as far as providing them with effective employees. Despite EQUAL being a noble cause with clear objectives that Megara applied to be involved in because of its high levels of unemployment, there was an additional anticipation that the experience of being involved in EQUAL would result in: • • •

a more mature authority, better prepared for future bids; increased management and administration skills of staff; an improved image of Megara Municipality as an attractor of EU funds.

Megara had participated in smaller EU programmes than EQUAL, but the large-scale nature of this programme increased the management and administrative skills of officers and staff, and clearly Megara became a more mature authority with an improved image, internally and externally. The following evidenced this: •

partners began to invite Megara staff to contribute to their bids;


• •

• •

Megara began to become known as a mature authority; independent auditing bodies regarded Megara as an exemplar of good practice. In this way other municipalities could benchmark their activities with Megara; it worked towards trying to change the current perception of EU programmes as simply a “cash cow”; in working with training organizations, such as Iridanos Vocational Trainers, the municipality experience in designing IT seminars improved.

The initial incentive for involvement was to create new work positions, obtain cash flow into the municipality and find temporary employment for some unemployed citizens. This latter objective was never achieved as interview data from the 10 people that took part in the 400-hour training seminars confirmed that none of them had found a job after training on environmental issues. However, the two former objectives were achieved, as some new positions were created in the municipality and cash did flow in. Trainees felt that they got adequate and relevant training but there was actually no potential employer to employ them other than the municipality in the future when it would establish its own sewage processing plant. LDCM became known as the reticulist organization due to the reticulist skills possessed by its political and administrational sections. This was regarded as an effective combination of administrative and political expertise and skills. There is generally the recognition that public sector reform is now linked to the capacity and potential of this fi rst tier of society, the municipalities, which can be spread and made use of so that problems of a welfare state, such as unemployment, are communicated to the top of the hierarchy – the Greek national government. In this way the higher, prefectoral, peripheral or national policy-making organizations will receive feedback from

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local antennas, such as the municipalities who will act as the “enablers” of the local society to report and quote problems that need solutions. The local department of the Labour Ministry (OAED) was expected to disseminate information about EU support to businesses and the unemployed, but due to their bureaucracy they were regarded as ineffective. Therefore the politicians in Megara took on this role, and with EQUAL funds they were able to commission research on labour market issues in the whole of Attica. This led to a strong knowledge base on the entire local economy, and a contribution to overall regional development. Megara is able now to make use of the collected data across the whole of Attica, and draw on this in answering citizens’ enquiries. From a marketing and promotion perspective of EQUAL to the local community, as part of the publicity requirements, Megara was able to change the image and public perception of EU programmes being purely about cash. It became evident that programmes of this nature had a wider application, and this challenged the stereotypical view of the EU. As enlargement of the EU proceeds, and poorer countries become members, the whole structural funding regime will be altered, as a result of the Sapir proposals3 (Regional Studies Association International Conference, Keynote Speech, 14–17 April 2004). Data highlighted the need for a Master Plan that could be constantly monitored and regularly updated. It was made evident that participation in such programmes required a lot of primary data collection, so any future Master Plan would require huge data collection. Indeed the local authority had not been keen on collecting large amounts of primary data, but the EQUAL programme forced the authority to realize the importance of data collection on such a scale. 3

Professor Sapir produced a report in May 2004 which resulted from the Lisbon Accord on dealing with new members of the EU.


In leadership terms, some people were reluctant to participate in local issues due to possible slander or excessive criticism. This needs to be taken into account in future mobilization and local political participation. The data revealed that political leaders and officials who were supportive of EU programmes tend to have greater expectations on outcomes. However, they are likely to get disillusioned at a later date when things do not go as planned or do not move as fast as anticipated. Still the local leaders have in mind their re-election and this makes them develop more short-term objectives. As Elcock suggests “supporters may become frustrated at the apparent lack of progress in achieving the aims for which they campaigned and therefore become increasingly critical of what they believe to be backsliding or inertia on their leaders’ part” (Elcock, 2001, p. 143). EQUAL and previous EU programmes were attempts to move Megara Municipality away from a top-down policy-making authority towards one characterized by a bottom-up approach. By involving partner organizations and local people in the policymaking process, a communitarian network allowed other voices to be fed into policy. There are many constraints surrounding bottom-up implementation, but Megara attempted to put in place safeguards to remedy these. Fragmentation can frustrate the implementation of policies, as can lack of communication and coordination. Overcoming some of the obstacles was a recurrent problem for both politicians and officers alike. The attitudes and decisions of officials and politicians were aimed towards carrying out market research, responding to problems as they arose from the communities and the wider environment, and bringing about structural changes within very tight budgets. Inevitably the ability to draw down EU finance helped with this process, and EQUAL in particular allowed the authority to provide services it might otherwise not have been able to provide. Despite the aims of EQUAL there remains the problem of a very weak private sector. All EU programmes aimed at remedy-

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ing skills deficiencies are based on the view that local authorities work in collaboration with the private sector and NGOs, but the weak state of private sector activity makes this a difficult problem to correct. As a consequence of this limitation, no amount of funding of the workforce can ameliorate the difficulties encountered by having such a paucity of private investment. The findings suggested that another problem was the fact that partner organizations needed to develop their reticulist skills as well; this issue arose in many interviews. Not only did the lack of such skills lead to poor communication between organization leaders and those staffing the organizations, but also it altered the whole resource base levels of interaction and improved working relationships. One key finding to emerge from interviews with the officials was the notion that politicians would benefit from training in engagement with the former. When there is a change in political leadership it takes time to get the momentum going and this can frustrate efforts to work in partnership with other organizations as well as retard the sequencing and sustainability of activities. It was also revealed in interviews that local people still mistrust the use of initiatives such as EQUAL. They prefer to believe in any case that the EU will not support their efforts and the EQUAL programme did not contribute towards changing these views. In interviews with officials it was noted that in order to ensure a smooth transition between one political administration and another, the roles of officials could be reinforced and safeguarded within programmes such as EQUAL. When a new political administration gained office in 2002 it was noted that problems were created that had a direct impact on the programme process with the danger of Megara being banned. One key decision, that of setting up the LDCM, could be construed as a very effective mechanism to instigate reticulist thinking and a new organizational form. The LDCM that served


as a reticulist for managing the local network of related players undertook more reticulist roles in other projects adopted by the local government especially in coordinating partnerships between the public and the private sector and NGOs. The establishment of the LDCM combined political and administrative skills as well as key skills for managing networks and EU programmes. The EQUAL programme provided good evidence of Megara Municipality as a mature organization, to such an extent that the authority developed the capacity to work in partnership with a broad range of varied and different types of partner organizations. These partner organizations were located locally, nationally and internationally. EQUAL and previous EU programmes gave the opportunity for Megara Municipality to act as “an enabling authority” not only by stimulating the network of partners but by working in collaboration with other agencies. This meant that the Megara council decided to try changing its role from being a hierarchical provider of public services, to playing a central role in the development of communication and coordination network involving public, private and voluntary sector agencies. The role of the council therefore shifted from being a service provider to being an organization which secures the achievement of its goals by generating cooperative action by private businesses, labour unions and a wide range of other partners. Thus it could be said that the council has shifted from its traditional service provider role to developing as an enabler of new network management skills. The council had two advantages over other organizations in managing these networks: •

•

it had a wide range of functions compared to any other local player, meaning that it can draw on a wide range of knowledge and skills within its own staff; it also possessed a wide range of contacts with other organizations in the private, public and voluntary sector.

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It has also been found that Megara became a learning organization, very responsive to its communities. As well as commissioning research on local needs, it was able to further develop its own capacities, and encourage partner organizations to identify their own skills deficiencies. In this way the partners within the network were able to share resources more effectively. Megara was successful in responding to the local needs, in particular the needs of unemployed people. The authority had long experience in managing EU programmes for the unemployed, up until the involvement in EQUAL. However, despite the many successes of EQUAL in terms of building up the capacity of staff skills and developing strong networks, the programme was not very successful in fi nding jobs for the long-term unemployed. Interview data suggest that there was no deficiency on the part of Megara Municipality in identifying the problems of the unemployed, and the authority was congratulated on its forward thinking approach to this social problem. Issues beyond the control of Megara were responsible for the failure of this programme. However, though EQUAL did not achieve its aspirations, later programmes appear to be moving in a more positive direction. They may prove to be satisfying local needs more effectively than EQUAL.

L ES SO N S L E A R N E D F R O M EQ UA L At the outset, this case was focused on investigating the lessons learned from the participation of the Municipality of Megara in the EU initiative EQUAL, and the key questions were based on how well networked Megara had become as a result, and whether or not it had taken on the role as an “enabling authority”, effectively responding to the needs of the community which it serves.


Since 1980 the reforms of local government led to the need for better use of local resources. Reforms based on improving services allowed for the establishment of Local Development Companies. The European dimension of reform has been a significant element in Greece, and municipalities like Megara have benefited from EU funds for reducing disparities between richer and poorer regions. EQUAL was only one of a series of EU programmes. Megara had learned lessons over the years prior to the EQUAL programmes. Undoubtedly, involvement in previous programmes had helped them gain knowledge over the years and an in-depth analysis of the local dimension of the EQUAL programme added force to the argument. However, important as EQUAL was in allowing the authority to create new relationships and networks, overall it was not successful in improving employment opportunities. Other programmes had more success in remedying unemployment problems. As a result of EQUAL and both prior and subsequent programmes, Megara was able to take on a reticulist and enabling role, especially in establishing an arm’s length LDCM. This was the less bureaucratic and more flexible arm of the municipality. Despite some of the negatives of EQUAL, there were countless positives, and there were many lessons learnt from the experiences, but the overall fi nding from this research is that Megara Municipality had a capacity to stimulate and develop key networks and partnerships, thereby providing sustainable relationships for the future.

REFERENCES 2001 Greek Census. Benington, J. 1994. Local Democracy and the European Union. Commission for Local Democracy Research Report, no. 6. London, CLD Ltd.

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Corey, E.R. 1990. MBA Field Studies: A Guide to Students and Faculty. Harvard Business School. Crabtree, B.F. and Miller, W.L. 1992. Doing Qualitative Research. London, SAGE Publications. Chatzibasileiou, E. 2000. The formation and the consolidation of democratic polity 1974–1981, in History of the Hellenic Nation, vol. 16, Athens, Akadimaiki. Denzin, N.K. and Lincoln, Y.S. 1994. Handbook of Qualitative Research. Thousand Oaks CA, SAGE Publications. Derthick, M. 1972. New Towns in-Town: Why a Federal Program Failed. Washington DC, The Urban Institute. Elcock, H. 1991. Change and Decay. New York, Longman. Elcock, H. 2001. Political Leadership. Cheltenham, Edward Elgar. EU Resolution on Local Action for the Employment 7/4/00, COM2000. Flogaitis, S. 1981. Financial, political and administrative autonomy or the choices of the law 1080/1980. Administrative Reform, 67–84 (in Greek). Friend, J.K., Power, J.M., and Yewlett, C.J.L. 1974. Public Planning: The Inter-corporate Dimension. Tavistock Press. Geddes, M. 1997. Partnerships Against Poverty and Exclusion. Bristol Policy Press. George, S. and Bache, I. 2001. Politics in the EU. Oxford, Oxford University Press. Hirst, P. 1997. From Statism to Pluralism. London, UCL Press. Hlepas, N-K. 1994. The Multilevel Local Government: Theoretical Questions and Institutional Metamorphosis. Athens-Komotini, A.N. Sakkoulas (in Greek). Hlepas, N-K. 1999. Local Administration in Greece: The Dialectical Antagonism between Decentralisation and Local Government. AthensKomotini, A.N. Sakkoulas (in Greek). Hogwood, B. and Gunn, L. 1984. Policy Analysis for the Real World. Oxford University Press. Hoinville, G. and Jowell, R. 1983. Survey Research Practice. London, Heinemann Educational Books. Hood, C. 1995. Contemporary public management: a new global paradigm. Public Policy and Administration, 10(2): 104–117. Howard, K. and Sharpe, J.A. 1983. The Management of a Student Research Project. Aldershot, Gower.


Improvement and Development Agency 2001. Benchmark of the “ideal” local authority. Third edition, August. Available at: www. idea.gov.uk. Institute of Economics of Estonia 1997. Business and economy: “The public sector”, in The Institutes Working Paper Series, pp. 261– 269. Jankowitz, K. 1995. Business Research Projects, Second edition. London, Chapman and Hall. John, P. 2001. Local Governance in West Europe. SAGE Publications. John, P. and Cole, A. 2000. Political leadership in the new urban governance, in Pratchett, L. (ed.) Renewing Local Democracy: The Modernising Agenda in British Local Government. Frank Cass, pp. 98–115. Jones, R. 1999. The European Union as a promoter of public-private partnerships. International Journal of Public Private Partnerships, 1(3), Sheffield, Hallam Press. Lawton, A. and Rose, A. 1994. Organisation and Management in the Public Sector. London, Pitman Publishing. Leach, S., Stewart, J., and Walsh, K. 1994. The Changing Organization and Management of Local Government. London, The Macmillan Press. Loughlin, J. 1999. Regional and local democracy in the European Union. Committee of the Regions by John Loughlin, May 1999, Brussels. Maistros, P. 2000. The Institutions for Development in Local Government. Athens, Nea Synora-A. Libani (in Greek). Makridimitris, A. et al. 2000. “Decentralisation and Local Government”: Conclusions-Suggestions. Athens, Athens Academy (in Greek). Makridimitris, A. and Liverakos, P. 2000. Decentralisation and Local Government: The Apparent Need for Transformation of the Regional and Local Governments in Greece. Athens, Centre for Social and Economic Research. Mavrogordatos, G. 1998. Between Pitiokampti and Prokrousti: Pressure Groups in Modern Greece, Second edition. Athens, Odysseas (in Greek). Ministry of Interior, Public Administration and Decentralisation, January. Mouzelis, N. 1995. Greece in the twenty fi rst century: institutions and political culture, in Constas, D. and Stavrou, T. (eds) Greece

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Prepares for the Twenty First Century. Baltimore and London, Johns Hopkins University Press. OECD 2001. Local Partnerships for Better Governance. Paris, OECD Publications. Osborne, D. and Gaebler, T. 1992. Reinventing Government. New York, Addison-Wesley. Papadimitriou, G. 1986. The Local Government Electoral System and the Constitution. Athens-Komotini, A.N. Sakkoulas (in Greek). Papadimitriou, G. 1993. Local Government in Modern Democracy. AthensKomotini, A.N. Sakkoulas (in Greek). Parkinson, M. 1996. Partnership, entrepreneurialism or competition? Public Money and Management, 16(3), July–September, 1–7. Patton, M.Q. 1990. Qualitative Evaluation and Research Methods, Second edition. Newbury Park, CA, SAGE Publications. Pollitt, C. 1993. Managerialism and the Public Services. Oxford, Blackwell. Pratchett, L. 2000. Renewing Local Democracy The Modernising Agenda in British Local Government. Frank Cass, pp. 98–115. Pressman, J. and Wildavsky, A.V. 1973. Implementation. Berkeley, CA, University of California Press. Rhodes, R.A.W. 1997. Understanding Governance: Policy Networks, Governance, Reflexivity and Accountability. Buckingham, Open University Press. Rif kin, J. 1995. “The end of Work” translation in Greek (1996) Nea Synora – A.A. Livanis. Salet, W., Thornley, A., and Kreukels, A. (eds) 2003. Metropolitan Governance and Spatial Planning. Comparative Case Studies of European City-Regions. London, Spon Press, Taylor and Francis Group. Selltiz, D., Jahoda, M., Deutsch, M., and Cook, S.W. 1962. Research Methods in Social Relations, Second edition. New York, Holt, Rinehart & Winston. Slack, N., Chambers, S., Harland, C., and Harrison, A. 1995. Operations Management. Pitman Publishing, pp. 81–90. Southern, R. 2002. Understanding multi sector regeneration partnerships as a form of local governance. Local Government Studies, 28(2), summer. Taket, A. and White, L. 2000. Partnerships and Participation, Decision Making in the Multi-Agency Setting. Chichester, John Wiley.


Tomaney, J. 2001. Identity and politics: the regional government debate in North East England. Northern Economic Review, 31, spring/summer. Tsinisizelis, M. and Chryssochoou, D. 1996. Images of Greece and European integration: a case of uneasy interdependence. Synthesis: Review of Modern Greek Studies, 1(2), 22–33. Verma, G.K. and Beard, R.M. 1981. What is Educational Research? Perspectives on Techniques of Research. Aldershot, Gower. Yin, R.K. 2003. Case Study Research, Design and Methods, Third edition. London, SAGE Publications.

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CHAPTER 8

CHANGE MANAGEM ENT PROC ESS IN TH E C IT Y OF AM ERSFOORT Piet Severijnen and Job van de Bovenkamp Ba

INTRODUCTION Change in the public sector has been an issue in the Netherlands since the mid-1980s. Various external influences like budget cuts imposed by central government, new public management and the issue of the quality of services were important drivers in these developments. Other important influences that have placed local authorities before new challenges are developments in the use of new information technology and telecommunications instruments, changes in the demographic characteristics of the local population and in its relationship with local authorities, and changes in the social structure.


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In 1993 two Dutch local authority organizations (the cities of Delft and of Tilburg) were nominees for the worldwide prize for the best local government organization (the Bertelsmann prize). Local government reform in the Netherlands has never stopped since then, initiated both by individual municipalities as well as by central government. An important change is the shift that took place in March 2002 from a monistic to dualistic system of municipal government. This among other things means a reallocation of the power between the municipal council and the cabinet of mayor and aldermen, more attention for accountability and (possibly) elected mayors in 2006. All these developments (and those that take place worldwide) have some characteristics in common. In the first place, the main driver for the innovative restructuring of the organization and the development of new policy and citizens’ participation instruments were (and are) the continuous fi nancial strains these organizations face. In the second place, there is always a visionary leader initiating the change processes and the innovative developments. Also in some cases central government plays an important role. However, internationally, we see two different situations. In countries like the Netherlands and Germany municipalities are (to a certain degree) autonomous. This means that they have freedom to develop and experiment. In a country like England, however, local authorities are very much under the influence of decrees from central government. If we want to learn from developments in municipal organizations in other countries we should always be aware of differences in national and local settings, in culture, in administrative systems, in local government legislation, and in the relationship between local and central government.

CHANGE MANAGEMENT PROC ESS IN AMERSFOORT

LO CAL GOV ER N M EN T I N TH E NETHERLANDS The Netherlands is a kingdom with a population of about 16 million people, over 50% of whom live in the western part of the country, the so-called Randstad. This area encompasses the cities of Rotterdam, Den Haag, Amsterdam and Utrecht. The country is a decentralized state with three tiers of government: central government, provincial government (12 provinces) and local government (at the moment there are 478 local authorities). Central government has a representation at provincial level in the person of the commissioner of the queen and at local level in the person of the mayor. The most important task of the provinces is to control the local authorities. As such it, for example, sets the framework for urban and country planning.

The political organization of Dutch local government Although undergoing rapid changes, the political organization of Dutch municipalities still consists of three bodies: the local council, the mayor and the cabinet of mayor and aldermen. These bodies are supported by the administrative organization, which is led by the town clerk or chief executive officer.

The local council The highest responsibility lies with the local council. Every four years the inhabitants of the municipality elect their local council. Not only Dutch inhabitants are entitled to vote, but also those immigrants that have lived in the Netherlands for a period of at least five years and have a residence permit. Individuals having

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the nationality of one of the member states of the European Union are entitled to vote as soon as they take up residence in the Netherlands. The local council forms the policy committees for the various services from its members. In the committee meetings the policy proposals will be discussed before being decided upon in the full council. The number of councillors depends on the population size of the municipality. It varies between nine in a municipality with a population of 3000 and 45 in a municipality with more than 200 000 inhabitants. The meetings of the local council are open to the public.

The mayor In the Netherlands the mayor is appointed on behalf of the queen by the commissioner of the queen of the province in which the municipality is located. The mayor has a six year term of office (one of the proposals in the new legislation of the dualistic system is direct elections for the mayor as from 2006, however, at the time of writing there is a lot of opposition to this proposal). After this period he can be reappointed for another six year period.1 The mayor chairs the meetings of the local council and of the cabinet. Here he acts as an advisor.

The cabinet of mayor and aldermen Together with the aldermen the mayor forms the cabinet. The cabinet is responsible for the day-to-day political management of the municipality. This includes responsibility for the execution of the political decisions taken and legislation issued by central and provincial government and relevant for the municipality. 1

Of course when using the masculine form, we refer both to masculine and feminine persons.


The aldermen are councillors. They are chosen by their fellow elected members to take up this position. Also the number of aldermen depends on the population size of the municipality and can be up to six. Under the old monistic system, they keep the right to participate in the voting in the meetings of the local council. The political composition of the cabinet mirrors that of the local council. In small municipalities aldermen do their job on a part-time basis. In the larger municipalities it will be a fulltime job.

The administrative organization of Dutch local government The town clerk or CEO is the head of the administrative organization and is appointed by the local council after a normal (officers’) selection procedure. He forms the connection between the political and administrative organization. It is his responsibility to make sure that the administrative tasks are being dealt with on time, and that the services are being delivered up to the quality level agreed. He also supports the cabinet of mayor and aldermen. As such he attends all the cabinet meetings and together with the mayor signs all the decisions taken by the cabinet. The traditional administrative organization of local authorities in the Netherlands consisted of the town clerks’ department and services directorates. The former used to be responsible for the preparation of the political decision making and the latter for the execution of the decisions and the rendering of services. In the early 1980s many local authorities in the Netherlands experimented with new organizational structures and models. As we saw above, the main reasons for this were the budget cuts enforced upon the authorities by central government. These reforms changed the traditional town clerk–directorates model into a corporate model. The service directorates were now

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responsible for both the preparation as well as the execution of the political decisions. Also management responsibilities changed. Managers were made responsible for both the use of the resources and the results (products and services). In this new setting, the chief executives’ department (now corporate department) is responsible for the coordination and controlling of the resources and in some cases for the direct rendering of public services (e.g. one-stop shops). The vast amount of products, production processes and service activities (Dutch local authorities provide about 250 different products and services) makes it impossible for politicians to occupy themselves with every detail. To function efficiently they must be able to concentrate on the major issues (“the what”) and leave the day-to-day worries (“the how”) to the organization. This means that the elected members and the various organizational (management) levels must be in agreement about the quality of the products and services to be delivered and the resources available to do so. This is achieved by applying the principles of contract management.

City council

Cabinet of mayor and aldermen CEO

Department for maintenance and environment

Department for well-being, education and social security

Fire department

Corporate department

Department for city development and housing

Department for social benefit

Police department

Figure 8.1 Until about 2000 this was a possible corporate structure of a Dutch local authority


Tasks of Dutch local authorities In the Netherlands local authorities have to respect the laws and regulations set by the two superior levels of government: provincial and central. This means that local authorities are being supervised by provincial and central government. However, in reality this supervision has a very low profi le. In certain situations municipalities are autonomous and can function independently of laws, rules and regulations set by these higher levels of government. Second, municipalities have semi-autonomous authority for the implementation of central and/or provincial governmental decisions and regulations with respect to education, culture, housing, social welfare, town planning and physical infrastructure. Thus it is safe to say that Dutch local authorities have a relatively high degree of autonomy when it comes to providing services and products. However, with respect to finances we see a different picture: contrary to other Western European countries (for example, Germany), Dutch local authorities depend for more than 75% on central government grants for their financial resources. A large part of the central government grants is allocated to the execution of specific services, mostly to education and social welfare.

From a monistic to a dualistic Dutch local government system Until March 2002 local authorities in the Netherlands functioned according to the monistic system. In this system, the local council had the ultimate decision-making power. The cabinet of mayor and aldermen was to be seen as an extension of the local council, a sort of committee.

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The legislation “dualistic municipal government” became effective on 7 March 2002. In the dualistic system a clear distinction is made between the roles, the position and the powers of the local council and those of the cabinet of mayor and aldermen. The council will have a more independent position in relation to the cabinet, which will make it possible for the council to exercise control over the cabinet. This should lead to a better visibility of local government and to a reinforcement of its political character. The cabinet is responsible for the handling of municipal affairs, administrative powers contained in the Municipality Act and the decrees that delegate power to local government. In fact this formalizes the situation that has been practice during the last decades. In this way the local council can concentrate on its role as a representative body and as scrutinizer of the policy decisions and actions of the cabinet. The councillors have been allocated instruments to perform these tasks. Thus it can set a framework for policy development and decisions. It can also check the implementation of this policy with all the powers of scrutiny at its disposal. However, in this situation aldermen, after having been chosen and having taken up office, can no longer remain members of the local council. Thus the local council is better able to maintain its independent position and independent control. The council can also appoint a chairman from among its members. Furthermore aldermen can be recruited from outside the council (that is, not being elected members). This makes it possible to appoint people with required specialist expertise. It also makes the work of the aldermen more professional. The new legislation also has consequences for the mayor. Besides the plans to have elected mayors from 2006 on, he or she should be given a more important role in guiding and leading the governmental processes and in acting as an intermediary between the cabinet, the local council and the local population.


One instrument the mayor uses to exercise this role is the socalled “Citizens annual report”. In this report the mayor expresses the plans and targets for the year to come and gives an account of the achievements in the forgoing year. Also by legislation the cabinet has to commission investigations into the efficiency and effectiveness of the performance of the local authority’s organizational units and tasks. In the old situation the CEO or town clerk supported both the local council as well as the cabinet of mayor and aldermen. Now under the dualistic system the competences of the cabinet and the local council have been separated, the latter has its own administrative support. This function is carried out by the socalled “griffier”, the council secretariat. It is his job to assist the local council and the committees in the execution of their tasks. He is present in the council meetings and co-signs the minutes. As such the “griffier” performs the function of the town clerk during the meetings of the local council. His tasks can vary from administrative to taking care of processes or issues concerning content.

THE CITY OF AMERSFOORT The city of Amersfoort The city of Amersfoort is centrally located in the Netherlands. With a population of 133 000, it has witnessed an accelerated growth in recent years. This is mainly caused by the construction of new dwellings. The population is expected to grow to 160 000 by the year 2010. In the period 2000–2004 Amersfoort saw an increase of employment of about 7%. Sixty-five thousand employees work in over 6600 companies and organizations. Most of these are concerned with the rendering of services. The unemployment

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rate is about 6%. The population of Amersfoort in general has a high education. Three out of 10 of the adult population have an education at university or polytechnic level. Income level in Amersfoort is 10% higher than the Dutch average. The liberal party holds the majority in the local council.

The municipal organization2 The municipal organization of Amersfoort consists of a political and an administrative organization. As we will see below, the way in which the administrative organization executes its tasks is different from most of the other Dutch municipalities.

The political organization The political organization of Amersfoort consists of the three bodies described above: the local council, the mayor and the cabinet of mayor and aldermen. Having a population size of more than 130 000, the local council of Amersfoort consists of 39 elected members, representing a total of seven different political parties. The cabinet consists of the mayor and six aldermen (representing four parties). It mirrors the political composition of the local council. Each of these aldermen has political responsibility for a number of products and services and also has a special focus on one or more of the local districts.

2

Most of this information was taken from the Amersfoort internet site www. amersfoort.nl.


The administrative organization As from 1 January 1997 the local authority organization of Amersfoort consists of three sectors. Each of these administers a part of the municipal tasks as independently as possible. Focus is on the coordination of the execution of the policy measures. The first task of these sectors is to formulate the basic postulations and the frameworks within which the programmes need to be executed. As much as possible, the actual execution is being commissioned to external parties on a contract base. To achieve this, tasks of internal departments have been outsourced. Also public– private partnerships and collaborations with various organizations are being used for the execution of municipal tasks. Consequently Amersfoort has the smallest number of staff members per 1000 inhabitants in comparison with other Dutch municipalities. When it comes to the execution of its tasks, the sectors are to a very large degree independent. To take care of the necessary intersector fine-tuning and coordination, the directors meet on a regular base with the CEO and the municipal controller. Together they form the Central Management Team. This Central Management Team is supported by a small corporate staff of about 50 staff members. Together they guarantee the cohesion of

City Council secretariat Cabinet of mayor and aldermen

CEO

Corporate staff

The sector Municipal Development and Maintenance

The sector Wellbeing, Social Security and Education

The sector Services, Information and Advice

Figure 8.2 The basic organizational structure of the Amersfoort Municipality – the sector’s tasks

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the municipal policy. One of the responsibilities of the corporate staff is to develop and prepare (strategic) policy for the municipality as a whole. The municipality of Amersfoort has various tasks to administer. This is done by the sectors SOB, WSO and DIA, and the corporate department. The sector Municipal Development and Maintenance (SOB) is mainly responsible for economic development, town and country planning, municipal maintenance and care for green areas. But also the development of inner city districts, environment, housing, land development company, monuments and archaeology fall under the responsibility of this directorate. The sector Wellbeing, Social Security and Education (WSO) takes care of issues related to well-being, culture, social security, education, child care, health care, sport, labour market policy, asylum policy, youth and elderly people. The sector Services, Information and Advice (DIA) is in general responsible for rendering of services and delivery of products to the public and the quality thereof (this sector provides travel documents; registers lifetime events like births, marriages and deaths; receives the payment of local taxes; carries out policy research and collects local statistics). The corporate staff occupies itself with strategic planning for the municipal organization as a whole, with respect to personnel, municipal budget, communication and democratic participation. The council secretariat supports the local council, the committees and its elected members. The job consists of: supplying the information to the elected members to carry out the tasks; supporting the elected members with their preparation of the meetings; taking responsibility for the processes and procedures of decision making; preparing the meetings and the minutes.


H O W T O S U C C E S S F U L LY R E S T R U C T U R E A N I N T E R N A L D E PA R T M E N T The case of Amersfoort describes the process of a successful organizational restructuring and change management of an internal department, the so-called “bedrijfsbureau” – the department for operational management. The “bedrijfsbureau” is responsible for the internal administration, fi nancial controlling and management support of the sector for Municipal Development and Maintenance (SOB).3 Tasks include information and automation, procurement, administrative organization, bookkeeping, planning and control, and advice with respect to the economic conduct of business. In 1997 the manager of the “bedrijfsbureau” joined the municipality of Amersfoort. Although a new organizational structure had just been put in place and good results in terms of support regarding the use of resources and the conduct of business had been achieved, there was still room for improvement. The department consisted of a number of small units, each minding its own business. There was no common direction and no uniform strategy for the department. “People were apathetic, exhausted and they lacked the power and the spirit to do their work.”4 There was a lack of common and central direction with respect to conduct of business. A major change was needed. A number of vulnerable positions had to be disposed of. Also the capabilities of the staff members should be better made use of. However, a major budget cut of c150 000 was the immediate reason to take a critical look 3

In Amersfoort two of the organizational sectors have their own “bedrijfsbureau”, which is responsible for the internal administration of the sector. This administration is linked to the corporate administration, in order to guarantee organization-wide coordination and uniform documentation. 4 Quotes from an interview with Job van de Bovenkamp in the magazine Pentascope Magazine, December 2003.

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at both the effectiveness and efficiency of the internal processes of the department. The budget cut was to be realized in three years (2004–2006). On the one hand, by participating in ad hoc projects (c75 000) and on the other hand, by improving procedures, work processes, etc. one working place could be disposed of (another c75 000). The conduct of business had to be looked at critically and a new way of internal cooperation had to be explored. In recent years a discussion has taken place whether in organizational development one should concentrate on content or one should pay more attention to the processes. The first approach can be characterized as concentrating on the hard facts (the traditional way), while in the latter (also called systemic thinking) the soft facts play a central role. The approach in this case initially was very much focused on soft facts of management. The basic idea behind the process was that “structure follows culture”. However, as we will see in the description of the case below, also the hard facts approach played an important role.

THE CHANGE PROCESS AND THE D E PA R T M E N T R E O R G A N I Z AT I O N The philosophy behind the change process was twofold: •

5

The conviction that under the surface, people very often have immense possibilities. All that is needed is to discover these possibilities, make them visible and support the people to develop them.5

Here we see a similarity with the systemic approach. In this approach there is a focus on so-called soft facts. An organization, a person, is an open system. An intervention in the system will have an internal effect and consequently external reactions which cannot be predicted. Working according to the systemic method means focusing on the processes in an organization and giving support to the people to deal with and solve their problems themselves.


•

The basic idea that structure follows culture. Realizing a cultural change would automatically lead to a new organizational structure.

The initiative for the change process was taken by the responsible department manager. After discussing his plans with the sector director, he was given a free hand to start up the process. This in spite of the fact, as we shall see later on, that the sector director was in favour of a different approach. The fact that neither the CEO nor a politically responsible alderman was involved highlights the fact that in Dutch local authority organizations responsibilities are delegated to a lower management level.

Table 8.1 Phase 1 Milestone 2

Milestone

3

The change management process Period

Activity

March–August Research and 2003 analysis June 2003 Report of the research and analysis phase September Activities plan for 2003 follow-up November Proposal for new 2003 organizational structure December Proposal for reduction 2003 of job descriptions March 2004 Presentation of integrated proposal for new organisation March/April/ Personnel selection May phase

Milestone

June 2004

4

1 September 2004

Proposal for new way of working together Implementation

Actors Responsible manager External consultant

Responsible manager External consultants

Departmental manager HR consultant Union representative

Management team of the new department

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In this process the dolphin was chosen as the symbol. The dolphin stands for fresh, intelligent, a strong capability for cooperation, excellent listener and patient, a fountain of inspiration, energy and power, aimed at results and enjoying every splash, and flexible in making use of all possibilities and chances. The change process can be divided into the following four main phases.

Phase 1: Research and analysis In this period of research and analysis, during which the change manager was supported by an external consultant, three issues were dealt with: •

•

•

Culture: In spite of coming from a similar background the staff members of the department represented four or five different strands of culture. These had to be brought together. To achieve this, four workshops were organized. In these workshops the participants were triggered and invited to change their way of conduct. Communication: The whole group of around 30 persons who were involved were given instruments to improve their communication competences. An important issue was: “how to make use of each others’ qualities?” This is all about attitude, behaviour, and capabilities. Work process analysis: An analysis of content of work processes of the department was carried out. Here the central question was: are there points for improvement and, if so, where?

Since this approach was based on the principle that structure should follow culture, space was created to let a change emerge from within the people themselves. For this reason a very open


process was chosen. Nothing in the process was predetermined: change without a blueprint. This involved a lot of improvisation and at the same time was also pretty risky. There were moments when there was insecurity about the future and proceedings. The first two issues were tackled in four workshops. For the third issue a different track was followed, focusing on daily work processes.

The workshops: culture and communication The objective of the workshops was to discover new ways of working together, using unconventional methods for example cartoons. The participants were offered methods to deal with working relationships in an effective way, to map and discuss their own and their colleagues’ qualities. This resulted in a collective dream. Participants learned to look at each other in a different way. At the core of the collaboration is a relationship focused way of working. People now are acquainted with each others’ qualities. A foundation for change has been created. For the first workshop, titled “Do not be afraid to dream”, only the topic had been communicated. There was an obvious resistance caused by an uneasy feeling of wanting to control everything. The tension faded away when participants were asked to depict their personal dreams. Especially the creation of a collective dream generated energy. Here the participants were invited to draw an image, a picture of what the conduct of business of the sector SOB should look like. The second workshop, titled “A different look”, which took place in the local zoo, was already much more relaxed. Through photos of topics such as flexibility, customer orientation and cooperation the participants shared their different impressions. The employees were invited to consult with each other with respect to their “chain problems”. The results were astonishing.

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People only need an opportunity to be able to express their ideas freely to arrive at results. The third workshop, titled “Managing relations”, focused on (working) relations and team roles. The final workshop, titled “Consent and dialogue”, focused on networking. Here both tracks came together. The process workshops had already generated concrete suggestions for improvements. During the fourth workshop the participants’ personal qualities were explored and matched these with the suggestions for improvements (from the work processes analysis). This was based on “consent”, meaning: “we come to an agreement unless there are serious objections”.

Unfortunately this last workshop had too much of an open ending. It took place just before the summer holiday and participants were left with rather a lot of uncertainties about the follow-up. Consequently we were afraid that the momentum of the project would fade away. ( Job van de Bovenkamp)

Summing up, the four workshops resulted in an attitude which proved to be vital for people to be able to work together fruitfully: • •

• •

a collective dream was built which created a common direction for all the staff members of the department; people acquired a different way of looking at their own and at their colleagues’ work, which had a positive effect on the work of the department; awareness was created that, in cooperation with others, meant relations between people played a central role; participants acquired an insight into their own and each others’ individual qualities.


The work processes analysis In order to fi nd possibilities for improving the internal processes and procedures, an analysis of the work processes was made. The participants mapped the supporting processes and looked for improvements. This resulted in the following three process chains: • • •

administrative support; management information and operational steering/control; issuing of rules, setting of structures, clear covenants.

The staff members themselves worked out their own position and the connection between the processes. The bottlenecks in the processes were singled out, which led to a number of suggestions for improvement. The activities this phase resulted in a report, drafted by the consultancy agency, that accompanied this part of the process. Included in this report was an activity plan for the further process.

Phase 2: Towards a new organizational structure of the department for operational management The activity plan focused on the intention to continue to concentrate the work on the cultural elements. However, often concentrating on soft facts alone is not enough to achieve good results. To be successful in everyday life, we also need to look at the hard facts, the content. This is especially true in (semi-) crisis situations. The department in our case study needed to be restructured in order to be able to work efficiently and effectively and to realize budget cuts. Concentrating on and sticking to working on soft facts would have meant a sure, but very slow process. So in September 2003 the director of the sector intervened and

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City council Council secretariat Cabinet of mayor and Aldermen

CEO

Corporate staff

The sector Municipal Development and Maintenance

Operational management

Planning, Control and Advice (PCA)

Spatial development

Information, Service and Advice (IS&A)

The sector Wellbeing, Social Security and Education

The sector Services, Information and Advice

Economic development

Municipal maintenance

Registration and Accountability (R&V)

Figure 8.3 The place of the department for “Operational Management” within the Amersfoort municipal organization

changed the planned process. In his opinion a priority should be given to the development of the structure, though not enough attention was paid to the kind of people involved. The change manager was dealing with people, whose everyday work consisted of looking for securities and dealing with business processes. Therefore it would be wrong to leave the staff members in uncertainty for too long. Also here the differences in opinion between the director (more a hard facts person) and the manager (focusing on the soft facts) were brought to the surface. The former expressed his belief that with this process the intended new organizational structure would never become a reality. He did not want to keep the staff members in insecurity for three years; consequently he intervened in the process. The change manager wanted to let this emerge from the process and the resulting culture.


In November and December 2003 two new developments were presented to the staff members. These met with confl icting reactions: •

•

On the one hand, the proposal to restructure the many small organizational units into one department got a very positive response. To deal with possible opposition, the so-called consent methodology was used: if someone had fundamental objections, he or she had to communicate these. However, the person doing so was also obliged to play an active role in finding a solution. Decisions were not forced upon the people involved, neither was there extensive discussion about decisions. This proposal was accepted by the staff members. A second change, however, caused much more turmoil and met with a lot of opposition. This was the plan to reduce the number of job descriptions from 24 to five.

Based on the five job descriptions the individual work tasks for the staff members were described in detail. This description formed the basis for the remuneration system. With the individual staff members targets were agreed using the SMART (specific, measurable, acceptable, relevant, time-based) principles. This step was very much a top-down decision (again an intervention by the sector’s director). It is not always feasible to do as much as possible together in order to create a common ground. There will be a moment when clear decisions will have to be taken, when somebody will have to say: “This is the way in which we will do it.” This turned out to be the best way to deal with the opposition. This second phase was completed in March 2004 with an integrated proposal for the new organizational structure.

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Phase 3: The new organization and reallocation of the staff members In the new departmental organizational structure the following three working units were created. Each of these consists of about 10 officers: •

•

•

the unit for Planning, Control and Advise (PCA) – this unit will advise the total sector, will develop the control function and occupy itself with division-wide and specific subjects, and will set the rules and guidelines; the unit for Information, Service and Advise (IS&A) – this unit will have a permanent staff to support the main department with the supply of information and giving advice. The officers of this unit fall under the responsibility of the unit manager, but their workplaces are physically located close to their clients, being the internal colleagues they provide the services for; the unit for Registration and Accountability (R&V) – this unit will be responsible for support and administration.

At the start of this phase there was clarity about the new organizational structure and the job descriptions. Now the staff members needed to be matched to the new situation. In the period between March 2004 and July 2004 more than half of the about 30 staff members switched to another position in the new departmental organization. Applying the principle of job rotation, in three years’ time another group will change position. The way in which this was done was unique since the people were not obliged to accept a certain position. They were asked to voice their preference for a position, not for a work package. Early March 2004 all the staff members were asked to name two positions (in order of priority) they were interested in, as well as their preference for one of the three organizational units.


Our change manager carried out the selection interviews himself together with the human resources manager and a union representative. This all went very smoothly. There were no objections to the decisions taken and these activities resulted in a job reallocation plan. Here we could speak of a victory for the departmental change manager. However, there was one complication: the three future unit managers, who had also been part of the change management project team, obviously had their personal preferences for the persons they wanted to be their future staff members. Here our change manager experienced some moments of insecurity and uncertainty. However, also this issue was solved by the director of the sector. He gave the change manager sole responsibility for the allocation of officers and the assignment of the three unit heads was left to the last possible moment. From this the change manager learned two things. The fi rst one is that he had underestimated the staff members’ capabilities to see where the process was leading to. The idea of the process was to pave the way for a change of culture and consequently a change of structure. The participants, however, failed to see this. The second one is closely linked to this fi rst one: when in a process of change one realizes that the people concerned fail to see the horizon, then do not leave them in uncertainty about the plans for the future (that is, about the new organizational structure, about their new job descriptions, about their personal workplace) for too long.

Phase 4: The implementation In phase four the implementation took place. Here the two strands, culture and structure, came together. Although the process had not actually evolved the way in which our change

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manager had envisioned, undoubtedly the individual phases have influenced each other. By September 2004, the old department for resources and the individual internal management support functions which were part of the other departments in the sector had been eliminated. The new department for internal management support has started its work. The new working units have been organized, and the staff members have taken up their new positions. The new department is much more a single organizational unit. This means that officers can substitute one another and are more flexible. For the clients it is important that there will always be somebody they can address. In the new structure it is much easier to exchange knowledge and experience. This will lead to better expertise and work results. Also tasks will be organized much more efficiently and it will be possible to work in project groups. Most of the 30 staff members are positive and enthusiastic about the outcomes. In the fall of 2004 the process was officially closed with festivities. Also the budget cuts that were enforced upon the department are being achieved. Important in this respect has been the role of the responsible change manager. He had a vision about the way in which the change process of the department should proceed. He was not afraid to embark on an unconventional journey. As we saw earlier, the basic philosophy in this process was: structure follows culture. In this process he continuously involved all the persons concerned in a bottom-up way. This made the process a learning exercise for all involved. Herein lies the strength of the first part of the process. However, he also listened to the advice of his sector director, when the latter pointed out the risks involved in leaving the staff members in insecurity too long. Looking at previous experience with organizational change in other local authorities the change manager concludes:


Nowadays I spend much more time and effort in getting closer to the people, to make them see that they are themselves responsible. In Delft (my previous authority) I was much more supporting and helping other people. Here I listen, I am constantly looking for the link between process and content and one’s own responsibility herein. This is a basic difference. It is not about the final results, but about the process: how do we achieve this result.

APPEN D IX: B R I EF OV ERV I EW O F R ESPONSIBILITI ES OF TH E MAIN ACTORS, AC T I V E I N DUTC H LO CAL GOV ER N M EN T The local council is responsible for all the policy issues of the municipality. The council controls the execution of political measures, determines the principles and the framework and allocates the resources. The cabinet of mayor and aldermen has the final responsibility for the general governing and management of directorates/major service departments. Takes care of the political coordination and strategic planning as far as content is concerned. Reports to the local council. The aldermen are responsible for the products and services and for the resources of one or more special policy areas. The alderman takes responsibility for the policy measures related to a service and for the resources involved (the work plans). Changes in policy and in use of resources should be decided upon in the cabinet. The service directors are responsible for the agreements with the cabinet. They have integrated responsibility for the preparation and the execution of policy and are accountable to the cabinet, using management reports, the financial account, etc.

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They are also responsible for the coordination with the other service directors and with the cabinet and the individual aldermen. The heads of the units develop the work plan for the unit and settle the agreement in this respect with their director. They have “integrated” management responsibilities which have been transferred to them by their director. They are accountable to their director (by feedback, unit reports, fi nancial accounts, etc.). Heads of units are responsible for the coordination with the other directors (directly or indirectly). They are responsible for the coordination with the alderman and the director.

CHAPTER 9

MIL AN MUN I C I PALIT Y AN D TH E GOVERNAN C E OF MUN I C I PAL ENTERPR ISES Daniela Cristofoli and Francesco Longo

INTRODUCTION With a city numbering 1 350 000 inhabitants, Milan Municipality is one of the most important local governments in Italy. It employs more than 18 000 people and administers around c14 billion every year. Five hundred and fourteen million euros relates to the share capital of the companies that Milan Municipality owns. Taking the municipal companies into consideration, Milan Municipality employs some 50 000 people overall. Since the early twentieth century, Milan Municipality has provided its citizens with a wide range of public services: e.g. gas, water, power, waste management, mass transit and welfare services. Strategic Change Management in the Public Sector. Edited by F. Longo & D. Cristofoli Copyright © 2007 John Wiley & Sons, Ltd.

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Up until the 1990s, Milan Municipality provided each of these services on its own or through agencies it completely controlled, the so-called “aziende municipalizzate”. These were public organizations, with limited autonomy in their strategies and their operations: they were a spin-off from Milan Municipality. Then, during the 1990s, the Italian public sector was involved in a reform process: the aim was to introduce managerial practices in the ways public organizations operated. Most of the agencies providing public services were transformed into joint-stock companies and private partners were involved as minority shareholders. Some companies were also listed on the stock exchange. Milan Municipality became a holding organization controlling many companies and agencies. This required that Milan Municipality employed new instruments to control the activity of its subsidiaries and agencies: the aim was to ensure that these companies and agencies continued providing services that would satisfy public needs.

PROV I D I N G M I L AN ’S C I T IZ EN S W I TH P U B L I C S E R V I C E S : M I L A N M U N I C I PA L I T Y A N D T H E M U N I C I PA L C O M PA N I E S In early 2004, Milan Municipality was providing its citizens with different services: i.e. gas and power, waste management, urban and suburban mass transit, water, sport, catering services for kindergartens and schools, local markets, etc. These services can be divided into two groups: utilities and welfare and cultural services. Milan Municipality chose the same instrument to provide both categories of services: joint-stock companies. In order to implement public sector reform Milan Municipality took a managerial approach in the way of providing public services whatever their nature was.

G OV E R N A N C E O F M U N I C I PA L E N T E R P R I S E S

Also the municipal companies can be divided into two groups: on one side, we have the companies producing high revenues for Milan, those providing gas and power being typical examples of this category. On the other side, we have the companies providing welfare and cultural services, such as sport, culture, etc.: they are not bound by market forces. These companies come from a three step process: the existing “aziende municipalizzate” were transformed into joint-stock companies; other joint-stock companies were set up to provide the public services that Milan Municipality had previously provided on its own; some foundations were also set up, as, for example, the “Fondazione La Scala”. At the moment, Milan Municipality is part owner of 10 companies owning varying percentages of their stock. Below is a description the relationships these companies have with Milan Municipality, and Figure 9.1 shows the structure of the group which it heads. AEM SpA is the company providing Milan with its gas and power. It is one of Milan Municipality’s most important companies, making a profit of some c170 million in 2004. Set up in 1910, at its outset AEM was an agency of Milan Municipality and did not have its own legal status, and only had limited autonomy for managing its business operations. Its top managers were appointed by Milan Municipality, often chosen to reflect the power balance among different political parties. In 1996 AEM was transformed into a joint-stock company, becoming autonomous as a legal entity and gaining extensive independence for strategies and management. Milan Municipality, as the local government body having to ensure that Milan’s population received gas and power, was its only shareholder. Since then, Milan Municipality’s relationship with AEM has gradually altered: it was regulated by corporate governance rules and by purchaser–provider contracts. In 1998 Milan Municipality decided to list 49% of AEM’s shares on the stock exchange, and now Milan owns less than the 30%. Selling the first

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tranche of AEM shares brought over c700 million into Milan’s coffers. AMSA SpA is the company in charge of providing waste management services. Like AEM, AMSA was set up as an “azienda municipalizzata”. In the 1990s it was transformed into a joint-stock company: Milan Municipality is the only shareholder. AMSA has a turnover of around c270 million annually. ATM SpA provides Milan’s mass transit services. Set up by Milan Municipality in 1917 and transformed into a jointstock company in 2001. It has a turnover is around c270 million per year. In 1995 a company was set up to manage Milan’s underground rail network: MM SpA, of which Milan Municipality has total ownership. As of 2003, MM was also put in charge by Milan Municipality of providing the water service. Milan’s two airports are managed by another joint-stock company: SEA SpA, which was set up in 1984. Milan Municipality owns 84.56%, with only 0.045% in private hands. Other local governments of the Lombardy region own the remaining shares. SOGEMI SpA was set up to manage the wholesale and local markets and, like the other companies, it similarly was transformed into a joint-stock company in the 1990s. It has a yearly turnover of around c14 million. Milano Ristorazione SpA and Milano Sport SpA were set up as joint-stock companies to provide the catering and sports services previously ensured by Milan Municipality. Both Milano Ristorazione and Milano Sport were set up when Milan Municipality was involved in public sector reform. Milano Ristorazione provides catering services to the city kindergartens and schools, delivering about 80 000 meals every day. Milano Sport manages the sport facilities and offers the possibility to attend sport courses at low prices. Milan Municipality owns just under 100% of both companies’ capital.


Milano Mare manages the highway linking Milan to Genoa, and Milan Municipality only has an 18% stake in the company. AFM SpA is the company managing the municipal pharmacies. In 2002 Milan Municipality decided to privatize its pharmacies, transferring them into the hands of a foreign pharmaceutical company and receiving more than c200 million in return. Milan Municipality currently owns just 20% of AFM’s share capital. Recently, however, this sale of AFM SpA to the foreign pharmaceutical company was overturned by a judiciary court because of the potential confl ict of interest the company may have in both producing and marketing drugs. This means that Milan Municipality will have to reimburse the pharmaceutical company with the amount paid. Most of the Municipal companies are also holdings controlling other companies. This makes Milan Municipality a holding of other holdings. The more the distance between Milan Municipality and the companies providing public services increases, the more difficult it becomes to have control over the public service provision.

MILAN MUNICIPALITY SOGEMI SpA 99.97%

AEM SpA 50.997%

MI RISTORAZIONE SpA 99%

AMSA SpA 100%

MILANO SPORT SpA 99.87%

ATM SpA 100%

MILANO MARE SpA 18.60%

MM SpA 100%

AFM SpA 20%

SEA SpA 84.56%

Figure 9.1 The most important municipal companies providing public services

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E N S U R I N G T H E S AT I S F A C T I O N O F P U B L I C NEEDS: INSTRUMENTS FOR CONTROLLING M U N I C I PA L C O M PA N I E S Milan Municipality has implemented a complex system for controlling the operations of the companies it owns, consisting of four instruments: (1) corporate governance rules, (2) economic and financial controls, (3) purchaser–provider contracts, (4) customer satisfaction surveys. This system involves different departments in Milan Municipality: i.e. the political and legislative bodies, the “Finance and Balance” department, the departments in charge of individual services (“Line Office”), the “Plan and Control” department with its two units (the “Quality Control and Customer Satisfaction” and the “Municipal Companies” units). The corporate governance rules allow Milan Municipality to act as shareholder. Having appointed company boards, Milan Municipality can direct and control the company’s activity: it can determine the overall direction of the company, also overseeing and controlling the executive actions of management. The appointment of the company boards involves all the most important political bodies: i.e. the city council, the office of the mayor and the mayor. The city council has a twofold task: first, it establishes the criteria for appointing the members of the company boards and, second, it appoints a commission made up of five members. With the help of the office of the mayor, this commission evaluates the applications for the role of company administrator, while the mayor appoints the municipality’s representatives at each company. In the end the appointment of Milan Municipality’s representatives on the company boards relies strongly on the relationship of trust between the mayor and the appointed administrators. The economic and financial controls aim to monitor and evaluate the contribution of the municipal companies to Milan Munici-


pality’s economic balance. This is a task for the “Finance and Balance” department in Milan Municipality and is divided into two units. The former is in charge of implementing the contracting out policy while the latter has responsibility for auditing the finances of the municipal companies. This department manages the financial relationships between the holding and its controlled companies. In detail, it: •

•

•

•

receives the fi nancial statements from the individual municipal companies, integrating them with those of Milan Municipality; negotiates the dividend amount with the boards of the municipal companies. The aim is to reconcile the municipality’s investment needs with the investment needs of the companies; evaluates and approves the payments for the services provided by the municipal companies, in order to check that targets are met. Each “Line Office” helps in this effort; analyses the results of the customer satisfaction surveys, with the help of the “Quality Control and Customer Satisfaction” unit.

The purchaser–provider contracts aim to define ex ante what Milan Municipality expects from its companies in terms of the quality and the quantity of the services provided. It also establishes the price the municipality has to pay for the services provided. It is a task for the different departments dealing with individual services (the so-called Line Office) to define and manage these contracts. Each office has to: •

•

prepare the purchaser–provider contracts and debate their content with the “Municipal Companies” and the “Finance and Balance” departments; check compliance with the standards set out in the purchaser–provider contracts;

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• •

•

check that invoices issued by the municipal companies are correct; plan the surveys to monitor customer satisfaction, and then analyse the results together with the “Quality Control” and the “Municipal Companies” units; analyse the reports drawn up by the municipal companies together with the “Municipal Companies” unit.

To find out how satisfied Milan’s citizens are, the municipality set up a customer satisfaction system. It is the responsibility of a unit in the “Plan and Control” department to manage this system. The “Quality Control and Customer Satisfaction” unit develops the plan for collecting data about customer satisfaction. The “Line Offices” and the “Municipal Companies” unit help in this effort. The unit then analyses the results of the survey together with the pertinent “Line Office”. The aim is to identify unexpressed needs and to monitor customer satisfaction. All these instruments to control the municipal company have a contact point in another unit of the “Plan and Control” department: the “Municipal Companies” unit. Its aim is to collect all the data available about the various aspects of the different companies: economic and fi nance control, compliance with the purchaser–provider contracts and customer satisfaction. Milan Municipality’s control system has a double dimension: it can be categorized according to its objects or to the service controlled. It is a task for the “Municipal Companies” department to unify both these aspects. In this respect, the “Municipality-owned Companies” department has to: •

define contents, times and targets for the company reports dealing with the strategy implemented, the economic results, the costs of the services provided, the efficiency and effectiveness of the services provided, the compliance with that set out in the purchaser–provider contracts, etc. Collaboration from the company management is paramount;


• • •

•

•

analyse the results of each report. Collaboration from the specific “Line Office” is important; draw up reports dealing with the activity of the municipal companies for the “Plan and Control” office; standardize, adopt and review the purchaser–provider contracts (this means also identifying the qualitative and quantitative standard for each service). The help of the specific “Line Office” and “Finance and Control” department is important in this effort; approve the purchaser–provider contracts, in collaboration with the specific “Line Office” and the “Finance and Control” department; define the plan for the customer satisfaction surveys and analyse their results, together with the “Quality Control and Customer Satisfaction” unit and with the specific “Line Office”.

The full control system is shown in Figure 9.2. This system extends to the relationships between Milan Municipality and

MUNICIPAL COMPANIES UNIT

Managing the invoices

Financial report and cash flow

Controlling financial management of the subsidiaries

FINANCE AND BALANCE DEPARTMENT

Defining the standards for the purchaser–provider contracts

LINE OFFICE

Managing the provider–purchaser contract

MUNICIPAL COMPANIES

Defining customer satisfaction standards

QUALITY CONTROL UNIT

Mapping customer needs and customer satisfaction

Providing services

CUSTOMERS

Figure 9.2 The set of instruments for controlling the activity of the municipal companies

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each of its companies. Milan Municipality seems to have been successful in interpreting its new role: not rowing but steering. It also seems able to monitor each side of its companies’ operations, acting as shareholder, as buyer and as local government.

C O N T R O L L I N G T H E M U N I C I PA L C O M PA N I E S : W H AT I S M I L A N M U N I C I PA L I T Y ’ S O U T L O O K ? The case of Milan Municipality can be considered as one of the most evident examples of the new role municipalities are expected to play in providing public services. The industry of public services is going towards liberalization and privatization and more and more frequently municipalities are deciding to contract out or to contract in their services. Thus, municipalities have to play new roles: they have to manage and control the activity of an increasing number of autonomous companies. They have to employ and develop new instruments. In this specific case, two challenges seem to be affecting Milan Municipality. The first challenge deals with the alteration of the relationships between Milan Municipality and the companies providing public services. While Milan Municipality seems to be employing ever more specialized and autonomous companies for providing services, it also seems involved in the tendency to privatize (it privatized AFM SpA and sold more than 51% of AEM SpA shares on the stock market). The second challenge deals with Milan Municipality’s ability to direct and control its companies’ operations. Strategically and operationally, the municipal companies are becoming increasingly independent (this is often necessary to enable these companies to operate properly in the market). On the other hand, the system for controlling the municipal enterprises set up by Milan Munici-


pality seems to involve too many departments and too many tasks which often overlap. This gives rise to various questions: Is the control system set up by Milan Municipality actually able to keep its companies’ operations under control? Is Milan Municipality able to collate all this information, or does the information disappear in the end? Is Milan Municipality actually able to control its companies’ operations, or is this control ineffectual? Is the relationship of trust between the mayor and the appointed administrators able to govern the provision of public services? In this latter case, how can Milan Municipality’s control system be improved? Does a solution exist? Milan Municipality was aware of the complexity of the system set up for managing its companies. In order to rationalize it, at the end of the 2004 Milan Municipality decided to abolish the “Municipal Companies” department, putting the “Finance and Balance” department in charge of monitoring and controlling the entire system and the “Personnel Department” in charge of monitoring customer satisfaction. Milan Municipality seems to focus on economic and financial control, whereas its ability to act as purchaser seems to be weak. Was this the better solution? If Milan Municipality is not able to properly direct and control the companies providing public services will it still be possible to argue that it should pursue its contracting in, contracting out and privatization policy? What is the result of the contracting-out policy? Is there a loss or an improvement of democratic control?

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CHAPTER 10

MANAGING BARC ELONA’S OLYMPI C H ERITAGE Lidia García, Francesc Rubio, Koldo Echebarria and Alfred Vernis

INTRODUCTION During an international congress, representatives of Madrid and Barcelona each presented their municipal sports policies. One major difference between them attracted considerable attention: Madrid managed its sports facilities through its own staff of civil servants, which numbered some 2000, while Barcelona’s facilities were indirectly managed through contracting-out arrangements with a sizeable network of associations and private non-profit or for-profit organizations. One of the congress delegates noted the difference and observed, “I always thought Madrid was governed by the right wing and Barcelona by the left”.


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What has become known as the “Barcelona model” of sports facility management is not the result of a recent decision but the reflection of a city tradition. The only new aspect of the model is that since Barcelona was named the site of the 1992 Olympic Games the number of sports facilities managed by external contractors has registered a tremendous increase. Between 1982 and 1992 more than 50 000 million pesetas in public funds were invested in municipal sports facilities (hereafter referred to as MSFs). The entire process of constructing and indirectly managing sports facilities took place in the midst of major changes in municipal management. The start of a drive in 1985 decentralized powers to the city’s 10 districts, which began taking charge of the MSFs in their particular neighbourhoods. Around that same time the city council began introducing a management-oriented approach to municipal government: “management centres” were set up to handle similar areas of services. They had a certain autonomy in terms of financial management and performance was measured on the basis of results. By the beginning of 1992 the struggle to reduce municipal debt had forced the city council to opt for an efficiency-based approach. The Sports Area responded by attempting to make its operations self-financing in so far as possible.

S P O R T S A S S O C I AT I O N S A N D T H E O LY M P I C G A M E S Barcelona has a long tradition of associationism, which in the field of sports alone translates to 1100 organizations of a variety of types. This interest in sports dates back to the beginning of the century when members of the public began forming clubs and associations. The municipal government became timidly involved in the 1930s, constructing a few facilities. But the city

M A N A G I N G B A R C E L O N A ’ S O LY M P I C H E R I T A G E

council recognized its inexperience in managing these facilities, some of which were managed by sports associations or federations under the control of a municipal officer. In 1979 the first democratically elected government owned approximately 100 MSFs, one-fourth of which were already indirectly managed. The advent of democracy went hand-in-hand with an increase in sports activity, which coincided with economic and social changes. Sports began to be viewed as a life quality variable. This meant that there was more pressure on the city council to provide facilities and, as a result, investments in sports facilities steadily increased. It was at this time that the city council began playing a really active role, becoming one of the leading financiers of sports facilities while continuing to collaborate closely with the network of local associations. In 1986 Barcelona was named the site of the 1992 Olympic Games. This made it necessary to build a wide variety of facilities for both popular and more esoteric sports. The city not only invested in the spectacular Olympic stadiums able to host large international events, but also fi nanced a plethora of more modest facilities aimed at encouraging public participation in sports activities, and introduced a policy aimed to equip public schools with appropriate sports facilities. With the increased supply of sports facilities came an increased public interest in sports. Barcelona now has one of Spain’s highest percentages of citizens who engage in some sports activity: 54% of the population between the ages of 15 and 59 regularly do some sport and the number of participants in municipally organized sports events is close to 200 000 a year. Privately owned facilities have also registered an increase in the number of users and consequently the supply of such facilities has increased, service has improved, and a considerable number of facilities have been built. As a result there are now more than 600 sports facilities in Barcelona, 60% of which are private and 40% publicly owned.

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Of these latter, almost 95% are municipally owned (the others belong to the provincial or regional governments). The MSFs coexist on the local market with private sports facilities which offer similar services, particularly swimming and tennis clubs, some of which are more than 100 years old, small and medium businesses operating in the high growth field of fitness, and an increasing number of facilities for indoor leagues, which attract a large number of players. The private sector, and particularly the owners of small and medium-sized facilities, have accused the city council of unfair competition, arguing that the public sector should limit itself to building the infrastructures the private sector is unable to provide. However, in the opinion of Francesc Rubio, the city council’s sports manager, “the public and private sectors need to live together and try to find ways to coexist so that both sectors can develop in peace. This is not easy.” Albert Batlle, the municipal councillor for sports argues that “we cannot divide the market by applying a criterion whereby the private sector handles everything that is profitable and the public sector takes care of the rest. We have to shape a consensus so that each sector has its own space. That’s why I propose to ask the private sector to approve the local government plan for future sports facilities.”

C O N T R A C T I N G O U T: A M O D E L F O R M A N AG I N G S P O R T S FAC I L I T I ES When the fi rst democratically elected city council took office in 1979, indirectly managed MSFs (25%) were operated as their managers saw fit. The city council did not have specific accounts for individual facilities, nor did it have performance monitoring


systems, or any kind of formal agreement or contract to govern relations with its contracted organizations. This initial situation became more and more complex as the number and size of sports facilities increased. The time had come to seriously rethink management policy. The municipal officers in charge at the time decided, as Francesc Rubio put it, to “do nothing to recover management of facilities which for years had been run by different clubs. On the contrary, they suggested that sports associations once again take responsibility for managing a public good which is part of a public service. The idea was to replace a de facto arrangement with a more formal version, with contracts between the owner, or city council, and its contracted agencies.” As Francesc Rubio pointed out, opting for indirect management “is the consequence of the way sports and the relationship between the local government and sports associations have evolved throughout history. The main issue here is not choosing between public or private management but finding ways to guarantee continued public ownership of the service and facilities, promote sports, make them accessible to the general public.” This type of management must also give priority to making the facilities profitable on three levels: as sports facilities, as a social service and as a financial investment. At first some factions of the left wing political spectrum objected to the idea of indirect management, interpreting it as a step towards privatization. Nowadays, however, the model is widely accepted. According to Albert Batlle, “no one, either liberal or conservative, has proposed an alternative. Any objections we get have to do with isolated changes in the terms governing specific facilities, such as the amount of fees to be paid by the managing organizations.” One of the first moves towards normalizing the situation was the passage of the Sports Facilities Municipal Act, approved in

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1981 and revised in 1991. This law, together with the Spanish Local Government Act and the Municipal and Local Government Act of Catalonia are the legal framework for managing sports facilities in Barcelona. The contractual relationship Municipal sports facilities are divided into business units. Every business unit consists of one or more facilities whose proximity or other characteristics are such that they can be managed by a single unit, thereby economising on operating costs. Business units can be very complex: an example would be a unit consisting of an athletics track, a soccer field, two indoor facilities (each with an indoor running track and several muscle-building and fitness rooms), an indoor swimming pool, an outdoor swimming pool and a small golf course. At the other end of the scale are business units that consist solely of a soccer field used purely for training and competition. The duration of the contracts depends on the investment to be made by the managing organization, the estimated time necessary to recoup the investment and the facility’s theoretical economic potential. Contracts are awarded in public competition and bids are assessed on four grounds: the improvement of sports services outlined in the tender conditions, the proposed investment, the possibility of increasing the fee paid to the city council, and the actual management plan. The principal terms of current MSF management contracts are: •

•

the municipal government retains ownership of the facility and its services, and this must be communicated by the facility’s signs and advertising; the contract establishes a basic programme of sports activities;


• • • • • • • •

•

• • •

the facility shall be open to all citizens, subject only to payment of the admission fee; the managing organization shall pay the city council an annual fee; this fee shall be partly fi xed and partly variable and shall amount to an established percentage of operating revenue; part of the variable fee can be reduced in accordance with investments made by the managing organization; admission fees must be approved by the competent municipal authority; the city council and the managing organization shall keep separate operating accounts for MSFs; between 5 and 15% of operating accounts shall be allocated to promoting sports; the operating account will include an additional 4% which will be paid to the managing organization so long as the facility breaks even; accounts shall be kept in accordance with Spanish Accounting Standards and audited accounts shall be presented annually; a percentage of any surplus earnings shall be divided equally between the city council and the managing organization; control measures are established to ensure transparency (compulsory annual audits); failure to comply with the terms of the contract shall be punished by fines ranging between c25 000 and c1 500 000. In the event of serious offences the contract will be rescinded.

Monitoring and assessment MSFs are monitored and assessed by a follow-up committee and a management committee. The Follow-up Committee meets

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twice a year and is made up of municipal representatives (area and district), representatives of the management organization, representatives of user groups and other neighbourhood organizations (chiefly local residents’ associations). The committee’s general responsibilities include ensuring that the terms of the contract are met and more specifically involve approving annual accounts and planning the next fi nancial year, designing a user schedule and a programme of activities, and proposing admission fees and annual investments. The management committee consists of one representative of the municipal district or area and the manager of the individual sports facility and is in charge of monitoring day-to-day activities and handling all management-related issues. Contract terms specify that management committee meetings are to be held quarterly although their frequency actually depends on the needs of the individual facility. MSF managers explained that “in addition to management committee meetings, we also meet frequently with the city council sports officer. We don’t wait for management committee meetings to discuss all the issues involved” and “usually the management committee meets monthly, but that depends pretty much on what the two members decide”. The tools used so far to monitor and assess the contract arrangement are user satisfaction surveys, annual audits and monthly measurement of a series of indicators. User satisfaction surveys are voluntary and carried out annually or biannually only by facilities with large billings and a considerable number of users. Survey results are submitted to the city council’s Sports Area. As of 1992, contract terms include the obligation to present audited annual accounts but the audits are purely fi nancial, although in facilities of this type it is also important to measure performance from the standpoint of the facility’s contribution to the neighbourhood society and to encourage sports activities.


In order to make up for this shortcoming in the auditing procedure, the Sports Area designed an indicator sheet to be fi lled in quarterly by all MSFs. However, according to Francesc Rubio, “we still need assessment tools. We have some indicators, among them a list of services that includes the number of individual and group users, the number of hours the facility is in use and so on, but we need to perfect the measurement system.” For example, there is no information about the types of people who use the different facilities, which makes it “hard to know if we are actually meeting our political priorities”. The Area is currently working on a permanent information system, but as of yet no agreement has been reached on exactly which indicators would best describe SMF management performance. In addition, the Area has two other problems. First, it is not easy to collect information. Every management organization has its own system for gathering operations and management information. Some of these systems are very complete and highly automated (for example, computer-controlled user access), while others are extremely simple. As Francesc Rubio explained, “we only set the indicators that interest us. After that, the management organizations can use whatever kind of information system they prefer. It would have been different had there been an appropriate tool for everyone. But it is not only hard to design one, it is also hard to get people to accept it.” Faced with such a variety of information systems, the Sports Area has opted to send quarterly indicator sheets to all MSFs, but not all the facilities take the trouble to fi ll them in and return them. Second, although available information is limited and incomplete, Francesc Rubio reported that “we have not yet been able to analyse a lot of the information we have. Because we are still in charge of monitoring and following up all the municipally owned facilities, we just don’t have the time.”

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SPORTS AREA, DISTRICTS AND M A N A G E M E N T O R G A N I Z AT I O N S The Sports Area plays a double role: it manages facilities and also coordinates municipal sports policy. Francesc Rubio explaines that facilities managed by Area headquarters have tremendous potential in terms of both sports and revenue, and this caused the Sports Area’s general strategy to take a back seat to the needs for managing “its” facilities. Area action is more suited to a new district than to an agency in charge of strategy management. Of the 124 management units, 25 reported to the Area and five of these were still managed directly. Moreover, the Sports Area designs and directly runs campaigns to promote sports activities for school children, senior citizens, the handicapped, and so on, all of which were carried out in all the MSFs. The Area was also in charge of organizing all city-wide sports events involving mass public participation or top fl ight competition, even when they were privately organized. The Area had 35 employees who were in charge of these tasks, in addition to the personnel employed by the city council’s directly managed facilities. The organisation chart was as shown in Figure 10.1. The city council’s decentralization process got under way in 1985 and involved gradually turning over the task of managing “neighbourhood” sports facilities to the districts. By 1997 80% of the MSFs were district managed. When the decentralization process first got under way, the districts had no experience in managing sports facilities and no personnel with any background in the field. This made it very difficult for them to take on this new responsibility. It was not until 1993 that the job of district sports officer was introduced and the different districts were able to set up a special system for managing sports.


Director

Staff

Facility Operating Unit

Administration Management and Service Information Service

Public Works and Construction Service

Sports Promotion Unit

Promotion Service

School Sports Service

Sports Events Service

Figure 10.1 Organization chart

Even though all 10 districts now have their sports officers, the relations between the Sports Area and the districts is sometimes ambiguous. The decentralization process is not yet complete and in some cases it is not clear who is responsible for what. As Manuel Ibern, Advisor to the city councillor for Sports explained, “a lot of things promoted by the area are never really accepted by the districts because they are viewed as impositions from outside”. On some occasions, the general criteria established by the Area have been ignored by the districts. One example of this was the case in which a district councillor proposed approving a management contract that did not include payment of fees to the city council, simply disregarding the Area advising against this move.

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However, MSFs generally perceive their relations with the different districts (or the Area, when it acts as a district) as quite good. One facility manager described them as “there are points that have to be discussed with the district and the Area, but I never leave the bargaining table without having reached an agreement”. Nevertheless there is some criticism of municipal management. One of the main objections has to do with the fees to charged by the city council. Some managers felt that “the city council’s new system of public tenders imposes very high fees on the management organizations. This and other conditions encourage a short-term approach to management. If a management organization has to earn returns just a few years after making its initial investment and paying the fee, it is unlikely to invest much in maintaining the facility.” Some of the management organizations have also criticized the city council for “interventionist behaviour”. Some managers report that “so long as relations are good that’s not a problem, but the wording can be interpreted as the council’s and that becomes a sword of Damocles hanging over us”. Francesc Rubio feels that municipal intervention should be seen simply as keeping tabs on the facility: “and this is necessary because the fi nal responsibility for any action undertaken by the management organization is always the city council’s”. In addition, he pointed out, “we need to take a more interventionist stance and exercise tighter controls in order to defi ne policies and influence the service delivered”. Lastly, some of the contracted organizations expressed concern that decentralization might cause management criteria to differ from one district to the next. They feel that “the Sports Area should establish clear city-wide criteria so that we are not faced with different approaches in different districts, as we are now. There should be some central agency that defines criteria.”


T Y P E S O F M A N A G E M E N T O R G A N I Z AT I O N S : SELECTED EXAMPLES The city council’s relations with management organizations are governed by contract terms and by coordination mechanisms designed to facilitate monitoring and assessment. The Sports Area is attempting to introduce standard management practices for all contracted agencies but, as Francesc Rubio explained: “They are so diverse that this is a problem. Every facility is different and introducing standard terms would mean including things that would be all right for some facilities and not so good for others.” The five examples set out below give a good idea of this diversity.

Polideportivo Claró The Polideportivo Claró is run by the Fundación Claró, a cooperative association set up in 1979 to manage a school. The school had its own sports facility which was also used by the entire neighbourhood. In 1987 the city council announced plans to remodel and enlarge the facility, occupying adjacent property and turning the whole thing into an MSF. The city council and the cooperative split the cost of buying the property and making the enlargement. In 1991 a special contract was signed, whereby the cooperative would manage the facility but be exempt from paying fees to the city council until 2020 (i.e. for 50 years) because its investment had been so large. The members therefore set up the Fundación Claró, to which the cooperative ceded not only its assets but also its ideology. As the facility manager stated, “We want our management to be based not so much on economic efficiency but on promoting the social aspects of the facility: ensuring that sports for school and community are a right, not a privilege. That’s why the users themselves

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participate in management through three elected representations to the Board of Trustees”. The Board of Trustees also includes a city council representative who “hardly ever comes”. In accordance with the Fundación’s ideology, users of the facility are essentially neighbourhood residents, particularly families with children.

Banys de Sant Sebastià This MSF is managed by the Club Natació Atletic Barceloneta. According to its manager, the swimming club aims to “promote swimming and water polo at all levels. We are interested in competition: our teams are well-ranked in all categories, from children to veterans. The club is located on property owned by the Port of Barcelona.” The agreement signed with the city council is valid until 2025 and stipulates that the facility should be managed by associations located in the Barceloneta neighbourhood. Construction was financed by the city council, the Port of Barcelona and the neighbourhood associations that were willing and able to invest. Because the required investment was high, only the two largest neighbourhood associations opted to participate. Both of them had a long tradition in the neighbourhood, having been in operation since the 1920s and were fierce competitors in the sports arena. When remodelling was completed in 1991, the city council masterminded a merger between the two clubs and awarded the management contract to the resulting organization, without issuing a public call for tenders. Due to the special terms of the arrangement, the club’s managers pay no fee to the city council. The members include a large number of “fans” who do not use the facilities very much but actively support the club and are closely identified with the team colours.


Piscina Bernat Picornell The site of the Olympic swimming competitions, these pools are managed by SEAE, a company specialized in services related to water sports and physical fitness. The manager described its aim as “making the facility as profitable as possible because that will benefit both us and the Sports Area. The higher our revenue, the higher the fees we pay the city council and the more they pay us for managing the pool.” The facility is located in the Olympic complex and after the 1992 Games it had to be adapted for public use rather than competition. The management contract was awarded to a company with experience in sports facilities, the ability to take charge of the adaptation and no links to any particular neighbourhood. Today users come from practically all parts of the city.

Can Caralleu Until 1996 Can Caralleu was directly managed by the Barcelona city council. The management contract was then awarded to an association made up of the Centre Excursionista de Catalunya, the Universitat Ramon Llull and the Fundació Claror. The consortium presented a plan to remodel the existing facilities during 1999 and then go on to construct two multi-use athlethic tracks, three paddle tennis courts, a gymnasium, two fitness rooms, three indoor swimming pools and parking facilities, all of which were to be completed by June 2001. However, the traditional user organizations, particularly the C.P. Sarrià, with its 10 football teams, opposed the idea on the grounds that the new arrangement might limit their use of the facility. Lluís Rivas, vice-president of C.P. Sarrià, criticized the city council of “privatizing the only public sports facilities in the district”. In his opinion, “the city

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council will not invest because it happens to be in Sarrià”, one of the city’s wealthiest districts.

T H E A D VA N TA G E S O F I N DI R EC T MANAGEM ENT In 1995 the city council commissioned the university to audit a number of directly and indirectly managed facilities. The findings indicated that indirect management translated to improved efficiency and greater incentives to promote sports activity and make the fullest possible use of the facilities. In Francesc Rubio’s opinion, indirect management “not only responds to a socio-political objective of collaborating with the city’s many associations, it also has advantages in terms of management itself, which takes a variety of forms and involves a variety of criteria”. Moreover, indirectly managed facilities are able to more easily renew and adapt to the public’s new demands; there is competition between the various facilities and they tend to diversify their services, etc. The study carried out by the university revealed that users ranked their global satisfaction as 7.8 on a scale of 10. Quality of facilities (maintenance and cleanliness) is the most important factor in determining user satisfaction and the people surveyed said that they would be willing to pay higher admission fees in exchange for better facilities. Moreover, in the 1996 survey on quality of life in Barcelona, 62% of the people interviewed said that they were quite or very pleased with the city’s sports facilities. At the same time a municipal survey made in 1989 revealed that the public was largely unaware of who actually owned the indirectly managed municipal facilities. Private


citizens view management as synonymous with ownership. The 1991 regulations on contracting out therefore included a section on the use of image, stipulating that “any type of signage either in the interior or the exterior of the facility must conform to municipal standards and shall in all cases expressly indicate that the facility is municipally owned”. Another advantage is increased efficiency. The 124 management units now in operation are run by a staff of 80 : 35 in the city council’s Sports Area, one specialist in each of the 10 municipal districts, and 35 employees who work as maintenance personnel and doorkeepers at the nine facilities directly managed by the city council. Manuel Ibern stated that “indirect management means much greater efficiency. It gives the facilities flexibility in scheduling classes; they can hire people on part-time contracts for the summer high season, and so on. This would be impossible if we had a bureaucratic culture.” Additionally, indirect management also means that contracted organizations can make a financial contribution because some of the facilities are profitable. The Sports Area’s overall budget is more than 90% self-financed. Moreover, indirectly managed MSFs create jobs for about 800 people. However, as Albert Serra, top manager of personal services, pointed out, “as they are not on staff, we don’t know much about them”. According to the regulations on contracting out, MSFs should inform the city council about all new employees, but they don’t always bother to do so. A particularly thorny problem is what happens to personnel when a management organization’s contract with the city council expires. As a rule, all the people employed by the former management organization lose their jobs and the new organization brings in its own personnel. However, there has already been one case in which the employees of a former management organization took their case to court and won.

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A P P E N D I X 1 : B A R C E L O N A C I T Y C O U N C I L C H A R T: E X E C U T I V E O R G A N I Z AT I O N CENTRAL BODIES OF GOVERNMENT

EXECUTIVE COMMITTEE

AUTONOMOUS AGENCIES

Municipal agencies: - administrative - commercial, financial - industrial or similar

MUNICIPAL COMPANIES

AREAS

TERRITORIAL AREAS

FUNCTIONAL AREAS

GENERAL SERVICES

WELFARE

MAINTENANCE TRAFFIC AND AND PUBLIC TRANSPORT FACILITIES

- Executive managers - Service managers - Units, departments, services, etc

10 DISTRICTS

URBAN PLANNING

Welfare

Technical services

Legal advisor

Administrator

A P P E N D I X 2 : B A R C E L O N A C I T Y C O U N C I L C H A R T: P O L I T I C A L O R G A N I Z AT I O N P L E N A R Y C O U N C I L D I S T R I C T S

PLENARY COUNCIL Mayor

(Executive) Council

DISTRICTS

Board of Spokespersons

District Councils A District Councillor

Executive Council

District President

Vice-President

Plenary Council Commissions

Lieutenant Mayors

Councillors: - President Plenary Council - Area Commissioners - District Councillors

Public Revenue and Infrastructures (1)

Security, Traffic and Transportation

Social Welfare and Education

“Friendly City” and Youth Affairs Comm

Employment and Economic Promotion

Land and Housing Policy

Trade and Consumer Affairs

Urban Planning

Environment and Urban Services

Internal Affairs and Cultural Policy

Executive Council (1) Acts as Special Audit Commission

Area Commissions

Civic Participation Institutional Relations and Sports Public Health Housing Culture Civil Service and Quality Youth and Women’s Affairs Traffic and Transport Sustainable City Civil Rights Education and Tourism

C H A P T E R 11

MANAGEM ENT BY R ESULTS. ITS WAY FROM I DEA TO DOGMA IN TH E CASE OF SWEDEN Göran Sundström

INTRODUCTION This case deals with the origin and development of Management by Results (MBR) in the Swedish state. This steering model is an interesting object of study because it contains ideas and technologies often pointed out as key features in New Public Management (NPM). At the same time it has been a central component in Swedish public sector reform policy during the last 25 years. Today the model is meant to permeate the Swedish state administration. MBR is also an interesting object of study, since there are different stories in Sweden, among both scholars and practitioners, regarding how this steering model has evolved. On the one Strategic Change Management in the Public Sector. Edited by F. Longo & D. Cristofoli Copyright © 2007 John Wiley & Sons, Ltd.

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hand, there are those who claim that MBR is a modern and efficient way of controlling the public sector, and that the steering model has continuously improved over the years. On the other hand, there are those who claim that many of the methods and techniques that are used today have been tried before with only limited success and that responsible actors (the government and the agencies responsible for developing the steering model) have been unable or unwilling to learn from experiences. This raises a number of questions: • •

•

When was MBR introduced in the Swedish state? How can the learning process be characterized – has the model been developed and adjusted on the basis of experiences of how it works in practice? If the learning process has failed, how can we understand this?

The case in large part consists of document studies, collected mainly from agencies that have been responsible for developing, implementing, and evaluating the steering model. A large number of policy documents, investigations, government bills, experimental work, evaluations, publications have been scrutinized. These studies have been complemented by some 40 interviews. The interviewees have been strategically chosen and embrace both bureaucrats (top level and lower) and politicians.1 The chapter is divided into three sections. This first one, in which I also offer my interpretations of MBR, is followed by a section where I outline a descriptive and chronological story

1

This chapter is part of a larger study, which is only available in Swedish: (Sundström, 2003). At a number of points in this chapter I will draw conclusions from empirical material reported in the larger study but not in this chapter.

M A N A G E M E N T B Y R E S U LT S

about how MBR has evolved in the Swedish state. In a third section I summarize the story and discuss its implications.

W H AT I S M A N A G E M E N T B Y R E S U LT S ? It is not at all clear what MBR is. There seems to be almost as many ways of describing the model as there are analysts. Here, I will offer my interpretation of it – that is the Swedish version – based on how it is regulated in present law texts and how it has been discussed in different documents published by responsible actors. MBR embraces two main ideas: one is about delegation, the other is about information. According to the first, politicians should leave “smaller” decisions and decisions of a more administrative character, concerning an agency’s localization, internal organization, staffing (recruiting, wages, education, and so on), to the individual agency. Such delegation is said to have two positive effects. First, it will unload the politicians and the ministries so that they can devote their precious time to politics, which in this case is considered as formulating goals and guidelines for the administration and following up results. Second, the delegation will increase the creativity and efficiency among the agencies since they more freely can choose means to fulfi l their assignments. The second idea is about what scholars sometimes refer to as rationalistic policy analysis. Here, the idea is that agencies can be steered and controlled better using a certain kind of information flow. This flow is characterized by its circulating form and its intensity. In certain budget documents the politicians should “order”, from each agency, both activities (through formulation of objectives and results requirements) and information about attained results (through formulation of reporting back

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requirements). The objectives should aim at both performances and effects, and each should be related to an appropriation. Each agency is to be given several objectives, aiming at activities deep down in the organization. Further, the objectives should be as precise as possible; they should be SMART (Specific, Measurable, Accepted, Realistic, and Time specified). The agencies, in their turn, are to report back their performances as well as the costs and the effects of each performance. On the basis of this information they should also make proposals regarding their own future activities. This information should in a final step be aggregated at the ministerial level and form a base for new objectives and results requirements. These ideas and methods reveal that MBR rests upon (at least) five basic assumptions, of both an ontological and epistemological kind. A first assumption, and perhaps the most important, is that individual administrative units at a rather low level are able to map out the causal connection between their own performances and the effects of these performances, and that they also can estimate the costs of these performances and effects. A second assumption is that each unit is willing, devoid of value judgements, to currently report information to higher administrative units, and on to the government, about their own results, and also to make impartial proposals regarding the direction and fi nancing of their own future activities. A third basic assumption is that information about results from lower levels can be aggregated at higher levels and made the base for new decisions on goals, results requirements, and resource distribution. A fourth assumption is that politicians are both able and willing to specify goals and results requirements, and that the goals can be deconstructed into more well-defined goals in a hierarchic chain going deep down in each individual administrative organ. A fi fth assumption, finally, is that the public sector can be divided into two relatively clear-cut and stable spheres: one political and one non-political or administrative.


M A N A G E M E N T B Y R E S U LT S I N S W E D E N : THE STORY The Rationalization Commission of 1956 This story begins in the mid 1950s. In 1956 the Social Democratic government, and in practice the Ministry of Finance, initiated an ad hoc commission, the Rationalization Commission, to meet an old and gradually growing discontent with, as the critics put it, the state administration’s rigid and inefficient way of working. The agencies responsible for developing and evaluating what we today would call public management policy became a main target. They were criticized as being too finicking and too narrow minded, unable to adopt broader views on questions regarding how to organize and regulate state activities to make them more efficient. However, the government had really no basic ideas regarding a point of departure when reforming the policy area. As a result, the directives guiding the work of the commission became rather vague. Despite the generous space given to the commission, it submitted a most defensive proposal when it finished its work in 1959. This can be explained by the way the commission was put together. It was fi lled with bureaucrats from the agencies to be examined and reformed. This produced a deadlock (Nybom, 1980). The commissioners spent most of their time defending and motivating the existence of their own organizations. The result was a proposal without any interesting and pioneering ideas. According to the commission the best thing to do was basically to let the policy area remain as it was (SOU, 1959: 22). But this was not what the Minister of Finance wanted to hear; he needed a more bold reform proposal to silence the critics (Nybom, 1980). Such a proposal was also available. One of the commissioners, Ivar Löfqvist, objected to the commission’s proposal, and instead

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he wrote his own. This proposal was more audacious and implied that the four former agencies within the policy area should be reduced to two. These two agencies were to become rather small and professional, with far-reaching autonomy. Using the latest management methods and techniques they were to work on a broad scale focusing on questions about steering, controlling, and organizing state activities. One of the agencies, RRV (the National Audit Office), was to focus on control activities, not least the development of modern auditing methods. The other agency, Statskontoret, was to focus on organizational questions. Statskontoret was the only agency of the former four to survive if Löfqvist’s proposal was realized. Worth noticing is that Löfqvist himself was acting director-general of Statskontoret and at the same time the administrative head of the Ministry of Finance. Occupying all these positions he had an exceptionally good insight into the reform process, and he knew well the demands and wishes of all important actors. The Ministry of Finance and its Budget Department, which handled the question, took a liking to Löfqvist’s proposal and wrote a government bill on the basis of it (prop. 1960: 126). Holding the pen was the head of the Budget Department, Lars Lindmark, who in just a few years was to become the directorgeneral of RRV. According to the bill, RRV was to become the central audit office. However, it wasn’t to work with auditing only but also with more general questions about steering, planning, organizing and controlling state activities. Many of these questions were very close to questions assigned to Statskontoret. Further, both agencies were encouraged to spread their knowledge among state agencies by informing and educating. RRV and Statskontoret were also to be closely arranged in organizational terms. Thus, the director-general of RRV was placed on the board of Statskontoret, while the director-general of Statskontoret was placed on the board of RRV. At the same time the head of the Budget Department was placed on the board of Statskontoret,


which was a unique arrangement at the time (Nybom, 1980). It was explicitly pronounced that these institutional arrangements were to facilitate cooperation and coordination between the two agencies and the Budget Department. Thus, one central feature of the government bill was the ideas of integration, cooperation and coordination. Another was the extensive freedom of action given to the two new agencies. The bill contained only vague directives and recommendations regarding the agencies’ working methods and their internal organization. For instance, the boundaries of RRV’s non-auditing activities weren’t discussed at all. To a large extent the agencies had to decide for themselves how to achieve the far-reaching efficiency reforms and economy measures coveted and demanded.

The arrival of Program Budgeting When the two agencies started their work in 1961, expectations were high. But after just a few years it became clear that the great plans were about to go to pieces. The activities of RRV and Statskontoret had not changed to any appreciable extent compared to the agencies shut down just a few years earlier; methods and techniques for steering and control remained very much the same. In the spring of 1963 the situation became critical; if new ideas and perspectives were not soon introduced to guide the agencies in their daily work, the agencies could become utterly questioned (Nybom, 1980). At this moment Statskontoret got wind of a new steering model used in the USA, called Program Budgeting, and soon it started to investigate and promote this steering model. In November 1963 Statskontoret wrote a request to the Minister of Finance asking for permission to continue and extend the investigation, but now together with RRV (SOU, 1967: 11). In its request Statskontoret declared that the investigation probably would be

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of great concern for the whole state and that it would touch upon a number of questions of a fundamental character. This was also why Statskontoret felt obligated to ask for permission to continue its investigation (SOU, 1967: 11, p. 10). On 13 December 1963 the Minister of Finance approved, on behalf of the government, Statskontoret’s request and presented the directives of the Program Budget Commission. But it should be noted that the request wasn’t fully met. The commission was only allowed to examine the conditions of introducing the new steering model on the agency level (in the request the whole state and the ministries had been included). The Program Budget Commission was to be arranged in an unusual way. Formally, it was a regular ad hoc state commission. However, just as Statskontoret had requested, the assignment went directly to Statskontoret, which was to cooperate with RRV. This way of arranging a commission inside a state agency was most unusual. The commission was to be supervised by a group of experts. The director-general of Statskontoret, Ivar Löfqvist, became the chairman and the director-general of RRV became the vice-chairman of this group. The head of the Budget Department, Lars Lindmark, was also assigned together with Lars-Ivar Ivarsson, who was the one who originally had called Statskontoret’s attention to Program Budgeting. These men were accompanied by two professors of management and business economics. However, the actual work was to be done by a small working group located inside Statskontoret. This group was led by Sven-Ivar Ivarsson. The Program Budgeting Commission presented its final report in 1967 (SOU, 1967: 11–13). According to the commission, a general problem at the time was represented by difficulties to make out the exact cost of specific public services and products. How much payment did the state have to demand from the taxpayers to cover the costs of a visit to the state-owned Royal Opera, an education at a state-owned university, a soldier,


a police arrest, and so on? Further, the budget documents contain information neither about why a certain agency received a certain amount of money, nor about what the agency did with the money. Short of this kind of information the politicians were unable, the commissioners argued, to steer state activities towards desirable objectives and to efficiently organize the administration and distribute resources among its different parts (SOU, 1967: 13). To improve the situation they argued for a new way of controlling state activities, and here Program Budgeting was seen as a solution. They declared that the steering model was an import from the US, but that it had to be adjusted to Swedish conditions. In its proposal the commission stressed the importance of delegating decisions from the government and the ministries to the agencies. According to the commission, the government’s decisions on details were to be regarded as “irrelevant bonds”, preventing the agencies from being efficient and creative (SOU, 1967: 13 p. 13). The commission paid special attention to the far-reaching regulation of appropriations in the annual governmental approval documents (regleringsbrev), given to each agency. The regulation regarding wages, recruitments, and administrative expenses ought to be given the form of overall budgeting, the commission argued. The commission also stressed the need for the government to specify goals, not only for each agency but for each field of activities (programmes) within each agency. Without such goals it would not be possible to measure efficiency within the public sector: The efficiency in organizations’ activities depends upon to what extent the persons involved in the activity are able to act in accordance with the goals of the organization. One central aim of Program Budgeting is to promote such goal oriented acting on different levels within the public sector. (SOU, 1967: 13, s. 13 my translation)

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Further, it was important that the goals could be realized at lowest possible costs. Therefore, it was necessary to introduce a more elaborated control system. Each agency, and each unit within the agency, needed to get a better grip on their performances, the effects of each performance, and their costs. Systems for current and narrow measures of both productivity and efficiency needed to be developed. And because the agencies had the best knowledge about the activities to be measured they should conduct analysis of their own results and work out proposals regarding new goals and new recourse distributions. In 1970 RRV described Program Budgeting in the following way: In Program Budgeting steering is conducted through the formulation of goals and result requirements. The present system [to be replaced by Program Budgeting] aims at resources rather than results. Program Budgeting aims at concrete results and gives more room than the present budget system to select means. From the government’s point of view it will be a matter of steering the agencies through the formulation of objectives. Management by objectives puts increased demands on the agencies and requires efficient information and accounting systems and also systematically following up activities and analysis of results. Each agency has to be result oriented, result conscious. (RRV, 1970 the foreword, my translation)

Program Budgeting is tested and evaluated The Program Budget Commission’s point of departure was the formal regulations. It did not conduct any empirical studies of the ministries’ and the agencies’ way of working and how they actually interacted with each other and the surrounding environment. What the commission did though was to start up pilot studies with Program Budgeting. However, the commission finished its work without awaiting the results from the pilots. This was not due to time pressure; the commission completed its work


on time. Instead the commission emphasized the general urgency of starting up Program Budgeting. The pilot studies widened in the late 1960s, and in 1970 it included some 30 agencies. It should be noted that while the pilots were running, both RRV and Statskontoret prepared handbooks and ran information campaigns stressing the excellence of Program Budgeting. Moreover, the government praised Program Budgeting while the pilots were still running. For instance, in the budget bill in 1969 the government stated: The analysis and pilot studies successfully started must now purposefully be completed. As time goes by and new experiences are gained the government will decide on the pace and extent of further reforms. (From RRV, 1975a appendix 3, p. 5, my translation)

In 1971 the government gave RRV an assignment to evaluate the pilot studies with Program Budgeting. That RRV was given the assignment was no coincidence. The former head of the Budget Department, Lars Lindmark, who was a most energetic and strenuous man, had become director-general of RRV in 1965. At the same time he took over the chairmanship of the Program Budget Commission. The year after, he started to reorganize RRV. Using Program Budgeting as a base, he reformed the methods for performance auditing. He also created a new large department for the development of methods for steering, control, and budgeting and also for running information campaigns and education programmes. Further, Lindmark managed to recruit many of the most ambitious and committed actors from Statskontoret and from the Budget Department to leading positions at RRV. In the early 1970s RRV was a very popular place of work and it attracted the very best and brightest among new examined academics. Each new employee was drilled quite hard in the new steering model. RRV left its final evaluation report in 1975. In the report RRV declared that it regarded the pilot studies with Program

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Budgeting as “a necessary base for further development” (RRV, 1975b, p. 11, my translation). The results were to “deepen the experiences and to develop detailed and concrete systems” (RRV, 1975c, p. 18, my translation). Statements like these, the fact that RRV already had produced a large number of handbooks, and that the government recurrently praised the new steering model while the pilots were still running caused a Swedish professor of political science to make the following statement in 1976: From the beginning, however, it has been perfectly clear that the experiment simply has to be successful and that the major principles of Program Budgeting have come to stay. Only the forms and details, not the basic principles, have been open to challenge and change. (Andrén, 1976, pp. 351–352)

RRV’s evaluation was based on both a questionnaire and a document study. The questionnaire gave a somewhat mixed picture. The respondents felt that they had become more conscious about the importance of costs and results. A growing interest for different steering techniques was reported, and more people seemed to participate in the discussions about goals, results and planning activities. The agencies were also pleased with the increased leeway given to them. At the same time some respondents meant that the far-reaching demands on specified goals and detailed analysis of results could lead to centralization rather than decentralization. A common opinion was also that the new steering model, with its emphasis on discussions about goals and results, generated more blurred rather than clearer lines between agencies and ministries. Another frequent opinion was that the information on goal achievement and results was problematic regarding topicality, selectivity, readability, and its focus on details. If the questionnaire gave a mixed picture, the document study conveyed a clearer one. It revealed that the politicians tended to meddle in administration and that they stated too few and too indistinct goals and reporting back requirements. It also


showed that the agencies had failed to identify performances and to map out the causal connection between the performances and their effects. And in most cases costs and performances were discussed at different places in the accounting documents. Moreover, the agencies were disinclined to present proposals about savings and in deepened re-examinations regarding their own activities. At the same time, information from the agencies about goal fulfi lments and results did not form the basis for decisions at the ministerial level. Here, RRV’s conclusion was quite disappointing: It seems obvious, that to this point it hasn’t been possible to describe or account for desired and achieved results using the concepts’ objectives, goal achievements, effects, and performances, in the way these concepts have been defi ned. (RRV, 1975b, p. 14, my translation)

This was undeniably a setback. But when RRV summarized its observations the problems were played down. Instead, RRV turned its attention to a new steering system that it was developing, called the State Economic-Administrative system (SEA). SEA was presented as a rotating circle showing how “planning and budgeting” was to be followed by “accounting and analysis of results”, which in turn was to be followed by “auditing”, which lead back to “planning and budgeting”, and so on (RRV, 1975a). Just as in Program Budgeting the agencies were given a central position in SEA doing strict and recurring analysis of their own results and sending proposals to the government about their own future activities. On the basis of this information the government was supposed to make plans (on short and long terms) and to formulate objectives for each agency. RRV declared that SEA was based on Program Budgeting, but also on experiences gained from the pilot studies and from RRV’s education programmes and performance auditing. Here, RRV was trying to say that the situation had changed compared

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to when the pilots had started and that the new experiences had to be considered when reflecting upon the results from the evaluation. Therefore, SEA and not Program Budgeting as it originally had been presented should be the point of departure when new proposals now were to be discussed. In its final recommendations RRV stressed the successful results from the questionnaire. Certainly, problems had been observed in the document study, but according to RRV there were plenty of room for improvements. Four solutions were presented. First, methods and techniques needed to be refined. Second, education programmes and information campaigns needed to be intensified and improved. Third, the engagement among politicians and bureaucrats needed to increase; too many actors showed too little commitment. Finally, it was necessary to show patience; the reform was new and contained complicated methods and techniques. All put together, it was clear that RRV wanted to depict observed problems as implementation problems and not as model problems. At the same time it should be noted that RRV never really discussed how the proposed solutions were to solve observed problems. RRV declared that it was willing to help the government to solve the problems. After all, RRV was the expert agency within the field. Not only did it possess the experience and knowledge needed to improve different methods and techniques, but it had also built up a capacity to carry through large education programmes and information campaigns. The right thing to do now was, RRV argued, to let Program Budgeting “transform” into SEA. That no one but RRV really knew what SEA was did not seem to bother RRV.

Program Budgeting is transformed into SEA The Minister of Finance wasn’t that impressed by RRV’s evaluation. At the time, he had been holding the minister post for 20


years, and he and his closest collaborators were well aware of the weaknesses of Program Budgeting. And they were beginning to despair. As mentioned above, the Minister of Finance had been cautious from the very beginning, only allowing the Program Budget Commission to examine the possibilities to introduce Program Budgeting at an agency level. Now an increasing number of critical voices were beginning to be heard both among the agencies meant to apply the new steering model and among scholars specialized in implementation theory and organization theory. Not least, there were strong doubts about the agencies’ ability to measure performances and their effects and about their willingness to report results in an impartial way. The Minister of Finance himself strongly doubted the politician’s ability and, above all, willingness to specify measurable goals. He argued that it would be a political suicide to specify, for example, how many people were allowed to be killed in car accidents, or how many convicts were allowed to escape from state prisons each year. So, instead of giving RRV a green light to go ahead with its SEA system the government adopted a wait-and-see strategy. However, in 1976 the Social Democrats lost the election, and for the first time in over 40 years a non-Social Democratic government came to power. Just six months after the shift the government presented a bill where RRV’s wish to transform Program Budgeting into the SEA system and to continue to develop the system was met (prop. 1976/77: 130). Of course, one can wonder how a new government, in which no minister had any experience at all of governing the state, so quickly could form an opinion about the efficiency of such complicated steering models as Program Budgeting and SEA.

The budget handbook of 1978 In the late 1970s a major budget reform was carried out. An important ingredient of this reform was a new ambitious budget

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handbook which RRV worked out in 1978 in close cooperation with the Budget Department within the Ministry of Finance. The handbook was meant to guide the agencies when working out their accounting reports and budget requests. It contained detailed information about how to identify, analyse, and describe performances, effects, and costs. It was all based on SEA. RRV spent a lot of resources on the handbook, preparing manuals, running information campaigns, and educating bureaucrats. Pilot studies with the handbook were conducted between 1978 and 1980, and in 1980 they were evaluated. According to the plans guiding the evaluation the aim was to “increase the interest for modernizing the budget system” and to “produce data and impulses for the next edition of the budget handbook” (RRV, 1979, my translation). The handbook as such, and the basic ideas that formed its foundation, were obviously not to be put to the test. RRV engaged two different actors for the evaluation. One was a private consulting bureau, which also had assisted RRV in writing the budget handbook. The other was a young PhD student specialized in organization theory, Bengt Jacobsson. According to the evaluation made by the consulting bureau, the agencies’ accounting reports hadn’t changed to any appreciable extent; neither had the working processes within the agencies. Most agencies had shown great difficulties conducting result analysis; performances were often not measured and almost never connected to costs or effects. And only a few agencies had presented proposals about savings or ways to increase its efficiency. However, the consultant bureau was quite optimistic in its summary. It concluded that there was “room for development”. According to the bureau most problems could be accounted for as “misunderstandings” among the agencies about how to use the methods and techniques presented in the budget handbook. The bureau concluded that it ought to be possible for each and every


agency to conduct result analysis according to the guidelines in the handbook. Jacobsson’s evaluation was based on in-depth studies of nine agencies and ministries within different policy areas. He found that there was a general positive attitude towards the economical perspective that the budget handbook represented. The respondents welcomed a document where all rules and guidelines about steering and planning were collected. However, the information required by the handbook wasn’t really the kind asked for and needed by the ministries. According to civil servants within the ministries the budget requests had become more badly arranged and difficult to grasp. Too much energy was spent on questions about how to outline budget requests, on appendixes, on figures, tables, diagrams, and so on. The civil servants claimed they had not the time or the knowledge needed to specify demands the way outlined in the handbook. Respondents from the agencies pointed out the results analysis as the most difficult part. Not only because performances were difficult to specify and connect to costs and effects but also because the ministries didn’t formulate goals and results requirements. Overall, the handbook was regarded as too rigid; it did not take into consideration all the various types of activities performed by the public sector. It was considered too theoretical and divorced from reality. In its final report, which was based on the two evaluations, RRV emphasized that there was a growing interest within the public sector for questions regarding management and control. Several agencies had asked for “arenas” where the new steering techniques could be discussed and where experiences could be exchanged. Certainly, problems had been observed with the budget handbook, but these could to a large extent be accounted for by unclear guidelines and misunderstandings. Therefore, it was imperative that the handbook was refi ned and that education programmes and information campaigns continued. One must

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also consider, RRV argued, that the budget handbook was new. On the whole, the pilot studies were seen as a success, and RRV was optimistic about the future. It was clear, RRV argued, that a development had been started, that experiences had been gained, that lessons had been learned, and that there now was a foundation to stand on in the coming efforts to further develop the new steering model. And of course, RRV argued that it was the one agency to use in this ongoing quest for progress. Thus, again observed problems where seen as implementation problems and not as model problems. Worth noticing though is that RRV never once mentioned the pilot studies with Program Budgeting and the evaluation results they generated. This in spite of the methods and techniques used in the budget handbook being most similar to, if not to say identical with, those used in Program Budgeting. If such comparison had been made, it would have revealed that observed problems, as well as proposed solutions, had striking resemblances. Nor did RRV discuss the growing criticism within the academic world towards the techniques and methods promoted in the budget handbook.

The MBR reform of 1988 In 1988 the government launched a new big budget reform – Management by Results (MBR). It was based on a report by the Agency Management Commission (Verksledningskommittén). The commission had started its work in 1983 and submitted its proposals in 1985 (SOU, 1985: 40). It was led by a former director-general of Statskontoret and cooperated closely with both Statskontoret and RRV. The commission’s main proposal was that the government should specify goals and reporting back requirements for an agencies only each third year instead of every year. In addition these


goal and result requirements needed to be more elaborated and put down in certain documents. Correspondingly, an agency was to submit extended budget requests each third year. In this way the commission hoped that the ministries would be able to spend less time processing detailed information and more time working out general goals and guidelines. At the same time the agencies would become freer to decide by themselves how to fulfi l the goals. However, somewhat contradictable, the commission also proposed that the agencies not only should continue to submit annual accounting reports to the Government Office but also that the reports should be more elaborated. This proposal wasn’t discussed at any length. Instead the commission referred to an ongoing project inside RRV. RRV had already in 1983 started to examine the possibilities to introduce a more detailed annual accounting report. RRV had made a study based on interviews with civil servants inside the Government Office. The study had shown that the civil servants were quite content with the accounting reports they received from the agencies and that they normally didn’t have any problems collecting the information they needed. More current and detailed information was not what they wanted, and if such information was to be developed it would probably not be used. These statements did not discourage the reformers at RRV. They maintained that the civil servants did not know, or were unable to express, their real needs. It was imperative, RRV argued, to continue the efforts to develop systematic, detailed, and current information about performances, effects, and costs, and that the information was sent to the Government Office and used for new decisions on goals, result requirements, and recourse distribution. In May 1984 RRV received an assignment from the Budget Department to continue its work to develop what was called annual accounts on results (årliga resultatredovisningar). As the reader will observe, there are striking similarities between Program Budgeting and SEA on the one hand and

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MBR on the other. However, neither the Agency Management Commission nor the government mentioned earlier efforts to introduce and implement Program Budgeting and SEA. Instead the government explicitly tried to distance MBR from Program Budgeting. In the bill the government stated that the implementation of MBR should be done “from another point of departure than when working with Program Budgeting”. It was maintained that Program Budgeting started from the formulation of goals which were to be broken down in a hierarchical chain. This had been proved difficult, the government declared. Therefore, when using MBR, “the concrete steering of activities should start from a refined declaration and analysis of results of state activities” (prop. 1987/88: 150, appendix 2, p. 70, my translation). This statement was peculiar. Just a few lines earlier in the bill the government had underlined the importance of formulating goals and result requirements. The Agency Management Commission had done the same. The statement was also difficult to understand on a theoretical level. Certainly, one can imagine a “pure” MBO, where objectives are formulated on different levels without following up results, or goal fulfi lments. But here, the government was outlining a “pure” MBR, where results were to be followed up on different levels but where no objectives were to be formulated, except perhaps (but it was unclear) on a most general level. The question was then, to what should the results be related? On the whole the statement implied that Program Budgeting was something completely different than MBR. This was misguiding, to say the least. Here, I would like the reader to compare the following statement from the government bill from 1988 with RRV’s description of Program Budgeting from 1970 quoted earlier (see page 242): The government shall determine the objectives and main directions for the state activities for a period of three years. The government shall also state the economical terms for the activities. The agencies are gradually to be given increased responsibility to


fulfi l their assignments with their own decisional competence. It means a decrease of regulations in detail . . . The demands on information about, and analysis of, results will sharpen and focus ought to shift from budgeting to follow-up activities and evaluations. (prop. 1987/88:150 appendix 2 p. 69, my translation)

When described on this general level Program Budgeting and MBR seem to be almost identical steering models. This impression does not decrease when reading law texts and guidelines from the 1960s, 1970s, and 1980s. Nor does it decrease when studying more concrete steering methods and techniques applied during the course of events.

New pilot studies The Agency Management Commission suggested that pilot studies should be conducted with its main proposal, the “three years budgeting”. However, as soon as the results were collected the three years budgeting was to be “carried through on a full scale” (SOU, 1985: 40, p. 78, my translation). Apparently, the results from the pilots had very little to do with this “carrying through on a full scale”. The pilot studies were conducted between 1985 and 1988, and the assignment to evaluate them went to RRV and Statskontoret. The time assigned for the evaluations was extremely short. The assignments were decided on 3 December 1987 and were to be reported on 15 January 1988. Again, the evaluations revealed serious problems regarding the efforts to identify and measure performances, effects, and costs. And the agencies seemed more reluctant than ever to evaluate and re-examine their own activities. But just as before, in their summaries, the evaluators emphasized more general attitudes, for example that the agencies had managed to get a better grip of their own activities, that there was an increased

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commitment among the agencies and that a “results culture” was beginning to evolve. And again, observed problems only caused the evaluators to propose that the efforts to implement MBR should increase. Methods and techniques ought to be refi ned, education program increased, and information campaigns intensified. The three years budgeting became regular in 1989. However, new evaluations in the early 1990s showed that it was not working the way it supposed to. Despite new guidelines and manuals, the ministries were still reluctant to specify goals and results requirements, and the agencies did not manage to specify performances or to connect them to effects and costs. And above all, the extended budget request meant that the agencies now had more room for elaborated arguments in favour of their own activities. When examining the budget requests the evaluators could not find one agency proposing a cut down in its own budget. Instead they were all asking, in an ever so sophisticated way, for increased budgets. Disappointed with the “three years budgeting” the Budget Department and its vassals, RRV and Statskontoret, now turned their attention to the annual budget documents: the annual accounts on results and the annual governmental approval documents (regleringsbreven). Pilot studies with annual accounts on results had begun in December 1987. They were evaluated by RRV and Statskontoret in cooperation. A first evaluation report was submitted in June 1988 and a fi nal report in September 1989. However, the government bill, where the MBR reform was launched, was decided in the spring of 1988, before the evaluations had been submitted, and in the bill it was decided to make the annual account on results compulsory. Noticeable also is that the evaluations revealed the same problems as before. The ministries showed great difficulties specifying activities (in the form of goals and results requirements) and information about results (in the form of reporting back requirements). The agencies did not identify results and costs in


line with the MBR model. The evaluations also showed that the new accounting documents had been poorly anchored within both the ministries and the agencies; they were to a large extent handled by a small group of people specialized in accounting and budget techniques. These setbacks were hardly discussed at all by the evaluators, and the solutions involved increased commitment and patience. If the evaluators were aware that the same problems had been encountered several times before and that the proposed solutions were a bit hackneyed, it was unclear why earlier evaluations were not mentioned at all. Further, just before RRV and Statskontoret submitted their final evaluation report in September 1989 the government initiated a commission that was to examine the possibilities to introduce a more sterling annual report, using the private sector as a model. These two documents – the annual account on results and the annual report (årsredovisningen) – were very similar. The core content in both was the analysis of results, where the agency was to identify, measure, and discuss its performances and the effects and costs of each performance, and also to use this information as a base for proposals about its own future activities. However, the annual report was in a way more ambitious, since it was to be decided by the agency board and not by the director-general alone, as had been the case with the annual account on results. It was also to be audited by RRV, which was a unique arrangement in an international perspective. However, despite the obvious similarities between the two documents, and the heightened level of ambition, the decision to introduce annual reports on a full scale was taken without awaiting the final results from the experiments with the annual accounts on results. Not even experiences gradually reported from the experiments were discussed. The annual governmental approval documents (regleringsbreven) had hardly been discussed at all in the government bill from 1988, where the MBR reform was launched. However, RRV had

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already in 1983, when editing a second edition of the budget handbook, worked out guidelines for the approval document. Here, it was stated that the ministries had to specify not only goals for each agency regarding performances and effects but also what information they needed. In 1989 RRV started an examination of the approval document. The aim was to refi ne the document. RRV engaged the same consult bureau as had been used when working out and evaluating the budget handbook in the late 1970s. In its report the bureau maintained that the government simply had to specify goals, expected results, and information about results in the annual governmental approval documents; it was “common sense”. The bureau did not ask why the government had been reluctant to do just that. This is perhaps not surprising, considering that the bureau did not base its discussions on any empirical studies. Nor did it mention earlier evaluations that had been done in connection with Program Budgeting, SEA, or MBR. In 1991 the Budget Department and RRV worked out new guidelines for the approval document. It was now stated that this document was the most important one in the MBR model. It was also stated that goals and results requirements should be stated in the document, and that they should aim at both performances and effects. The approval document was evaluated by RRV and Statskontoret in cooperation between 1991 and 1993. Both document studies and interviews were used. The studies showed that the ministries had great difficulties specifying goals, and especially goals aiming at effects. Overall, the goals were unclear and difficult to understand. Civil servants within the ministries explained these setbacks by the turbulent environments in which the ministries and the agencies existed; the MBR model demanded a kind of stable environment that did not exist in reality. They also claimed that they did not have enough knowledge about the agencies and their activities to specify goals and results require-


ments in line with the MBR model. Further, specified goals tended to put a brake on the government’s ability to act, and they could cause people to believe that certain areas were not prioritized. At the same time they could be used by the agencies as arguments when asking for more money. Finally, the studies showed that the approval documents were difficult to anchor within the ministries. They were often the work of one man, with the politicians almost totally absent. These problems were left unanalysed in the evaluation reports, and nor did the guidelines for the annual government approval documents change as a result of the evaluations. Here, our story ends. In the mid 1990s, all the documents and methods pointed out as central in contemporary texts on MBR were in place. Certainly, the documents and methods have been evaluated and refined further during the last 10 years, but on the whole the system has stayed intact.

M B R: R E I N V E N T I N G T H E W H E EL? In this case I have discussed the origins and the development of Management by Results (MBR) in the Swedish state. MBR is often presented as a modern steering system developed during the 1990s. However, based on this study it seems fair to ask if the model hasn’t been around since the early 1960s. Certainly, the application of different methods and techniques has changed during the last 40 years, but the methods and techniques as such, and especially those that have been pointed out as central for the model, were put in place already in the 1960s. And the five basic assumptions that MBR rests upon, and which were outlined in the first section of this chapter, doesn’t seem to have changed at all during the 40 years covered in this study. What has changed though is the way the steering model has been labelled; fi rst Program Budgeting, then SEA, and now MBR.

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The study also shows that the learning process has had significant deficiencies. Pilot studies have been arranged in order not to try out the model but rather to develop and refine it. Also, decisions about carrying through reforms have on several occasions been made without pilot studies being awaited and reported. And rather often decisions about going ahead with reforms have been made even though the results from the pilots have been discouraging. Further, during the course of events a large number of evaluations have been conducted by responsible actors. When examining these evaluations one can point at some common features. In general they have all started by reporting a number of successes. These successes have mainly been of a rather general character and have often had the form of attitudes, captured through surveys, for example: • • • •

that the agencies have become more conscious about the importance of results; that there is a growing interest for the steering model and its different techniques; that the interaction between the ministries and the agencies has improved; that the ministries have a better general view of the agencies.

After these successes the evaluators have, as a rule, discussed a number of setbacks. Unlike the successes these setbacks have been of a more concrete, economic administrative, character, captured through the studies of documents, for example: • •

that the politicians tend to meddle in administration; that the politicians state too few and too indistinct objectives and reporting back requirements;


•

•

•

that the agencies fail to identify performances and to map out the causal connection between their performances and the effects and costs of these performances; that the agencies are disinclined to present proposals about savings and in deepened re-examinations regarding their own activities; that information from the agencies about goal fulfi lments isn’t used by the ministries.

Finally, the evaluations have contained a set of solutions. Here, the uniformity has been conspicuous over the years. The solutions have been four in number: • • • •

refine and specify the methods and the techniques; increase and improve the education and information; increase the engagement among politicians and bureaucrats; show patience – the reform is new with many complicated methods and techniques.

A distinctive trait among the evaluations is that these solutions haven’t been discussed in such great detail in relation to the setbacks. Their importance has been taken for granted; there have usually been no discussions of a more basic kind backing them up. However, by looking closer at the solutions one can draw some conclusions about the evaluators’ understandings. The fi rst solution – refine and specify methods and techniques – implies that the steering model is not yet fully built, or that there is a (minor) construction fault, which in turn means that politicians and bureaucrats are not able to fully meet demands connected to the model. The second solution – increase and improve education and information – implies that the steering model, and its different methods and techniques, are dim and indistinct, which in turn means that politicians and bureaucrats are not able to fully

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Table 11.1 The relation between proposed solutions and understanding of the problems Solutions Refi ne and specify the methods and the techniques Increase and improve the education and information Increase the engagement among politicians and bureaucrats Show patience

Understanding of the problems Unfinished – lack of ability Indistinct – lack of understanding Uninterested – lack of commitment Running-in period – (temporary) lack of ability

understand the demands. The third solution – increase the engagement among politicians and bureaucrats – implies that methods and techniques are in place but that politicians and bureaucrats are uninterested in meeting the demands. The fourth solution – show patience – also implies that methods and techniques are in place but that politicians and bureaucrats need time to learn the new methods and techniques (see Table 11.1). As the reader will notice, the solutions suggested by responsible actors have been quite shallow. Problems have been regarded as temporary and have not generated more fundamental analyses or questionings. When differences have arisen between model and practice during the realization, it has constantly been taken as a pretext for the efforts to be even stronger. This is perhaps an expected pattern of behaviour in the short run. However, what is particularly interesting, and remarkable, when studying the learning process over a longer period of time is the fact that responsible actors almost systematically have ignored experiences gradually produced. Knowledge collected through an evaluation has never – and I mean never – been compared with experiences gained through earlier evaluations, and


this despite the fact that the evaluations to a very large extent have been conducted by one and the same organization, namely RRV. There are plenty of, what a former top level bureaucrat at RRV has called, “cloned evaluations” (Furubo, 2003). Observations and formulations found in evaluations of the 1970s are very similar to observations and formulations found in evaluations of the 1990s. As hinted above, to a large extent the same general successes have been reported (and emphasized), the same concrete problems have been reported (and defused) and the same solutions have been suggested (without further relating to the problems observed). Responsible actors do not seem to have actually paid attention to, or maybe not wanted to point out, the fact that the successes and setbacks reported, as well as the solutions suggested, already have been accounted for previously. One gets the impression that the wheel has been reinvented, again and again. To a “popperian” the process must seem dubious. Never once have responsible actors discussed the question of what observations must be made in order to make way for a more fundamental questioning of the steering model based on empirical studies. The evaluations have not been cumulative. The fact that the same severe problems have been observed time after time has indicated a lack of progress, e.g. in the shape of studies intended to test the validity of the steering model’s fundamental assumptions. Certainly, there have been empirical studies in which the steering model’s assumptions and objectives have been discussed and questioned. But these have been produced by other actors. Even though many of these actors have existed in the very vicinity of responsible actors, the study shows that these critical discussions and questionings never really have got close to and influenced the concrete development work. Responsible actors have been much more eager to meet like-minded colleagues from other countries on international arenas like OECD. Hence, through the whole process the same basic assumptions have continued to be the starting point for the work.

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The conclusion is that the learning process has failed. Knowledge and experiences available regarding the conditions for forming a functioning information and steering system of the kind repeatedly suggested and tested have not been properly used by responsible actors. Gained experiences have only been used for what Chris Argyris call single-loop learning, i.e. modifications within the scope of dominating and fundamental patterns of ideas and thoughts, and not for double-loop learning, which is about questioning these fundamental patterns of ideas and thoughts as well (Argyris, 1990). However, there have been experiences available which, if properly used, should have brought about discussions concerning more comprehensive and, above all, more profound changes, i.e. double-loop learning. In addition, even more experience of that kind could have been collected if experimental work and evaluations had been carried out in a more professional way. The question to discuss now is how can the course of events be explained.

REFERENCES Argyris, C. 1990. Overcoming Organizational Defence. New York, Allyn & Bacon. Amnå, E. 1981. Planhushållning i den offentliga sektorn? Budgetdialogen mellan regering och förvaltning under efterkrigstiden. Norstedts. Andrén, N. 1976. Programme Budgeting: the Swedish experiment, in Leeman A.F. (ed.), The Management of Change. Haag. Furubo, J.-E. 2003. Why evaluations sometimes can’t be used – and why they shouldn’t. Paper presented at the International Evaluation Research Group, Rome, May 2003. Nybom, T. 1980. Det nya Statskontorets framväxt 1960–1965, in Granholm, A. and Rydén, M. (eds), Statskontoret 1680–1980. En jubileums- och årsskrift. Liber. RRV 1970. Förvaltningsrevision i staten: Mål och medel för granskaning av effektiviteten i statsförvaltningen. RRV.


RRV 1975a. SEA – Statens ekonomiadministrativa system, in Effektiv statsförvaltning. Edited by Statskontoret, RRV, Statens personalnämnd och Statens personalutbildningsnämnd. Liber. RRV 1975b. Utvärdering av försöksverksamhet med programbudgetering. En sammanfattande slutrapport. RRV 1975c. Utvärdering av försöksverksamhet med programbudgetering. Delrapport 4, dnr 1972:520. RRV 1979. Utvärdering av budgethandbokens effekter. RRV dnr 1979:868. SOU 1959:22. Den statliga centrala rationaliserings- och revisionsverksamhetens organization. Governmental ad hoc commission. SOU 1967: 11-13. Programbudgetering. Governmental ad hoc commission. SOU 1985: 40. Regeringen, myndigheterna och myndigheternas ledning. Governmental ad hoc commission. Sundström, G. 2003. Stat på villovägar: Resultatstyrningens framväxt i ett historisk-institutionellt perspektiv (The Wayward State: The development of management by results in a historical institutional perspective). Stockholm University: Department of Political Science, dissertation.

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CHAPTER 12

MUN I C I PALIT Y OF BA AR . SPEYER AWARD FOR LOCAL GOVERNAN C E Albert Hofmeister and Jürg Dübendorfer

Baar is a small municipality in the Canton Zug in central Switzerland with Some 21 000 inhabitants. For European standards this is a very small size and most readers would never think to call Baar a city. This case describes major managerial and governance reforms of the municipality of Baar during the last few years. As a result of these reforms, Baar won the Speyer Prize for excellence in local governance in 2000. (http://www.dhv-speyer. de/5-speyerer-qualitaetswettbewerb-2000/default.htm)

INTRODUCTION There are several specialities in Switzerland and in Baar itself regarding public administration. These specialities have a direct impact on both governance and public management. Strategic Change Management in the Public Sector. Edited by F. Longo & D. Cristofoli Copyright © 2007 John Wiley & Sons, Ltd.

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Unlike other OECD countries where the role of parliaments in the New Public Management (NPM) has been largely neglected, in Switzerland a number of Cantons have tried from the very beginning to incorporate parliaments into the reform processes. Consequently the focus has rather been put on outcome, than on output and results (“outcome-oriented public management”/“wirkungsorientierte Verwaltungswirtschaft”). Thus, the objectives are not only to bring about a more economically efficient and effective management of the public sector but also to strengthen political accountability. As a result of this holistic perspective on NPM, many Cantons have reformed their political institutions in addition to their Cantonal public administration. Nevertheless, in most cases, the government and parliamentary reforms lag behind the administrative reforms. This shows that there was always a critical mass of Swiss reformers who perceived the need to reform political institutions in order to achieve the full potential of NPM. From today’s perspective one would say that Switzerland has been a forerunner in governance thinking and partly in governance reforms. Of course, the reflections and actions with regard to administrative and political reforms are based on a specific political and cultural environment. In the following, some important pillars of the Swiss system will be briefly described. They shape active civil society in Switzerland to a large degree, and also influence a community’s governance capability.

PI LL ARS OF TH E SWI SS SYST EM Direct democracy The principle of people’s sovereignty has a long tradition in Switzerland. It corresponds to a deeply rooted desire in the popu-

M U N I C I PA L I T Y O F B A A R

lation to be actively involved in important political decisions. The issues (initiatives or referenda) brought to public vote relate to all three levels of government and all areas of politics.1 In the Swiss democracy it frequently happens that voters do not follow the recommendations of the government and parliament. Thereby they set clear boundaries to representative democracy. It could even be argued that the people actually assume the role of the opposition in political decision making. Characteristics of this system are ever-changing coalitions and varying levels of interested third parties’ involvement. A pragmatic approach to policy making is also important. It might be that, as a result of the existing process, not all technical details are thought through appropriately. Furthermore, the attempt to reach a consensus and the pragmatism might limit innovation. These limitations must be recognized and remedied, if possible. They are the “price” for this form of active and vital civil society. Federalism The second cornerstone of the Swiss political system is federalism. Switzerland is not a natural entity, but is a composition of strongly divergent parts, each concerned with its own autonomy. These parts differ mainly in language and religion. Switzerland’s culture of compromise and inner balance has influenced its system of government, which differs from that of any other country. The executive is not elected on the basis of political parties’ platforms, and therefore does not represent a particular political orientation. The Federal Council consists of seven persons of which each one is being elected individually. Following their election it is their task to establish a common, 1

From December 2001 to December 2004 there were 13 direct democratic votes. By doing so, they expressed their opinion on 105 issues.

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consensual policy. This consensual approach, known as the “concordance”, has become a dominant trait of Swiss politics. Its basic idea is to take into consideration all parties and groups and to find solutions acceptable to all.

The militia system Generally, the word “militia” is used in with the context of military organizations. According to Duden (i.e. the most important dictionary in Germany), it is understood to be “quickly trained troops” or “citizen militias”. In the case of Switzerland, this definition is inadequate. Here, “militia” is understood as a basic attitude, according to which as many persons as possible are mutually responsible for all matters of general concern. This sense of responsibility is expressed in the army by the militia system and the general conscription associated with it. The discussions regarding Army XXI showed clearly that even today the militia system represents an important element of Swiss national defence. However, the notion of the militia is also deep seated in non-military contexts. This means that most functions in the political arena are fulfi lled by volunteers. Consequently, it is important that access to political offices is made available for everyone. Furthermore, the sense of responsibility for political functions as well as participation in the shaping of political life has to be strengthened. The militia system has an impact on the parliaments of all three levels of government. Both chambers of the national parliament (the National Council and the Chamber of Cantons), as well as all cantonal and municipal parliaments, are based on the militia principle. This means that there are no full-time parliamentarians in Switzerland. In Switzerland, the militia system is an important cornerstone of an active civil society. The advantages, however, are out-


balanced by the disadvantages. The disadvantages include the limited time commitment of the functionaries, the unavailability of a wide circle of persons who are professionally committed, and – consequently – limited qualifications of the people available. Despite these disadvantages, the militia principle continues to be deep-seated in the population.

A high level of social capital at local level In Switzerland associational activities and civil engagement are strongly influenced by local conditions and traditions. For example, in the municipality of Baar 129 associations are officially registered. They form the backbone of the governance of this local area. This number does not include organizations and associations that are active in Baar but registered in other local areas such as national and international political organizations and NGOs. This density of associations in Baar (122 associations for about 20 000 inhabitants) is not exceptional in Switzerland. The vast majority of these associations have no political purpose. Nevertheless, this high level of social capital may catalyse civic engage-

Table 12.1

Civic organizations and associations in Baar in 2006

Type of organization Cultural associations Sports clubs Charitable organizations Music clubs Other organizations Political parties Total

Number 31 51 3 13 26 5 129

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ment in local politics. This is an important aspect in Switzerland where the system of direct democracy is based on civic participation in political decision making.

Political structure on local level The political administration in Switzerland is divided into several organs. Depending on the number of inhabitants the legislative authority is either a “Gemeindeversammlung” (a citizens’ assembly), or a “Gemeindeparlament” (a municipal parliament). According to article 102 of the “Zuger Gemeindegesetz” (Law of the municipality of Zug) the citizens’ assembly can take the decision to introduce the municipal parliament. Baar consciously decided not to do so. The executive authority is a “Gemeinderat” (a local council), elected by either the municipal parliament or the citizens’ assembly. The “Gemeinderat” consists of several directly elected board members and of a director-general, a so-called “Gemeindeschreiber”. Baar has the distinction of being the biggest local authority in Switzerland that has no municipal parliament. Baar is managed only by a local council. As at 31 December 2004, Baar had 457 employees (333.37 full-time equivalent including teachers) and closed with a surplus of CHF 15 429 804.26 (about c10 million). Total expenses were CHF 130 190 492.73 (about c83 million) and total revenues CHF 145 620 296.99 (about c94 million) (see also www.baar.ch). In 1999, Baar was the fi rst municipality with more than 10 000 inhabitants to receive the ISO 9001-1994 certificate which was amended by the ISO 9001-2000 certificate in 2003. Quality management became one of the most important success factors in public administration. In 2000, Baar won the Speyer Prize in the category of politics and administration and in November 2002 it was named “Town of Energy”.


THE CHANGE PROCESS In addition to the Swiss specialities mentioned in the previous section, there were more factors enabling change in the governance/administration of Baar. In the following we will describe the history of the governance/administration reforms as well as the instruments introduced to implement them.

History The main impetus to rethink political structures and processes in Baar came from a local resident. He submitted a written motion to the elected board members asking them: • •

•

to draft “local by-laws” and to bring them before the citizens of Baar for vote; to develop the local by-laws by means of a consultative commission whose members should have a high professional competence and represent all political parties in Baar; to finalize the local by-laws within two years after the formal acceptance of this popular initiative.

The elected board members asked the citizens’ assembly in 1999 to validate this motion. The assembly empowered the elected board members (with the help of a commission on local by-laws) to develop local by-laws, which would then be brought before the citizens of Baar for vote. The commission and the elected board members also discussed the issue with the public and organized advocacy groups such as street-level associations. In addition, they organized a public hearing and a discussion on the local by-laws. The fi nal version of the local by-laws was brought before the citizens of

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Baar for vote on 2 December 2001. They were accepted with a majority of about 80%.

New by-laws The main elements of the new by-laws included: •

•

•

a comprehensive duty of the municipality of Baar to inform citizens on all local issues in order to increase political transparency; the duty of the municipality of Baar to involve citizens in strategic decision-making processes in order to foster local (participatory) democracy; the introduction of new reporting instruments (so-called controlling) to foster strategic management of the local authority.

Besides addressing obvious local governance weaknesses through the new elements described above, the “Constitution for the Municipality of Baar” integrated existing formal decisions and local regulations into a coherent framework without duplicating them. The most important decision, however, was to continue doing without a local parliament in the future, and to compensate the lack of this institution by a stronger participatory democracy which might complement direct democracy in the form of citizens’ assemblies.

Implicit goals of the reform As mentioned above, the main impetus to rethink political structures and processes in Baar came from a written motion of a


single citizen on 19 October 1998. After that motion was handed in, the local council set the following targets in order to improve local governance: • • • • • • • • •

increase customer satisfaction and orientation; foster confidence and acceptance of all citizens; facilitate compliance with regulations; define a clear operational and organizational structure; optimize cooperation among all internal and external interfaces; improve information flows; reduce duplications and handling time; increase personnel development; define instruments to ensure continuous improvement;

To achieve these goals, the local council decided to apply for an ISO 9001 certification. Baar received this certification within one year.

N E W I N I T I AT I V E S A N D I N S T R U M E N T S F O R B ET TER PUBLI C MANAGEM ENT Besides the instruments aiming to improve the participation of citizens mentioned above, there was a need for new instruments within public administration itself.

RPGK Before the implementation of the new by-laws, an accounting control commission (Rechnungsprüfungskommission – RPGK) was responsible for the internal audit on a yearly basis. There was no control over the tasks of the local council. Instead of setting up a new commission, the original RPK was enabled also to control

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the task of the local council and was therefore renamed as “commission of business and accounting control” (Rechnungs-und Geschäftsprüfungskommission – RPGK).

Cost and results accounting When the implementation of the ISO 9001 certification was finished, the local council decided to introduce cost and results accounting. The rollout was limited to several specific departments as integration was not possible at that time due to IT restrictions.2

Signatory powers/responsibilities/process improvements Another instrument implemented was the list of signatory powers. Together with clearly defined responsibilities and partially improved processes, this list made the responsibility of each one transparent. This strongly simplified day-to-day work.

Five-year financial plan and one-year budget Very important for the planning of all expenditures is the currently introduced five-year fi nancial plan on which the yearly budget is based. It is made up of four components: mission statements, budget process, education, auditing. 2

Current situation: rollout in all departments is not possible due to IT restrictions. IT provider for Baar is the Canton Zug. Currently, all relevant software is about to get customized to the needs of Baar in order to ensure a complete rollout of the cost and results accounting.


Mission statement. Each year, the mission statement of Baar is the basis for the identification of actions required. These actions are being controlled on a yearly basis. Missed achievement of objectives is documented and commented. The necessary actions, resulting from unachieved goals, are then being defined and sent to all citizens entitled to vote.

Budget process. The budget process is being executed on a yearly and controlled on a monthly basis. The adherence to the budget is essential and requires a strong discipline from all parties involved (local council, citizens’ assembly, public administration). All deviations from the budget need a written statement every six months. The budget defines the “operational life of the community” in the future and is therefore a primary driver of ongoing change.

Education. Initial resistance against the innovations decreased after preparatory trainings were organized. Everybody seemed pleased about or at least did not oppose the new tools. One department even complained about not having been involved in the new project “cost and business accounting”. This was a clear sign of commitment to innovation from this department.

Auditing. Apart from the controlling activities mentioned above, there are more controlling activities being executed in the public administration of Baar. There are several reference variables defi ned in order to monitor the most important areas of operation, e.g. number of complaints as a measure of the quality of the services. Due to the new management culture (management by objectives) and the transparency of the measurement regarding achievement of objectives, the working atmosphere has changed in a positive manner.

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N E W I N I T I AT I V E S A N D I N S T R U M E N T S F O R T H E C O L L A B O R AT I O N W I T H C I T I Z E N S During the process of drafting the local by-laws, the weaknesses and limitations of the municipal assemblies had become more obvious to the commission and to elected board members. In Baar, typically between 150 and 500 persons participate in a municipal assembly, which represents between 1 and 5% of the people entitled to vote. Even though on average only 200 citizens out of 11 000 potential voters attend the assembly, this is a clearly higher rate of participation than would be the case with a local parliament which might have about 40 members. One might also claim that the people not attending can be assumed to fully accept the decisions made by the municipal assembly. Not in the sense of “les absents ont toujours tort” (“the absentees are always wrong”), but rather in the sense of a “passive observance of the rights to vote and to elect”. Nevertheless, women and young people are clearly underrepresented in municipal assemblies. Therefore, the elected board members started to look for ways to foster citizen participation in Baar and to improve their contacts with citizens.

Initiatives to strengthen citizen participation in Baar Even though the municipality of Baar is characterized by a high level of social capital, the seven elected board members in Baar perceived that there was still potential to strengthen civil participation in community activities. As a first step, the elected board members asked a group of graduate students from the University of Zurich in Winterthur (ZHV) to evaluate a number of community activities and events with regard to civic participation and to make suggestions on how


participation could be increased. The final report showed that the municipality of Baar had already implemented a number of innovative projects to achieve a high level of citizen participation in community activities and to organize these activities efficiently and effectively. For example, in elections and referenda, the local authority made special efforts to encourage Swiss citizens living abroad to take part through postal voting. Nevertheless, the participation rate among Swiss emigrants remained low.

Building a community network The municipality of Baar organizes a kind of reception for new Baar residents once a year. During this event, the elected board members present themselves informally and the community organizations and associations also inform new residents about their activities. Once a year, the municipality also sets up a reception for young Swiss citizens including both an official element (with the presence of the elected board members) and an inofficial element (party for the young citizens in a chosen location). Another community activity held on a regular basis in Baar is the so-called “bring and fetch” day. This is basically an exchange fair for used furnitures and other household items that attract, in particular, people moving to or out of Baar. Other events that are organized by the municipality of Baar in cooperation with local associations are the artists market, the Christmas market and the New Year’s concert. A highly innovative community project in Baar is the so-called entrepreneurs’ breakfast. It was initiated in 1998 by the elected board members in order to inform actors in the local economy about important issues but also to inform themselves about the views and problems of economic

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stakeholders in Baar. In the beginning, only representatives of large companies were invited but nowadays, more than 650 invitations are issued including invitations to local craftsmen, service providers and international companies. The breakfast has become so popular that more than 100 entrepreneurs attended the last meeting where a government representative talked about the planned new financial redistribution system in Switzerland. The report makes many concrete recommendations on how to improve existing weaknesses in event marketing and what kinds of event may be organized in the future to attract groups that have not been very active in Baar so far. In order to improve the citizens’ engagement in community events the board decided to establish a systematic evaluation mechanism to measure citizens’ participation in local events. The quantitative and qualitative results of these evaluations are meant to be used to facilitate knowledge management, e.g. by making past experiences regarding certain types of events or activities available to other groups of citizens. Even though all the initiatives mentioned above are supposed to remedy gaps in community networks, they do not automatically increase political engagement among citizens. It was obvious to the elected board members in Baar that higher levels of political engagement do not only require sound information policies but also new structures and processes which encourage target groups to participate in the political life of the municipality. Furthermore, social exclusion of disadvantaged groups in Baar was to be avoided.

Initiatives to strengthen citizen participation in political decision making in Baar When the local by-laws formalized the political decision to do without a local parliament, the elected board members placed a


strong emphasis on better direct contacts with the citizens. Even though, in a small municipality like Baar, these contacts can already be made by simply walking around, the need to create new platforms for active political participation was recognized. This included: •

• •

•

the organization of public hearings before citizens’ assemblies or popular votes, in order to inform citizens on certain issues and to explain to them the pros and cons from the perspective of various opinion leaders; “planning for real” exercises, in particular for current planning processes; the foundation of street-level associations (where not already existent) in order to deal with on-the-spot problems such as school crossings, traffic, waste disposal, etc.; workshops, seminars, etc.

New instruments for information and communication The elected board members also understood that transparency is a vital precondition for effective citizen participation in community and political issues. Indeed, from the very beginning of the Baar governance reform process, elected board members were convinced that the new local by-laws had to be embedded in more effective information policies. A debate started on whether a new publication outlet would improve transparency on local issues that might interest Baar residents. At present, Baar has one page in the local weekly Zugerbieter at its disposal, where it publishes information stretching from available posts in the local authority to planning permissions, under the title “From the Town Hall”. The Zugerbieter, which is a commercial newspaper, reaches all households in Baar. However, some board members thought that the local authority

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should publish its own newsletter about two to four times a year. The advantage of such a new publication would be that it would allow for more comprehensive information about local events and that, once launched, it would also be less expensive than the page in the local newspaper, which currently costs CHF 100 000 (about cM64 000) per year. The elected board members decided in the end to stick with the existing channels of information, including the new municipal website.

Road shows The innovations regarding cooperation between public administration and the citizens were presented to the public by the means of informational road shows. All necessary voting and citizens’ assemblies passed without a problem. As public expectation to public administration is very high and almost impossible to achieve, transparency is even more important. Honest and reliable treatment of all complaints ensures understanding in case of mistakes.

R E S U LT: S P E Y E R A W A R D F O R LO CAL GOV ER N AN C E It is obvious that Baar is not comparable to public management reforms that have been undertaken by many other municipalities in Europe. Even though Baar modernized its internal management systems – e.g. by introducing performance agreements between staff and managers and by having the complete local authority certified under ISO 9001 – it also modernized its structures and local governance processes.


As typical for Switzerland, in Baar managerial and political reforms were closely linked. The ISO 9001 certification aimed to increase the efficiency, quality and citizen orientation of public services. The production of the quality handbook was also taken as an opportunity to sort out responsibilities between the officials and the elected board members in Baar. In the words of the laudatio of the Speyer Award (http:// www.dhv-speyer.de/5-Speyerer-Qualitaetswettbewerb-2000/ Default.htm): The municipality of Baar is characterised by a highly professional administration and a strong managerial culture. Both of these key features determine the relationships that are found in all areas of work that play a role in the politic-administrative system (citizens – municipal council – municipal administration). In particular, the top management of the municipality – the seven directly elected city councillors and the town clerk – is characterised by a pronounced culture of consensus and collegiality in the administrative management. Baar is one of the few municipalities that are not guided by bureaucratic principles but by a strong sense of pragmatism. The local stakeholders identify themselves strongly with the community. These conditions fi nally influence the presentation over and against the citizenry. Baar has proven that, under certain conditions, the democratic legitimacy of communal action can be guaranteed and the instruments of direct democracy optimally utilised even without a council, i.e., without a “parliament”. For example, drawing up of a multi-year “citizens’ budget”, which is still exceptional in Germany, has been routine here for a long time. Direct public involvement is, of course, established in the Swiss municipal system but its implementation in Baar can be seen as both successful and exemplary.

The experiences with direct democracy in Baar show that a vital civil society is an essential precondition for a functioning direct democracy. Vice versa, the existence of direct democratic

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instruments such as the municipal assembly also fosters civil society by encouraging the formation of political and civil associations in the local area. However, these institutions do not automatically activate civil society. Therefore, Baar decided to complement direct democracy with a range of participatory instruments and processes. At the same time, the municipality of Baar decided that a system based on representative democracy would not address obvious local governance weaknesses such as the underinvolvement of certain groups of the local population in community activities and political decision-making processes in Baar. In particular, there was a strong view that a local parliament would entail political controversies that were more motivated by struggles for power than by substance. In a representative system, policy making will always be influenced by the need to fi nd majorities for political decisions. Direct democracy has the advantage that these kinds of “political manoeuvres” do not take place. However, direct contact with citizens can lead to capture of interests and, in the extreme, to favouritism. This is clearly not the case in the municipality of Baar as the political and administrative leadership is characterized by a highly professional culture that always considers the mission and the strategic goals defined in the municipality of Baar. Therefore, not all municipalities will be able to follow the example of Baar. Substituting a direct democratic instrument for the legislative body depends – among other factors – on the size of the community. Moreover, the overarching political und social systems have to be considered as well. Local governance in Baar is strongly influenced by the political system of Switzerland, which is characterized by values like direct democracy, federalism and the “militia system”. As this case has shown, the Swiss system differs in essential ways from all other European countries.


NEXT STEPS: “IN ORDER TO REMAIN G O O D Y O U H AV E T O I M P R O V E C O N T I N U O U S LY ” The board members and public officials believe that even though there is already a high quality of life in Baar there is scope for further improvement, in particular with regard to improving relationships towards external stakeholders. As the mayor, Jürg Dübendorfer, always says, “in order to remain good you have to improve continuously”. Therefore, in 2003 the local authority invited the non-profit organization Governance International to undertake a pilot of the Governance Test in Baar. This evualuation method is based on a 360 degree assessment of quality of life issues and governance processes by important stakeholder groups in the local area. The findings of the Baar Governance Test were very positive, particularly in the fields of safety, education and public health. Nevertheless, even though there are no “red lights” showing at present, the focus group participants identified a number of future challenges such as economic development and citizen engagement which need to be addressed by the local authority and its partners. The findings of the project were presented in a public meeting in February 2004 to which all focus group participants had been invited. More than 100 persons accepted the invitation. The objective of the meeting was to strengthen the networks among the focus group participants but also to discuss which proposals for improvement should be taken further. The local authority discussed the results of the workshops held at the public meetings further in May 2004 and decided that the following proposals should be implemented: •

the board members are to undertake a “walk and talk” (“Politikerspaziergang”) in the local area in order to create an

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•

•

informal framework for residents to talk to them and to meet “hard-to-reach” groups; furthermore, the board members are also to visit the community groups and clubs of foreign residents in Baar in order to learn more about their views and concerns; last but not least, a working group dealing with traffic problems is to be established. The Governance Test had identified a number of approaches to reduce the problems of car traffic in the local area and to increase the safety for pedestrians and cyclists but it was felt that because of the high economic importance of this problem an integrated solution is necessary which needs some more thinking and discussions.

The local authority of Baar is highly committed to these new initiatives. It has promised to implement the key recommendations of the Governance Test and has already integrated them into the annual action plan which is distributed to every household each year.

CHAPTER 13

TH E I NTEGR ATION OF PERFOR MAN C E MANAGEM ENT INTO TH E MANAGEM ENT OF TH E LON DON BOROUGH OF LEWISHAM Paul Joyce

INTRODUCTION This is a case study about the integration of performance management into the management of a London local authority. The local authority in question – the London Borough of Lewisham – had a fine reputation for engaging with its local citizens and for pioneering new ways of engaging with citizens. But throughout the 1990s the whole of local government in England was increasingly faced with the need to respond to a performance measurement and management agenda. This was partly a result of the publication of performance indicators by the Audit Commission and became very urgent with the development of the


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legislation on “Best Value” in the late 1990s. The London Borough of Lewisham, in common with many other local government organizations, responded to these pressures for performance management by developing both its systems and its management culture.

PUBLIC POLICY CONTEXT The concept of performance measurement and management has been around for some time. Its importance in English local government was increasingly recognized as a consequence of the work of the Audit Commission, which was set up by the United Kingdom government in 1983. The Audit Commission was made responsible for auditing the accounts of local government and promoting value for money. Just over 10 years after its formation, Rogers (1994, p. 3) commented on its impact in terms of performance measurement: it was required . . . to ensure that proper arrangements were made for securing economy, efficiency and effectiveness – more broadly interpreted as being to ensure wise and prudent administration. But it is in its wider role of providing advice and analysis for local government generally that its impact in achieving accountability has been of greatest significance. In particular, its work in defi ning and refi ning performance measures, and its use of them to compare the performance of local authorities has created a widespread interest.

Performance measurement moved up the management agenda of English and Welsh local government as a result of the Local Government Act 1992. This legislation gave the Audit Commission the role of publishing performance indicators for local authority services. The Commission identified five main criteria for local government performance indicators (Buttery et al., 1993). The Commission stated that performance indicators should:

I N T E G R AT I O N O F P E R F O R M A N C E M A N A G E M E N T

• • • • •

be of interest to the citizen; deal with cost, economy, efficiency, quality and effectiveness; support comparisons over time and between local authorities; deal with the main services provided; be reasonably acceptable.

Each local authority in England and Wales was required to record its performance using these performance indicators and publish results in local newspapers. The Audit Commission then published the results nationally. The 1997 General Election brought to power a new Labour government that had promised it would introduce a new requirement, monitored by the Audit Commission, for councils to secure Best Value services for local people. The Local Government Act 1999 was passed and this contained legislation on Best Value and a duty to consult with the public. The initial understanding of Best Value was described by the Local Government Minister, Hilary Armstrong, as follows: Achieving Best Value will not be just about economy and efficiency, but also about effectiveness and the quality of local services. The new framework will be a demanding challenge to local authorities, seeking continuous improvements in service costs and quality. It will be a permissive framework which emphasises local choices and local accountability. But it will also ensure that every local authority makes improvements. (2 June 1997, answer to a written Parliamentary Question from John Healey MP (Wentworth)).

The legislation on Best Value required local government to integrate systems of strategic review, performance management, and consultation of the public. In recent years the approach to performance measurement and management has changed again with the development of a system

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of Comprehensive Performance Assessments (CPAs) carried out and published by the Audit Commission. The first results of these new style assessments were published in late 2002 when an Audit Commission report provided assessment scores and analysis of performance for single tier authorities and county councils in England. In the summer of 2002 the UK government’s Office of the Deputy Prime Minister published a consultation document on how councils that performed badly in the CPA would be handled. Failing councils would be expected to develop action plans to improve services and the government might, under certain conditions, bring in external contractors or interim management teams.

LONDON BOROUGH OF LEWISHAM Lewisham Council, or more formally, the London Borough of Lewisham, covers 14 square miles in the South East of London. It has a resident population of about a quarter of a million people. The council has been among the first of the local authorities to experiment with new forms of political management. In consequence, leadership of the council is provided by an elected mayor, a cabinet of leading elected council members, and an executive management team. This case study focuses on the council’s performance management framework, which has continued to evolve for more than 10 years. In early 2005 a proposed framework for 2005/06 and key performance indicators and performance pledges for 2005/06 were being presented to elected council members to give their approval. The framework for performance management had five major elements:


• • • • •

Community Strategy; community pledges; corporate performance planning; top 30 key performance indicators; performance planning at service directorate and individual service level.

The first of these major elements is the Community Strategy. It might be helpful at this point to introduce a development in strategic planning in the UK’s public services. In the last five years a new type of forum for interorganizational planning has been set up right across the UK. The name of this forum is a Local Strategic Partnership (LSP). By 2002 there were nearly 400 LSPs. Each one normally covers a single local authority area. For the first couple of years the LSPs were busy with the work of establishing themselves, but many began working on the development of community strategies in 2001–03. The London Borough of Lewisham has been active in the development of its local LSP. It has brought together local public sector agencies, voluntary sector organizations and the resident community. Broadly, the LSP is seeking to improve the quality of life in Lewisham. The Community Strategy is envisaged as built around a vision for the future and performance targets to improve the quality of life in the borough. It is hoped that all partners will increasingly realign their corporate strategies with the Community Strategy. The LSP has, theoretically speaking anyway, huge financial resources it can mobilize. For example, the public sector agencies control an estimated $1.25 bn of public money in Lewisham. The council with its partners hopes to set and pursue important priorities for the strategic development of the whole local area. The second element consists of council pledges to the community. These feed into the council’s corporate performance

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plan. They are operational in nature and refer to a one year planning horizon. The next element is the corporate level of performance planning. This involves a corporate strategy, corporate priorities and a corporate performance plan. As noted above, the theory is that planning at the corporate level is aligned with the Community Strategy so that Lewisham Council is contributing to its delivery. It should also be noted that the corporate level of planning is affected by statutory and multi-agency planning as well as the Community Strategy. One example is the Children and Young People’s Plan. These plans have strategic objectives, performance indicators and performance targets. It is intended that in the future there will be a close relationship between the multi-agency plans and the Community Strategy. The fourth element is a set of 30 key performance indicators that are used to measure progress in delivering corporate level priorities. Finally, there is performance planning by the council’s four service directorates and by the individual services of the council. The council’s service directorates produce visions and strategic objectives based on the council’s priorities. Managers in individual services prepare annual service plans and plan performance at an operational level. This element of the framework is short term, with action plans and targets for the year ahead. Lewisham Council seeks to integrate strategic planning, performance management, annual service planning, budgetary processes, and the personal appraisal system. For example, strategy approved by the mayor and elected members is linked to directorate vision statements and annual service plans, and the latter are linked to the work of individual staff. The annual budget setting process and asset management decisions are shaped by service objectives and performance against plans. This is shown in Figure 13.2.


Vision Community Strategy Priorities

How we will work with our partners in the public, private & voluntary sectors to improve the quality of life for the people of Lewisham

Corporate Priorities

How the council will contribute to meeting the Community Strategy Priorities.

The Pledges

Our operational pledges to the community for the year ahead

Key Performance Indicators

Our basket of 30 indicators, monitored each month, to measure progress in meeting our priorities.

Directorate Indicators

Broader baskets of indicators reported to DMTs

Figure 13.1 The performance pyramid (Source: Dave Cass, Strategic Policy Manager, Lewisham Council)

STRATEGIC (3–5 yrs)

OPERATIONAL (1 yr)

COMMUNITY STRATEGY

MAJOR STATUTORY PLANS

CORPORATE PERFORMANCE PLAN BUDGET DECISIONS DIRECTORATE VISION STATEMENTS ×4

ANNUAL SERVICE PLANS PERSONAL APPRAISAL TARGETS

Figure 13.2 Strategic planning framework (Source: Dave Cass, Strategic Policy Manager, Lewisham Council)

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Business Cycle Quarter 4

2005/06 Jan

Political processes

Feb

Quarter 1

Mar

Apr

2005/06 Budget approved

May

Quarter 2

Jun

Jul

Aug

Quarter 3 Sep

Oct

Nov

Quarter 4 Dec

Jan

Mayor agrees annual pledges

Key performance indicators agreed

Feb

Mar

2005/06 Budget approved

Corporate Performance Plan approved

Budget process

Financial Review Members resource meetings Efficiency statements prepared and published

Service planning

Self assessments and Service Plans produced

Draft budget proposals developed

Directorate Vision statements produced

target setting Self assessments and Service Plans produced

Corporate planning

Corporate Strategy reviewed and updated

target setting

Corporate Performance Plan produced and published Summary of Performance produced and published

Corporate Strategy reviewed and updated Corporate Performance Plan started Summary of Performance produced and published

Best Value reviews

review programme agreed reviews carried out and implementation plans approved review programme agreed

Figure 13.3 Annual business cycle (Source: Dave Cass, Strategic Policy Manager, Lewisham Council)

The annual cycle of planning, budgeting and reviewing activities is known as the Business Cycle. We have mentioned the planning and budgeting activities already. There is also a programme of reviews of services. These ensure that there is an indepth strategic evaluation of services on a regular basis. The cycle planned for 2005/06 is shown in Figure 13.3. Performance measures There are three different groups of performance measures in the Lewisham performance management framework. First, there are about 500 performance indicators that are monitored mainly for operational purposes. Second, there are about 100 Best Value Performance Indicators and 200 other performance indicators and


targets in the Corporate Performance Plan. Third, there is what is known as the “Top 30” indicators, which are reported to the executive management team and the mayor and cabinet on a quarterly basis. They are also monitored by directorate management teams on a monthly basis. The proposed 30 key performance indicators for 2005/06 are shown in Table 13.1. Table 13.1

Top 30 key performance indicators 2005/06

Portfolio Adult care and health

Adult care and health Adult care and health

Children and young people Children and young people Children and young people Children and young people Children and young people Children and young people Community Safety Culture

Indicator Number of homes receiving intensive home care (more than 10 contact hours and 6 or more visits per week) per 1000 adults aged 65 and over Percentage of items of equipment delivered in 7 days Average number of new clients for whom the assessment process starts within 48 hours of contact and is completed within 28 days of contact Percentage of SEN statements prepared within 18 weeks including those affected by “exceptions to the rule” under the SEN code of practice Percentage of half days missed due to absence in primary schools Percentage of half days missed due to absence in secondary schools Percentage take-up of school meals – free Percentage of children on the child protection register reviewed when due Percentage of looked-after children with three of more placements in the year Percentage of reported racial incidents leading to further action Number of physical visits to libraries per 1000 population

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Table 13.1

(Continued)

Portfolio

Indicator

Culture

Swimming pools and sports centres: number of swims and other visits per 1000 population Percentage of abandoned vehicles removed within 24 hours of expiry of notice period Percentage of land and streets that are of an acceptable level of cleanliness Percentage of bins collected on time Percentage of non-emergency housing repairs for which an appointment was both made and kept Average time to complete non-urgent housing repairs (calendar days) The average length of stay in hostel accommodation for dependent children and pregnant women Local authority rent collection and arrears: proportion of rent collected (including current tenant arrears from previous years) Average re-let times for local authority dwellings let in the fi nancial year (weeks) Percentage of standard land searches carried out in 10 working days Percentage of “other” (householder) planning applications determined within 8 weeks Damage to roads and pavements: percentage made safe within one working day Average number of days taken to repair a street lighting fault, which is under the control of the local authority Proportion of Council Tax collected Average time taken to process new benefit claims (days) Percentage of undisputed invoices paid within 30 days Calls answered within 15 seconds – call centre Visitors to ACCESS Point seen within 30 minutes Working days lost to sickness absence per FTE

Environment Environment Environment Housing Housing Housing

Housing

Housing Regeneration Regeneration Regeneration Regeneration

Resources Resources Resources Resources Resources Resources


TH E EM ERG EN C E OF TH E SYSTEM (1 9 9 4 – 2 0 0 5 ) Barry Quirk became the chief executive of Lewisham Council in 1994. Over a period of more than 10 years he has been supportive of developing the internal performance management agenda: When I was appointed I felt that we were overdecentralized, we put a little too much emphasis on front line innovation – on generating ideas. In a sense we were literate in innovation but innumerate on implementation. I realized that I had to tilt the culture, probably against the then established institutional grain.

In this section of the case study we look at how the performance management approach evolved. It appears to have done so during three major periods: 1994–1999, 1999–2002, and 2002–2005.

1994–1999 In 1994 Lewisham Council had a reputation for being an innovative council. It was a council in which new ideas flourished. It was a council in which ideas surfaced from “low down” in the organization. Barry Quirk: when I became chief executive . . . we were too decentralized, there were too many ideas coming from too many different directions and yes, you’ve got to have lots of ideas and encourage them all, but you’ve also got to be honest. Most ideas don’t work, and mature organizations learn from their mistakes or failed ideas more. Hence we needed to make the organization more systematic in how it approached innovation.

A chief executive of a local authority has often to foster leadership to bring about change. Barry was working with a quite large coalition of political and managerial leaders.

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When people talk about management teams they generally refer to the leader-chief executive nexus or to the top management team. This is understandable but there is a slight myth of the top team. In my experience it takes a core group of 20 or so leading politicians and 20 or so leading managers, perhaps more managers in organizations of our size.

This leadership group can be very influential in creating a climate for change: . . . the importance of the core group in an organization for establishing a climate I think is right. You need that climate in the organization for change and growth and development. And that core group, in an institution like ours, is both political and managerial, but it’s not [ just] the leader of the council, and the mayor and chief executive, and only those two. They have a role in building an atmosphere for progressive change but the wider organizational climate is built by a much bigger group. In my view we have to all the time widen the circle of people involved in that group. . . .

The development of a new climate takes time. It took me some time, with the individuals concerned, for people to gain acceptance of this idea that we needed to get more rigorous and make a strong push on performance management. I was greatly helped by a few leading politicians who wanted a new focus on improved service performance.

It appears that one of the early challenges was to move from performance measurement to performance management. What Barry found was a system of bottom-up reporting of performance and he was left with trying to put a corporate gloss on what was essentially a fragmented bottom-up approach. As a result there was no central or strategic performance management. Well, prior to that it was performance reporting. The top management team received regular performance reports but they were riddled with caveats and conditional qualifications. I decided to use


humour and I wrote a letter to all the senior managers about service performance saying that I had noticed a pattern of reporting; I classified the top 10 reasons managers gave for why performance was below target or worsening (underlying cyclical trends, computer failure, staff sickness, seasonal fluctuations in demand, and so on). I then said if people honestly said, well, “we took our eyes off the ball”, they would get most credit! At that time it was very much every area devising its own performance measures. At the time we had about 10 chief officers (we now have five) and so in a sense all these chief officers would get their service managers to devise their own performance measures. We didn’t have a central team which managed performance. We had a central policy unit but its focus was corporate policy development. It never appraised operational performance or devised a performance management framework. So it was a bricolage approach to performance management – whatever happened in various departments was aggregated and fi ltered corporately. And this was at a time when we had a strong service-based system – service departments and service committees. So, for example, we would have a housing committee, a chairman of the housing committee and a department of housing led by a director of housing. Service performance reporting was decided largely by the service department. They would decide which of the operational statistics they were using could pass as indicators of service performance by the corporate centre! And similarly in Education and Social Care, and in all these other committees as well. In this fashion a service-based operational system was overlaid with a fi lter of corporate reporting.

There is an obvious inference that can be drawn from these comments. The decentralized, bottom-up performance measuring approach was underpinned by a political management structure that fragmented political authority between service committees. Presumably, it followed on from this political management structure that the central administration of the council was focused not on implementation of strategic plans but on policy development, and thus was busy producing policy documents and not on managing overall performance and service effectiveness.

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1999–2002 In 1999 there was a highly significant change in the political management arrangements in Lewisham Council. An Executive Committee of the council was set up on a multi-party basis. The Executive Committee consisted mainly of elected councillors of the Labour Party but it also included an elected councillor from the Conservative Party. Liberal Democrat councillors were also invited but they were not prepared to do more than attend the meetings of the Executive Committee. Because there was more than one political party represented on the Executive Committee, the full council were able to delegate everything to it. In other words, it was a forerunner of what is now known in England as a cabinet model of political management. It should also be noted that a number of councils had referendums in 2002 to decide whether they would create a new type of mayoral position. In contrast to the usual situation in the United Kingdom where mayors are purely ceremonial in function, these referendums were deciding whether mayors would be elected and play a crucial leadership role in political management. Lewisham Council was one of the first councils to show an interest in this change in political management and subsequently became one of the fi rst councils in England to have a “proper” mayor. But even before this happened, Lewisham Council had moved towards this arrangement but on the basis of an unelected mayor. These innovations in political management then enabled the management of the council to become more corporate. Barry points out: The point was that the committee had full delegated power across the entire range of council functions. The meetings were conducted in the open and all officers knew they were reporting stuff to one place – it wasn’t a series of committees – we had one


Executive Committee. And that enabled me to force a more corporate approach to all issues – in terms of resource allocation, in terms of considering the use of assets or the best future for councilowned facilities . . . all proposals for change and spend had to be considered in the round. The corporate management and corporate governance of the whole organization met and determined issues in one place. And the politicians wanted to see corporate reports on performance, not service-based reports. This produced a strong platform for us to corporately monitor and appraise performance.

This move to a more corporate style of management triggered organizational adaptations. Whatever the material significance of the change, the symbolic significance of one change can be underlined – the conversion of the council’s central policy unit into a best value and performance management unit. Barry describes this adaptation as follows: It resulted in our corporate policy being converted into a best value and performance management unit. Its job became to appraise performance, appraise what was happening across the full range of council functions and activities. At this time there was also a major growth of targets from government (which has hopefully reached its high mark). We used the government’s “targetry” to ratchet up our move towards a more corporate system of performance management.

In terms of the mechanics of the new corporate performance management system, the council began reporting a small number of key indicators. Barry reports: Yes, we had high-level performance indicators which were reported to the mayor and cabinet (called the mayor and executive at the time). So we had a small number of key performance indicators which were reported there.

The system has also evolved – become more sophisticated – in terms of what gets reported and to whom.

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The information which you need on the performance of any service operation depends on what your perspective is – operational managers require fi ner grained information than is needed as part of some corporate diagnostic. We need to devise reporting arrangements which are useful managerially. Two problems arise from strong corporate management reporting. First, policy and political goals can get downplayed. And second, the focus can easily become concentrated on organizational effectiveness at the expense of community needs analysis. Policy or political goals (creating cohesive communities, for example) can’t always be reduced to operational management objectives that can be subjected to regular reporting. I think that it is best to have a mixture of policy, political and managerial objectives in an overall performance framework. Peter Drucker argued that the downside of organizational information systems was that management focus inevitably became drawn to internal systems, numbers and ratios and not to market information (or in our terms community needs analysis). We were aware of these problems and tried to correct for these trends by building strong political ownership of our corporate reporting and by producing a regular statistical report on changing community needs and tends. We now produce a regular quarterly management report on the five Ps – performance, project delivery, pounds, people management and probability (risk).

After 2002 The period since 2002 might be taken as a new period of performance management in Lewisham Council. First, the council now has introduced an elected mayor into the system of political management. Second, from late 2002 Lewisham Council faced a new environment in terms of the development of the Comprehensive Performance Assessment system. The Audit Commission’s assessments of Lewisham Council are taken very seriously. Barry comments:


Now in 2002 when we had the mayoral system, when CPA came in . . . we are [assessed by the Audit Commission as] as a “good” authority. Indeed in their assessment we are good and improving. In practice in 2004 our service performance score was above the threshold for “excellent” councils. The CPA process is very interesting to other countries because it is probably the most thorough and rigorous external assessment of local councils as to how well they are performing overall . . . it is a fairly sophisticated across the board assessment of how you are doing – from social care to refuse collection, from the management of money and resources to corporate governance – all computed through a complex algorithm which reduces all this managerial and service complexity to a single number on a five point scale.

As a result it is perhaps not surprising that Barry was considering further changes to performance management at Lewisham Council when interviewed in late 2004. He said: I’m now looking to introducing monthly management accounting so that we account to the mayor and local politicians each month for our stewardship of service performance, the budget, the people, the delivery of capital and critical projects and our management of risks. Having these issues reported on regularly and managed corporately is crucial to ensuring that we improve our overall corporate management.

In early 2005 Dave Cass, Strategic Policy Manager at Lewisham Council, gave the following account of some of the key changes and initiatives of the previous three-year period: •

•

Golden thread. The purpose of the golden thread is to create a clear link between the high-level corporate objectives of the council, through the various plans and strategies, to the work of individual members of staff; Target setting. Target setting is an important element of the performance management framework and therefore we have worked with managers to identify the key drivers that will influence performance levels over the following three years.

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•

•

•

The purpose of this work is to help managers set challenging but realistic targets, which if delivered, will provide better outcomes for service users; Strategic reviews. We have worked to replace the process driven Best Value Reviews with shorter, sharper reviews, focused on outcomes and change. In the past year we have conducted success reviews of highways maintenance, communications and, most recently, ICT; Customer focus. In recent years, Lewisham has made greater use of public perception data in the performance management framework. This is part of an iterative process to identify the drivers that influence the public’s opinion of the services we provide; Good to Great. Launched at the Chief Executive’s Managers Conference in February 2004, the Good to Great initiative invited managers and staff to think about how they could do things differently, which would result in better services for local people. Following the launch, all members of staff considered how they would make changes in their team meetings. Proposals were fed through and included in the following round of service plans.

As can be seen, and as Dave Cass suggested, Lewisham Council have been working both to develop the management processes and to foster cultural changes towards service improvement.

CONDITIONS INFLUENCING THE DEVELOPMENT OF PERFORMANCE MANAGEM ENT – POLITI CAL MANAGEM ENT A key question for anyone wanting to understand the design and implementation of performance management systems in local government is whether or not the system has evolved over time.


Barry Quirk’s view on this is especially interesting given that he has been so well placed to observe its development in the 10 years from his appointment as the council’s chief executive. His judgement is that it has changed and that there were two key events that brought about change. The first was the formation of the Executive Committee of elected councillors, which replaced the more pluralistic system of committees that had existed before this time. The second was the move to an elected mayor. He comments: The clear event I think was the creation of the Executive Committee, which encouraged and centralized management to report to one place, rather than many places. In this way political integration created the conditions for more effective corporate management, and in 2002 the election of the mayor provided extra impetus to this drive for a “one council” approach. The mayor, Steve Bullock, is elected directly and at large across the whole borough. He doesn’t have a fidelity to department, committee, or locality – his perspective is the whole borough and he thinks of the entire organization and its effectiveness.

THE EFFECTS OF PERFORMANCE MANAGEM ENT I N LEWISHAM COUN C I L The CPA assessment of Lewisham Council suggests that it had moved a long way in terms of performance management. Barry reported on the CPA results. I would say in our fi rst assessment we attained one of the highest scores on performance management among all councils (we got 4 out of 4 for performance management, and we were advised that there weren’t many, if any, of the excellent authorities who got as high a mark for performance management) so what we have been doing over the years has got us into a very good place in terms of corporate management performance.

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When interviewed in late 2004, Barry agreed that the development of performance management in Lewisham Council was a complete turnaround of the way it was. But did performance management make a difference to the public services experienced by the public? Did it have a positive impact on council performance? There is no quantitative data available on this question of impact but Dave Cass, who is an expert on the council’s strategic and performance management framework, gave his assessments of its impact. He considered it had a high impact on the overall performance of the council: Strong performance management systems have helped the council increase its CPA [Comprehensive Performance Assessment] score by nine points over the past year. This represents the second highest increase in the country after Calderdale [Council].

He also reckoned that the performance management system had a high impact in terms of providing focus. It had focused the council’s agenda on important issues. It had helped managers to focus on the council’s main priorities. It had helped all staff to focus on the council’s main priorities. He also inferred that the system had helped with the improvement of the quality of the services, although he observed that it was difficult to demonstrate this impact: Both public satisfaction and performance levels have increased over the past year. This would indicate performance management processes do have a positive effect on the quality of council services.

Interestingly, Dave Cass also saw the performance management system as important in making strategic planning effective. He suggested that performance measurement was being used to inform the council’s strategic planning processes. If the performance management system is having a range of positive impacts, what is it about the way Lewisham Council has


designed the system that is responsible for producing its effectiveness? Dave Cass, again, is our source of insight. His judgements are presented in Table 13.2. It is notable that so many factors seem to be working positively to produce the positive outcomes of performance management. Based on his judgements it would appear that effective performance management in local government requires: detailed attention to target setting by managers, use of locally developed performance measures as well as external ones required by central government or external audit bodies, sophisticated performance evaluation (i.e. look at performance over time, against benchmarks and against targets), and strong

Table 13.2 Factors contributing to impact Aspect of the performance management system (a) senior and middle level managers (e.g. department or unit heads) are set objectives based on the council’s strategic plan (b) the performance of senior and middle level managers are appraised/evaluated on an annual basis (c) the salary of senior and middle managers is/is not linked to performance (d) the council uses special performance measures to track the implementation of the council’s strategic plan

Dave Cass’s assessments

Positive factor – this is an important element to the “golden thread”, which ensures that staff work to meet corporate objectives at all levels of the organization. Positive factor – it is also important to note that all staff are appraised at least twice a year under the council’s system. Not a factor – sound evidence to indicate performance related pay has only a limited and short-term effect upon service performance. Positive factor – the council’s key quarterly management report extends beyond the measures audited by the Audit Commission. For example, in addition to KPI data, the quarterly management report also includes information on HR, fi nance and progress on major projects.

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Table 13.2 (Continued) Aspect of the performance management system (e) the way in which performance data is reported to leading bodies or committees of the council (f ) the way in which benchmarking is currently used in setting performance targets and evaluating overall council performance

(g) the way in which the top level evaluation of performance by the council tracks improvements (or declines) in performance over time (or is most of the evaluation based on a comparison of target and outcome) (h) the way in which the council’s budgeting deliberately shaped by performance data

Dave Cass’s assessments

Positive factor – see above.

Positive factor – in recent years, the council has placed greater importance on the target setting process. All targets are benchmarked against national performance data and, in normal circumstances, must be set in the top two quartiles. Positive impact – performance tracked using triangulated approach, i.e. performance is monitored over time (did we improve or decline?), against target and compared against local and national benchmarks.

Positive impact – under the budget setting process all changes to the budget are assessed against their potential impact on service performance.

linkages to other management systems (the strategic plan, appraisal systems, and budgeting). MAK I N G PER FO R MAN C E MANAGEM ENT W O R K I N G O V E R N M E N T O R G A N I Z AT I O N The design and operation of effective performance management systems has come to be seen as important in public services


all round the world. They are important not only for the effectiveness of strategic planning (as we have seen in this case study), but also for modernization and public services reforms generally. Are there any insights or lessons from this case study of the London Borough of Lewisham for local government managers that have to design, maintain, or operate within a performance management system? A single case study is not enough, by itself, to lay down rules for successful design and operation of performance management in local government. But we should nevertheless try to draw some conclusions, fully aware that they will need more corroboration. Some public service organizations – like the London Borough of Lewisham – have been seeking to perfect their performance management systems over many years. The Lewisham experience suggests that effectiveness of such systems is not accomplished over night. Steady determination and effort, year by year, eventually pay off. The Lewisham experience also shows that the evolution of the performance management system, given the steady determination and effort, speeds up at some points. In this case study it was apparent that the critical factor in the turning points in the evolution of the performance management system was the changes in political management structure. Specifically, a more corporate approach to performance management became much more viable with the development of a more integrated and coherent structure of political management. This change meant that the performance management system could be steered at the corporate level and the result was a more focused approach to improving performance and addressing the key issues of performance. But not everything is down to the political management structure. The organizational expertise of public services management is also undoubtedly crucial for the design and operation of an effective system of performance management. Based on expert

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opinion at Lewisham Council we can say that a number of things matter to the effectiveness of performance management. Attention to the details of formulating targets matters. Designing targets that help managers to manage matters – targets should not be merely to meet the external requirements of audit bodies. The way in which performance is evaluated matters. Finally, the way performance management is interlocked with strategic planning, appraisal systems and budgeting matters. In this sense, we can conclude that the Lewisham Council experience shows that an effective performance management system depends on both integrated and cohesive political management and organizational expertise of public services managers.

REFERENCES Buttery, R., Hurford, C., and Simpson, R.K. 1993. Audit in the Public Sector. Hemel Hempstead, ICSA Publishing. DETR 1998. Modernizing Local Government: Improving Local Services Through Best Value. London, Department of the Environment, Transport and the Regions. Heinrich, C.J. 2004. Performance management as administrative reform: is it improving government performance? Public Finance and Management, 4(3), 240–246. London Borough of Lewisham (no date) Value for Lewisham: Bid for National “Best Value” Pilot Status. Produced by Lewisham Corporate Services, Lewisham Town Hall, London. Osborne, D. and Plastrik, P. 1997. Banishing Bureaucracy. New York, Plume. Poister, T.H. and Streib, G. 1999. Performance measurement in municipal government: assessing the state of the practice. Public Administration Review, 59(4), 325–335. Poister, T.H. and Streib, G. 2005. Elements of strategic planning and management in municipal government: status after two decades. Public Administration Review, 65(1), 45–56. Porter, L.J., Oakland, J.S., and Gadd, K.W. 1998. Evaluating the Operation of the European Quality Award Model for Self-Assessment. The Chartered Institute of Management Accountants, London.


Rashid, N. 1999. Managing Performance in Local Government. London, Kogan Page. Rogers, S. 1994. Performance Management in Local Government. Harlow, Longman.

WEBSITE REFERENCES Audit Commission 2002. Comprehensive Performance Assessment, Local Government National Report, December 2002, downloaded from Audit Commission website http://www.audit-commission.gov.uk

309

INDEX

ABC (activity-based costing) 76 accountability issues concepts 2–3, 7, 13–14, 87–90, 95– 6, 120–1, 148–9, 266, 286–8 NPM 2, 120–1, 266 accounting 22–5, 82–117, 133–4, 143, 248–63, 274–6, 301 see also fi nance . . . accrual accounting 133–4, 143 activity-based costing (ABC) 76 adding value, Brussels Port Authority 22–3, 27–43 AEM SpA, Milan 203–5, 210–11 AFM SpA, Milan 205, 210–11 agencies 24–6, 202–11, 235–63 Agency Management Commission, Sweden 250–2 Alas, Ruth 22, 55–79 aldermen, Netherlands 178–88, 199–200 Amersfoort 23–5, 183–200 see also Netherlands administrative organization of local government 185–8, 199–200 background 23–5, 183–200 budgeting 186–8, 194–6 change process 188–200

communications 191–6 consultants 190–4 cultural issues 188–200 demographics 183–4 dolphin symbol 189–90 human resources 185–200 implementation phase 197–9 job descriptions 195–6 objectives 185–8, 190–200 Operational-Managementdepartment-restructure phase 193–5, 198–9 partners 185–8 personnel-reallocation phase 190, 196–7 phases of change 190–9 political organization of local government 184–8, 199–200 processes analysis 191–4 public–private partnerships 185–8 research-and-analysis phase 190–3 restructuring processes 187–200 sectors 185–200 service delivery 186–200 SMART objectives 195 SOB 185–200 structure 184–8, 190–200

312

INDEX

tasks 185–8, 190–200 work processes analysis 190–2 working units 196–200 workshops 191–4 AMSA SpA, Milan 204–5 annual service plans, London Borough of Lewisham 290–2 Antwerp 42, 43 Apogée 86, 87, 109 appraisal targets, London Borough of Lewisham 290–2, 305–8 Argyris, Chris 262 Armstrong, Hilary 287 ATM SpA, Milan 204–5 Audit Commission, UK 285–8, 300– 1, 305 audits 14, 100–1, 220–1, 231, 238–62, 273–4, 275–6, 285–6, 308 Austria 121–2 awards Baar 25, 26, 265, 270, 280–1 Coesfeld 119, 121–2, 136, 139–40 Netherlands 176 Baar 24, 26, 139, 265, 270–84 see also Switzerland accounting 274–6 audits 273–4, 275–6 awards 25, 26, 265, 270, 280–1 background 25, 26, 265, 270–84 budgeting 274–5 by-laws 271–84 change process 271–3 collaboration initiatives/instruments 271–3, 276–84 communication instruments 279–4 community activities 277–9 continuous improvements 283–4 critique 280–4 decision processes 25, 26, 265, 270–84 demographics 265–6 Governance Test 283–4 historical background 271–3 human resources 275, 280–1

information/communication instruments 279–4 ISO standards 270–1, 273–4, 281 management by objectives 276 mission statement 275 new initiatives 272–9 objectives 271–9 performance issues 270–1, 273–4, 280–2 political engagement 271–3, 278–4 quality issues 270–1, 273–4, 276, 281–2 reporting instruments 272–3, 298–300 road shows 280 RPGK 273–4 signatory powers 274 social capital 276–7 specialities 265–6 Speyer Award 25, 26, 265, 270–1, 280–2 stakeholders 25, 26, 265, 270–84 structure 270–84 training 275 transparency issues 272, 276, 279–80 University of Zurich in Winterhur 277 written motion of a citizen 271, 272–3 balanced scorecards 97, 105, 109–10 Banys de Sant Sebastià 226 Barcelona 24–6, 213–31 see also Spain associationism tradition 214–16 audits 220–3, 231 background 24–6, 213–31 Banys de Sant Sebastià 226 business units 218–19 Can Caralleu 227–8 competitive bids 218–19, 224 contracts 216–29 C.P. Sarrià 227–8 critique 222–4, 228–9 customer satisfaction surveys 220–1, 228–9

INDEX

demographics 214–16 districts 222–4, 230–1 Follow-up Committee 219–21 historical background 214–18, 222– 4, 225–8 human resources 229 indirectly-managed facilities 228–9 legal issues 217–18 Madrid 213 management organization types 225–8 meetings 219–21 monitoring/assessment of contracts 219–21, 225 objectives 217–21, 222–4 Olympic Games 25–6, 213–31 performance issues 216–17, 219–21, 224–9 Piscina Bernat Picornell 227 Polideportivo Claró 225–6 politics 217–18 quality surveys 228–9 Sports Area 220–1, 222–4, 230–1 structure 218–31 Batlle, Albert 216, 217 Belgium 22–3, 27–43 see also Brussels . . . Bertelsmann Foundation 121, 126–7, 138–40, 143, 176 Best Value, UK 286–8, 292, 302 Beutel, Rainer Christian 124, 126–8, 139 Beutel–Mentzel, Ingrid 25, 119–44 bottom-up approaches 14, 99, 165, 198, 295–7 BPI (BruPort Invest) 34–43 brainstorming 104 BruPort Invest (BPI) 34–43 Brussels Port Authority 22–3, 27–43 added-value indicators 33, 52, 53 background 27–30 BPI 34–43 BTI 37, 40–3 CFNR 43 challenges 30–34 competitors 30, 31, 32, 36, 39–40

concession contracts 32, 46 conclusions 40–3 container terminal project 34–43 contracts 29–30, 31, 33, 41–3, 45–7 creation 29 critique 40–3 Egis Projects 37–43 fi nancial accounts 32, 48–51 historical background 27–30 IFB 37–43 incentive schemes 31, 33, 46–7, 52-3 investments for the container terminal 35–6, 40 legal aspects 29–30, 34–5 management plans 32–3 mission 30–2, 36, 38 objectives 30–5, 32–3 performance contracts 29–30, 31, 33, 45–7, 52–3 public–private partnerships 34–43 Smet SA 37–42 stakeholders 29–30, 43 strategic challenges 30–34 structure 29, 32–3, 34–40 traffic statistics 29–30, 32, 40–1, 43, 44 vertical integration 37–40 virtuous circles 40 Brussels Terminal Intermodal (BTI) 37, 40–3 Bücking, Thomas 142 budgeting 22–5, 82–117, 175–6, 186– 8, 194–6, 238–57, 274–5, 290– 2, 301–2, 306–8 Amersfoort 186–8, 194–6 Baar 274–5 Coesfeld 124–9, 132–3, 142 infl ation 91–2 levels 92–4 LOLF 22–5, 90–4, 104–12, 115–17 London Borough of Lewisham 290–2, 301–2, 306–8 Netherlands 175–6, 186–8, 194–6 Sweden 238–57 UPCAM 90–1, 96–112, 115–17

313

314

INDEX

Bullock, Steve 303 by-laws, Baar 271–84 C3D 37 Calderdale Council 304 Can Caralleu 227–8 Carcoke 30, 47 career planning, Estonian hospitals 70–1 Cargovil 39–40 case book guide 21–6 Cass, Dave 301–5 centralization 4–5, 87–8, 107–9, 295 CFNR, Brussels Port Authority 43 change 2–20, 21–2, 26, 58–61, 65–7, 77–8, 111–12, 194–6 defi nition 5 domestic drivers 6–7, 175–6 dynamic environments 3, 6–7, 11– 12, 15–16 emergent change 6, 14 features 6–9 global drivers 6–7, 148–9, 176 innovation contrasts 5 levels 5–6 multidimensional model 7 OECD drivers of change 148, 261, 266 planned change 6, 9–10, 12, 59–79 resistance to change 2, 12, 15, 16– 17, 21–2, 65–7, 77–8, 111–12, 194–6 retained processes 15–16 stakeholder perspectives 7–9, 11, 12, 15–16, 26, 58–61 change management Amersfoort 23–5, 183–200 Baar 25, 26, 139, 265, 270–84 Barcelona 24–6, 213–31 Brussels Port Authority 22–3, 27–43 case book guide 21–6 classifications 4–6 Coesfeld 23–5, 119–44 comprehensive approach 11–15 concepts 3–20

defi nition 4 design step 3–4, 9, 11–18, 307–8 Estonian hospitals 22–3, 55–79 historical background 1–2, 13 immediate results 17–18 implementation step 3–4, 5, 9, 11– 16, 18 London Borough of Lewisham 24– 6, 285–6, 288–309 Megara 23–5, 146–69 Milan 24–5, 201–11 Paul Cézanne University AixMarseille III (UPCAM) 22–5, 81–117 process steps 17–18, 21–6, 188–200 skills 3, 18, 21–2 steps 3–11, 15–18 Sweden 24–6, 233–63 Switzerland 265–86 timescales 17–18 citizens annual reports, Netherlands 183 civil society, boundaries 4–5 classifications, reforms 4–6 clients, identification 2, 14 CNC 38–9 CNE 88–9 coaching 18 see also training Coesfeld 23–5, 119–44 see also Germany accounting system 133–4, 143 accrual accounting 133–4, 143 activities 128–37 awards 119, 121–2, 136, 139–40 background 23–5, 119–44 budgeting 124–9, 132–3, 142 committees 125–6, 129–30 competences 129–30 competitive tenders 134 conclusions 139–44 constitutional prescriptions 123 contracts 132–3 critique 137–44 demographics 122–3, 127, 138–9, 140–1

INDEX

fi nance issues 128–9, 132–4, 141–4 fi rst programme of reforms 126, 128–32 future considerations 137–40 future workshops 126–8 historical background 122 human resources 123–4, 125–6, 129, 131–2, 134–6, 139, 141–2 information systems 133–4, 136 input-based budgets 128–9, 132–3 ISO standards 135 IT uses 136 job descriptions 129 mayors 123–8, 141–4 meetings 125–8, 130, 144 objectives 124–8 opinion polls 134–5, 144 output-based budgets 132, 136 partners 133, 136–7, 140 performance evaluations 134–6, 137–40 postscript 143–4 problems 140–4 process reengineering 135–7 programmes of reforms 126, 128– 37, 141, 144 quality issues 134–5, 137–41 recruitment/selection of personnel 132 reform goals/processes 124–8 second programme of reforms 126, 132–7 service delivery 126–8, 131, 135–7 stakeholders 23–5, 119–44 strategic reports 126–31, 139–44 structure 123, 125–8, 129–31 third programme of reforms 128, 141, 144 training needs 131–2, 135–6, 143 Unna model 131 collaboration initiatives/instruments, Baar 271–3, 276–84 commercial risks 43 community pledges, London Borough of Lewisham 289–92

community reforms, concepts 2, 14, 289–92 community strategy, London Borough of Lewisham 289–92 competition 2, 12–13, 30, 31, 32, 36, 39–40, 134, 218–19, 224 complexity issues, public sector 9, 17–18 Comprehensive Performance Assessments (CPAs), UK 288, 300–1, 303–4 conferences 18 see also workshops consensus levels 12–13, 140, 192–6, 267–8, 281–2 consultants 11, 190–4, 248–50 container terminal project, Brussels Port Authority 34–43 content issues, strategic planning 14–15 contingency approaches 7, 15 continuous learning 10–11, 12–13, 70, 199, 260–2, 283–4 corporate governance see also governance . . . concepts 86–90, 206–11, 266, 299–300 defi nition 86 corporate performance plans, London Borough of Lewisham 289–92, 307–8 cost accounting, accrual accounting 133–4, 143 C.P. Sarrià 227–8 CPAs (Comprehensive Performance Assessments) 288, 300–1, 303–4 Cristofoli, Daniela 21–6, 201–11 critical success factors, NERH 62–79 cultural issues, concepts 2–3, 5–7, 11, 12, 15–17, 22, 30–2, 32–3, 114, 176, 188–200, 253–4, 281–2, 285–309 customer focus, London Borough of Lewisham 302

315

316

INDEX

customer satisfaction surveys 71–5, 206, 207, 208–11, 220–1, 228–9 Barcelona 220–1, 228–9 Milan 206, 207, 208–11 debt to total asset ratio, NERH 75 decentralization 4–5, 85–90, 99, 129, 148, 222–4, 295 decision processes Amersfoort 23–5, 183–200 Baar 25, 26, 265, 270–84 Coesfeld 23–5, 119–44 Netherlands 23–5, 180–200 strategic planning 14–15 delegation issues 95–6, 189–90, 235–63 Delft, Netherlands 176, 199 Deputy Prime Minister, UK 288 design step change management 3–4, 9, 11–18, 307–8 components 16–17 Development Plan for Estonian Hospitals (DPEH) 59–60 direct democracy, Switzerland 266–8, 270, 281–2 directorate indicators, London Borough of Lewisham 289–92 districts, Barcelona 222–4, 230–1 domestic drivers, change 6–7, 175–6 double-entry bookkeeping 93–4 double-loop learning 262 DPEH (Development Plan for Estonian Hospitals) 59–60 Drucker, Peter 300 Dübendorfer, Jürg 26, 265–84 dynamic environments, change management 3, 6–7, 11–12, 15–16 EAGGF (European Agricultural Guarantee and Guidance Fund) 145 EBITA, NERH 75 Echebarria, Koldo 25–6, 213–31

economies of scale 39 education 22–5, 81–117, 293, 297 see also Paul Cézanne University Aix-Marseille III Egis Projects, Brussels Port Authority 37–43 EHIF (Estonian Health Insurance Fund) 56–78 EHMP (Estonian Health Master Plan) 55–76 elections 10, 103–4, 149–50, 166, 177–9, 185–7, 247, 287, 298–3 emergent change, concepts 6, 14 employees see human resources environmental key performance indicators, London Borough of Lewisham 294 EQUAL see also Megara background 151–69 conclusions 168–9 critique 161–9 Greece 23–5, 145–73 objectives 152–5, 163–4 outputs 161–9 principles 153–4 equity reforms, concepts 1–2 ERDF (European Regional Development Fund) 145 ESF (European Social Fund) 145, 152, 157 Estonian Health Insurance Fund (EHIF) 56–78 Estonian Health Master Plan (EHMP) 55–76 Estonian hospitals 22–3, 55–79 actions 62–75 background 55–61 career planning 70–1 case overview 56–61 catchment areas 56, 72 change period 57–61 communications 61, 63, 77–9 conclusions 78–9 critical success factors 62–79 critique 60–1, 75–9

INDEX

demands 60–1 DPEH 59–60 efficiencies 62, 63–4 fi nancial statistics 56, 57–60, 64–5, 73–5 fi nancing 56, 76–7 gap analysis 75–9 health care expenditure/GDP 56, 60, 76–7 human resources 57–61, 63–75, 77–9 job descriptions 67–8 legal aspects 57–8 Master Plan B 61–2 mergers 22–3, 57–79 mission 58, 70 NERH 57–79 objectives 55–60, 61–75, 79 patient satisfaction 71–2, 73–5 payment/motivation systems 60–1, 68–9, 76–7 performance evaluations 56, 58, 61–2, 74–5 public opinion 58–61, 71–2, 78 rationalization option 61–2, 78–9 recruitment/selection of personnel 68, 78 redundancies 65–7 statistics 55–60, 64–5, 73–5 structure 56, 57–8, 64–7 training needs 69–70, 71–2 working environment 72–5, 79 European Agricultural Guarantee and Guidance Fund (EAGGF) 145 European Commission 35 European Regional Development Fund (ERDF) 145 European Social Fund (ESF) 145, 152, 157 European Union (EU) see also individual countries EQUAL 23–5, 145–73 GDP gaps 145 Greece 23–5, 145–73 market shares of transport modes 52 Sapir proposals 164

evaluation step, change management 3–4, 8–9, 10–11, 13–14, 18 Executive Committee, London Borough of Lewisham 298–3 experimental units 98–9, 114 expertise factors, London Borough of Lewisham 307–8 external fi nancial incentives concepts 2–3 NPM 2 Faculty of Law, UPCAM 83 Faculty of Science, UPCAM 83 federalism, Switzerland 267–9, 282 fi nance solutions 4–5, 22–5 see also accounting; budgeting; managerial tools fi nancial accounts see also accounting . . . Brussels Port Authority 32, 48–51 UPCAM 97, 100–12, 116–17 fi nancial portfolios 12–13 Follow-up Committee, Barcelona 219–21 Fouchet, Robert 22, 81–117 France 22–5, 27, 37–8, 43, 81–117, 161 see also Paul Cézanne University Aix-Marseille III accountability issues 87–90, 95–6 credits 86–90, 91–2 governance systems 86–90 Greece 161 information systems 85–90, 93–4, 97–8, 107, 109–10 legal background 83–90 LOLF (Organizing Law over the Laws of Finance) 22–5, 82–117 Fundación Claró 225–6 Garcia, Lidia 25–6, 213–31 Germany 23–5, 38, 119–44, 176 see also Coesfeld administrative reforms 120–2 background 119–22, 176 KGSt 120–1, 124

317

318

INDEX

tax goals 121 Unity (1990) 120 global drivers, change 6–7, 148–9, 176 globalization 6–7, 148–9, 176 goals, strategy 12–13, 14–15 Good to Great initiative, London Borough of Lewisham 302 governance 12–13, 23–5, 82–90, 122, 201–11, 266–84, 299–300 Governance Test, Baar 283–4 GPEC 97, 114 Greece 23–5, 145–73 see also Megara background 145–9, 151–2 challenges 148–9, 151–2 demographics 147–8, 151–2, 158–69 EQUAL 23–5, 145–73 EU funds 23, 145–9, 155–69 EU membership 147–8 GDP figures 145–7 training 146, 154–6, 161–2 unemployment problems 152–4, 158–69 Guérin, Pierre 38 Haeger & Schmidt 38–9 health care sector 22–3, 55–79, 293 Hesse, Uwe 141–2 Hofmeister, Alfred 26, 265–84 horizontal change, concepts 4–5 hospitals 22–6, 55–79, 293 Estonian hospitals 22–3, 55–79 mergers 22–3, 55–79 housing key performance indicators, London Borough of Lewisham 294, 297 human resources Amersfoort 185–200 Baar 275, 280–1 Barcelona 229 capabilities 10 career planning 70–1 Coesfeld 123–4, 125–6, 129, 131–2, 134–6, 139, 141–2 EQUAL 151–69

Estonian hospitals 57–61, 63–75, 77–9 job descriptions 67–8, 129, 195–6 London Borough of Lewisham 301–2, 305–8 Megara 146, 152–3, 159–69 payment/motivation systems 60–1, 68–9, 76–7, 96–7, 107–9, 136, 305–6 quality evaluations 10, 134–5 redundancies 65–7, 187–8 resistance to change 2, 12, 15, 16– 17, 21–2, 65–7, 77–8, 111–12, 194–6 selection criteria 3, 68, 78, 96–7, 132 Sweden 243–6, 248–3, 257–62 training 3, 18, 69–70, 71–2, 131–2, 135–6, 143, 146, 154–6, 161–2, 275 turnover rates 15–16, 141 UPCAM 82–6, 96–110 Huygens, Charles 29, 32, 38 Ibern, Manuel 223 IFB (Inter Ferry Boats), Brussels Port Authority 37–43 immediate results, change management 17–18 implementation step, change management 3–4, 5, 9, 11–16, 18 incentive schemes Brussels Port Authority 31, 46–7, 33–3 concepts 2–3, 16, 18, 31, 46–7 NPM 2 indirectly-managed facilities, Barcelona 228–9 individualism problems 141 information systems Coesfeld 133–4, 136 France 85–90, 93–4, 97–8, 107, 109–10 London Borough of Lewisham 299–300

INDEX

MBR concepts 235–6 Netherlands 175–6 innovations change contrasts 5 concepts 2–3, 4–5, 6–9, 15–18, 21– 6, 154–5, 176, 295–6 defi nition 5 policies 16–17, 21–2 innovators, powers 15, 176 institutions 5–9, 10–13, 26, 95–6 Inter Ferry Boats (IFB), Brussels Port Authority 37–43 internal organizational cultures concepts 2–3, 5–7, 11, 12, 15–17, 22, 30–2, 32–3, 114, 176, 188– 200, 253–4, 281–2, 285–309 reform needs 2–3, 12, 22, 188–200 Internet 136, 280 interviews 18, 71–5, 206, 207, 208– 11, 220–1, 228–9, 234–5, 256–7 ISO standards Baar 270–1, 273–4, 281 Coesfeld 135 Italy 24–5, 161, 201–11 see also Milan Greece 161 Ivarsson, Sven-Ivar 240–1 Jacobsson, Bengt 248–9 JMM, UPCAM 98 job descriptions 67–8, 129, 195–6 Joyce, Paul 26, 285–309 key performance indicators (KPIs), London Borough of Lewisham 288–4, 299–302, 305 KGSt 120–1, 124, 133–4 knowledge management 3, 260–2, 278–80 KPIs see key performance indicators Latvia 56 LDCM (Local Development Company of Megara) 146–69 see also Megara

background 146–69 fi nance issues 151 objectives 150–1, 163–4 leadership 12, 17, 164–5, 176, 288–9, 295–309 learning see also organizational learning; training concepts 9–11, 18, 26, 156–7, 168, 199, 234–62 continuous learning 10–11, 12–13, 70, 199, 260–2, 283–4 double-loop learning 262 from experience 260–2 single-loop learning 262 Lewisham see London Borough of Lewisham Liddle, Joyce 25, 145–73 Lindmark, Lars 240, 243 Lithuania 56 Local Development Company of Megara (LDCM) 146–69 see also Megara background 146–69 fi nance issues 151 objectives 150–1, 163–4 local public companies 22–6 Löfqvist, Ivar 237–8 LOLF (Organizing Law over the Laws of Finance) anticipated effects 94–112 concepts 22–5, 90–117 core concepts 91–4 France 22–5, 82–117 historical background 90–2, 99–100 objectives 91–4, 99–101 voting 92–4 London Borough of Lewisham 24–6, 285–6, 288–309 see also United Kingdom 1994–1999 period 295–298 1999–2002 period 295, 298–300 2002–2005 period 295, 300–2 annual service plans 290–2 background 24, 26, 285–6, 288–309

319

320

INDEX

Best Value reviews 292, 302 budgeting 290–2, 301–2, 306–8 Business Cycle 292 challenges 285–6 community pledges 289–2 community strategy 289–2 conclusions 306–8 corporate performance plans 289–2, 307–8 CPAs 300–1, 303–4 critique 300–8 cultural issues 286–309 customer focus 302 demographics 288–9 directorate indicators 289–92 Executive Committee 298–303 expertise factors 307–8 golden thread 301–2, 305 Good to Great initiative 302 historical background 288–9, 295–302 human resources 301–2, 305–8 impact factors 303–6 information systems 299–300 key performance indicators 288–4, 299–302, 305 leadership 288–9, 295–309 LSPs 289 management accounting 301–2 mayors 298–303 objectives 285–309 performance issues 24, 26, 285–6, 288–309 personal appraisal targets 290–2, 305–8 policy documents 296–300 political management 298–303, 307–8 quality issues 289–92 reporting systems 296–8, 298–300 reputation 295–6 reviews 292, 302 service delivery 293–309 strategic planning 289–92, 297, 305–7 structure 288–9, 295–302, 307–8

Top 30 key performance indicators 293–4 vision statements 290–2 London Strategic Partnerships (LSPs) 289 Longo, Francesco 1–20, 21–6, 201–11 LSPs (London Strategic Partnerships) 289 Madrid 213 management accounting, London Borough of Lewisham 301–2 management by objectives 24–6, 233–63, 276 management by results (MBR) 24–6, 233–6, 250–63 annual documents 254–7 assumptions 236 background 24–6, 233–6, 250–63 concepts 235–6, 251–3, 257–62 conclusions 257–62 critique 257–62 delegation principles 235–6 historical background 237–57 learning process 260–2 pilot studies 253–7, 258 Program Budgeting 251–3, 257 rationalistic policy analysis 235–6 setbacks 258–9 SMART objectives 236 solutions 259–60 successes 258–9 managerial reforms, concepts 1–2 managerial tools concepts 4–5, 9–11, 13–14, 15–18, 21–2 types 4–5, 9–11, 14 market boundaries 4–5 market reforms, concepts 1–2 market shares European transport modes 52 NERH 62–3 marketing 4–5, 14, 32–3, 42, 63, 112, 164, 277–9 see also managerial tools marketization, NPM 2

INDEX

matrix structure, UPCAM 85–6 Mattijs, Jan 22, 27–43 mayors Coesfeld 123–8, 141–4 London Borough of Lewisham 298–3 Netherlands 178–88, 199-200 UK 298–3 MBR see management by results Megara 23–5, 145–73 see also Greece background 23–5, 146–69 conclusions 168–9 critique 146–7, 161–9 demographics 149–50, 158–69 elections 149–50, 166 EQUAL 23, 151–69 EU programmes 150–69 fi nance issues 151 history of prior EU programmes 155–8, 162–3, 165, 169 human resources 146, 152–3, 159–69 LDCM 150–69 Master Plan 164–5 mission 149–50 objectives 148–50, 162–9 partners 149–50, 158–62, 165–6, 167–9 public opinion 166–7 public–private partnerships 149–50, 158–62, 165–6, 167–9 structure 149–50, 165–9 Teliko Orio (Final Frontier) 158–60 training 146, 154–6, 161–2 unemployment problems 152–4, 158–69 mergers Estonian hospitals 22–3, 57–79 hospitals 22–3, 57–79 merit reforms, concepts 1–2 middle management, concepts 12 Milan 24–5, 201–11 see also Italy AEM SpA 203–5, 210–11

AFM SpA 205, 210–11 AMSA SpA 204–5 ATM SpA 204–5 background 24–5, 201–11 contracts 206, 207–11 controlling instruments 206–11 corporate governance rules 206–11 critique 210–11 customer satisfaction surveys 206, 207, 208–11 demographics 201–2 economic-and-fi nancial control instruments 206–7 future prospects 210–11 governance of municipal enterprises 24–5, 201–11 Milano Mare SpA 205 Milano Ristorazione SpA 204–5 Milano Sport SpA 204–5 MM SpA 204–5 objectives 202–11 outlook 210–11 privatizations 25, 202–11 purchaser–provider contracts 206, 207–11 quality issues 206–11 SEA SpA 204–5 services 202–5 SOGEMI SpA 204–5 stakeholders 202–11 structure 202–11 Milano Mare SpA, Milan 205 Milano Ristorazione SpA, Milan 204–5 Milano Sport SpA, Milan 204–5 militia system, Switzerland 268–9, 282 Minister of Finance, Sweden 237–40, 246–7 mission 2, 12, 13–14, 30–2, 46, 38, 58, 70, 86–7, 92–3, 114, 149– 50, 275 MM SpA, Milan 204–5 monistic/dualistic systems, Netherlands 181–3 multidimensional model, change 7

321

322

INDEX

NERH see North Estonia Regional Hospital Netherlands 23–5, 120, 122, 175– 200 see also Amersfoort administrative organization of local government 179–83, 185–8, 199-200 aldermen 178–88, 199-200 awards 176 background 23–5, 175–200 budgeting 175–6, 186–8, 194–6 cabinets 178–88, 199-200 central government roles 176, 181 change drivers 175–6 citizens annual reports 183 constitution 176–83 contracts 180–3 decision processes 23–5, 180–200 demographics 175–7, 183–4 elections 177–9, 185–7 historical background 175–6 information systems 175–6 IT 175–6 legal issues 181–3 local governments 175–83 mayors 178–88, 199-200 monistic/dualistic systems 181–3 objectives 180–1 political organization of local government 177–9, 184–8, 199-200 quality issues 175–6, 180–3 stakeholders 177–83 structure 176–88 tasks 180–1 town clerks/CEOs 179–83, 185–8 New Public Management (NPM) 2, 120–2, 233–4, 266 New Zealand 120–1 Nielsen, Ralf 130–1, 142–3 North Estonia Regional Hospital (NERH) 57–79 see also Estonian hospitals actions 62–75 background 57–79

career planning 70–1 catchment area 72 change period 57–61 communications 61, 63, 77–9 conclusions 78–9 critical success factors 62–79 critique 60–1, 77–9 efficiencies 62, 63–4 fi nancial statistics 57–8, 64–5, 73–5 formal reform processes 61–2 gap analysis 75–9 human resources 57–61, 63–75, 77–9 internal controls 64 job descriptions 67–8 legal aspects 57–8 market shares 62–3 Master Plan B 61–2 mission 58, 70 objectives 57–60, 61–75, 79 patient satisfaction 71–2, 73–5 payment/motivation systems 60–1, 68–9, 76–7 performance evaluations 58, 61–2, 74–5 public opinion 58–61, 71–2, 78 ratio analysis 75 rationalization option 61–2, 78–9 recruitment/selection of personnel 68, 78 redundancies 65–7 strategic objectives 62–75, 79 structure 57–8, 65–7 training needs 69–70, 71–2 working environment 72–5, 79 NPM (New Public Management) 2, 120–2, 233–4, 266 OAED 162, 164 obstacles 2, 12, 15, 16–17, 21–2, 65–7, 77–8, 111–12, 194–6 OECD drivers of change 148, 261, 266 Offi cial Journal of the European Communities 36

INDEX

öhmann, Heinz 128, 138, 143 Oikonomoulous, Ionnis 25, 145–73 Olympic Games, Barcelona 25–6, 213–31 openness benefits 103 operations 6–7, 12, 14, 82–6, 95–6, 103–9, 111–12, 290–2, 307–8 organizational contingent history 7, 15 organizational learning see also learning concepts 9–11, 156–7, 168, 199, 234–62, 283–4 planned change 9–10 organizational skills 9–11, 18, 21–2 organizational strengths/weaknesses 10–11, 12 organizational structures 4–5, 7, 9–11, 12, 14, 29, 32–3, 34–40 see also managerial tools Amersfoort 184–8, 190–200 Baar 270–84 Barcelona 218–31 Brussels Port Authority 29, 32–3, 34–40 Coesfeld 123, 125–8, 129–31 Estonian hospitals 56, 57–8, 65–7 evaluation 9–11, 14 London Borough of Lewisham 288–9, 295–302, 307–8 Megara 149–50, 165–9 Milan 202–11 Netherlands 176–83 Sweden 237–9, 245–7, 250–7 UPCAM 83–90, 101–3, 113 Organizing Law over the Laws of Finance (LOLF) anticipated effects 94–112 concepts 90–117 core concepts 91–4 France 22–5, 82–117 historical background 90–2, 99– 100 objectives 91–4, 99–101 votes 92–4 overview 22–6

PACT programme 35 partners 17, 18, 22–3, 34–43, 133, 136–7, 140, 149–50, 154–69, 185–8, 202–11, 213–31 Amersfoort 185–8 Coesfeld 133, 136–7, 140 LSPs 289 public–private partnerships 22–3, 34–43, 149–50, 158–62, 165– 6, 167–9, 185–8, 202–11, 213–31 Paul Cézanne University AixMarseille III (UPCAM) 22–5, 81–117 accounting improvements 100–12, 116–17 actions 103–9 analytical budgeting 104–12, 115–17 background 82–117 balanced scorecards 105, 109–10 budget by destination 90–1 budgetary envelopes 96–110 case requirements 112 change process 22–5, 98–112 communications 103–4, 106–7, 112 conclusions 110–12 contracts 88–90 councils 83–4, 87–8 creation 83 critique 84–6, 110–12 elections 103–4 expected changes 96–112 experiments 98–9, 114 Faculty of Law 83 Faculty of Science 83 fi nancial accounts 97, 100–12, 116–17 governance 82–8 historical background 83–4, 86–90, 98–100 human resources 82–6, 96–110 informal governance systems 84–6, 93–4 JMM 98 legal background 83–90

323

324

INDEX

LOLF day 99–100 LOLF (Organizing Law over the Laws of Finance) 22–5, 82–117 matrix structure 85–6 meetings 102–6 operations 82–6, 103–9, 111–12 outcomes 110–12, 114 payment/motivation systems 107–9 performance issues 105–9, 114 phases of change 100–10 president’s roles 83–4 ratio analysis 104–5 stakeholders 83–6, 92–4, 106–10 statistics 83 strategy-making improvements 100–12 structure 83–90, 101–3, 113 performance contracts, Brussels Port Authority 29–30, 31, 33, 45–7, 52–3 performance evaluation systems see also managerial tools balanced scorecards 97, 105, 109–10 Coesfeld 134–6, 137–40 concepts 4–5, 8–9, 10–11, 13–14, 18, 24–6, 56, 62–3, 94, 97, 106–9, 114, 134–6, 286–309 critical success factors 62–79 dimensions 10, 286–8 KPIs 288–4, 299–2, 305 London Borough of Lewisham 24– 6, 285–6, 288–309 Phoenix, Arizona 121 Piscina Bernat Picornell 227 Plamper, Harald 25, 119–44 planned change, concepts 6, 9–10, 12 policies 16–17, 21–3, 55–79, 152, 286–8, 296–300 Polideportivo Claró 225–6 political patronage, merit reforms 1–2 politics 1–2, 8, 10, 22–3, 28–9, 55– 79, 119–44, 148, 217–18, 258– 2, 266–71, 281–2, 298–3

private sector public sector contrasts 7–8, 22–3, 149–50, 165–6, 216 public–private partnerships 22–3, 34–43, 149–50, 158–62, 165– 6, 167–9, 185–8, 202–11, 213–31 privatizations 25, 202–11 process reengineering 3, 135–7 productivity 10 see also performance . . . Program Budgeting, Sweden 239–7, 251–3, 257 public managers, stakeholder perspectives 8 public professionals 8, 60–3, 79, 114, 140 public sector see also change . . . ; reforms complexity issues 9, 17–18 private sector contrasts 7–8, 22–3, 149–50, 165–6, 216 public–private partnerships 22–3, 34–43, 149–50, 158–62, 165–6, 167–9, 185–8, 202–11, 213–31 quasi-markets, NPM 2 quick ratio, NERH 75 Quirk, Barry 295–304 radical changes, concepts 17 rationalistic policy analysis, MBR concepts 235–6 Rationalization Commission, Sweden 237–9 redundancies 65–7, 187–8 reforms Amersfoort 23–5, 183–200 Baar 25, 26, 139, 265, 270–83 balanced needs 2–3 Barcelona 24–6, 213–31 case book guide 21–6 change management 3–20 classifications 4–6 Coesfeld 23–5, 119–44

INDEX

comprehensive approach 11–15 concepts 1–20 defi nition 4 domestic drivers 6–7, 175–6 effective management 2–20 Estonian hospitals 22–3, 55–79 features 6–9 global drivers 6–7, 148–9, 176 historical background 1–2, 13 London Borough of Lewisham 24– 6, 285–6, 288–309 Megara 23–5, 146–69 Milan 24–5, 201–11 needs 2–3, 21–6 Paul Cézanne University AixMarseille III (UPCAM) 22–5, 81–117 periods 1–2 purposes 4–5, 12 slowness problems 2 Sweden 24–6, 233–63 Switzerland 265–84 systemic drivers 2, 6–9, 12, 148–9, 175–6, 188–200 regeneration key performance indicators, London Borough of Lewisham 294 relationships 12–13, 15–16, 25, 26, 95–6, 192–4 religion 137, 160 resistance to change 2, 12, 15, 16–17, 21–2, 65–7, 77–8, 111–12, 194–6 road shows, Baar 280 RPGK, Baar 273–4 RRV, Sweden 238–62 Rubio, Francesc 25–6, 213–31 rules, concepts 4–5 Sapir proposals 164 Schmidt, Kerstin 138–9 SEA, Sweden 245–57 SEA SpA, Milan 204–5 SEAE, Barcelona 227 Sepper, Ruth 22, 55–79 Serra, Albert 229

service delivery Amersfoort 186–200 Coesfeld 126–8, 131, 135–7 London Borough of Lewisham 293–309 service users, identification 2, 14, 148–9 Severijnen, Piet 25, 175–200 single-loop learning 262 skills see also training change management 3, 18, 21–2 organizational skills 9–11, 18, 21–2 SMART objectives 195, 236 SMEs 40 Smet SA, Brussels Port Authority 37–42 SOB, Amersfoort 185–200 social capital, Switzerland 269–70, 276–7 SOGEMI SpA, Milan 204–5 Spain 24–6, 213–31 see also Barcelona Speyer Award 25, 26, 119, 121–2, 139–40, 265, 270–1, 280–2 sports 22, 24–6, 213–31, 294 Sports Area, Barcelona 220–1, 222–4, 230–1 staff see human resources stakeholders 4–5, 7–8, 11, 12–14, 15– 18, 26, 58–61, 83–6, 92–4, 95–6, 119–44 see also managerial tools analysis 17 Baar 25, 26, 265, 270–84 Brussels Port Authority 29–30, 43 Coesfeld 23–5, 119–44 Milan 202–11 Netherlands 177–83 perspectives 7–8, 11, 12, 15–16, 26, 58–61 public/private sector contrasts 7–8 relationships 12–13, 15–16, 26, 95– 6, 192–4 types 8, 17, 58–9 UPCAM 83–6

325

326

INDEX

state boundaries 4–5 Statskontoret, Sweden 238–56 stevedoring activities, Brussels Port Authority 31, 37–9 strategic change management see also change management case book guide 21–6 concepts 1–26 strategic planning concepts 13–15, 289–2, 297, 305–7 content issues 14–15 decision processes 14–15 focus areas 13–14 London Borough of Lewisham 289–2, 297, 305–7 tools 14–15 strategy challenges 12–13 comprehensive approach 11–15 concepts 3, 12–15, 289–2, 297, 305–7 defi nition 12 dependencies 12–13 goals 12–13, 14–15 reform needs 3, 11–15 targets 12–13, 285–309 structure Amersfoort 184–8, 190–200 Baar 270–84 Barcelona 218–31 Brussels Port Authority 29, 32–3, 34–40 Coesfeld 123, 125–8, 129–31 concepts 3, 7, 9–11, 12, 14 Estonian hospitals 56, 57–8, 64–7 London Borough of Lewisham 288–9, 295–302, 307–8 Megara 149–50, 165–9 Milan 202–11 Netherlands 176–88 reform needs 3, 10–11 Sweden 237–9, 245–7, 250–7 Switzerland 266–84 UPCAM 83–90, 101–3, 113 Sundström, Göran 26, 233–63

Sweden 24–6, 233–63 Agency Management Commission 250–2 annual MBR documents 254–7 background 24, 26, 233–63 budget handbook 247–50, 256 budgeting 238–57 cloned evaluations 261 critiques 243–6, 248–62 elections 247 historical background 237–57 human resources 243–6, 248–3, 257–62 interviews 234–5, 256–7 learning process 260–2 MBR 24–6, 233–6, 250–63 Minister of Finance 237–40, 246–7 objectives 235–63 performance issues 239–63 pilot budget handbook studies 248–50 pilot MBR studies 253–7, 258 pilot Program Budgeting studies 242–6 Program Budgeting 239–7, 251–3, 257 Rationalization Commission 237–9 RRV 238–62 SEA 245–57 Statskontoret 238–56 structure 237–9, 245–7, 250–7 Switzerland 25–6, 121–2, 139–40, 265–84 see also Baar background 265–71 central government roles 268–9 civic organizations 269–70 concordance 267–8 decision processes 25, 26, 265–84 direct democracy 266–8, 270, 281–2 federalism 267–9, 282 local level social capital 269–70, 276–7

INDEX

militia system 268–9, 282 political system 266–71, 282 stakeholders 25, 26, 265–84 structure 266–84 SWOT analysis 14 systemic drivers, reforms 2, 6–9, 12, 148–9, 175–6, 188–200 targets, concepts 12–13, 285–309 technical aspects, change 6–7, 18 Teliko Orio (Final Frontier), Megara 158–60 Thatcher, Margaret 134 Tilburg, Netherlands 120, 176 timescales, change management 17–18 tools 4–5, 9–11, 13–14, 15–18, 21–2 see also managerial tools strategic planning 14–15 top-down approaches 9–10, 14, 128– 9, 165, 196, 295–7 TPG, UPCAM 99–100 training see also learning Greece 146, 154–6, 161–2 reform needs 3, 18, 69–70, 71–2, 131–2, 135–6, 143, 275 transparency issues, Baar 272, 276, 279–80 trust 103, 125, 130–1, 143–4, 157, 161–2 Turc, Emil 22, 81–117 turnover rates, human resources 15– 16, 141 UK see United Kingdom unemployment problems, Greece 152–4, 158–69 United Kingdom (UK) 24–6, 120–1, 134, 146, 150, 176, 285–309 see also London Borough of Lewisham

Audit Commission 285–8, 300–1, 305 Best Value 286–8, 292, 302 challenges 285–6 continuous improvements 287–8 CPAs 288, 300–1, 303–4 Deputy Prime Minister 288 elections 287 failing councils 288 legal issues 286–7 LSPs 289 mayors 298–3 objectives 285–309 performance issues 285–309 public policy context 286–8 the Université Paul Cézanne see Paul Cézanne University . . . universities 22–6, 81–117, 277 see also Paul Cézanne University Aix-Marseille III University of Zurich in Winterhur 277 Unna 131 UPCAM see Paul Cézanne University Aix-Marseille III USA 121, 239, 241 van de Bovenkamp Ba, Job 25, 175–200 Vernis, Alfred 25–6, 213–31 vertical change, concepts 4–5 vertical integration 37–40 virtuous circles, Brussels Port Authority 40 vision 38, 58, 70, 79, 97, 132, 149– 50, 176, 290–2 working capital ratio, NERH 75 workshops 18, 126–8, 131–2, 191–4, 279–80, 283–4 Index compiled by Terry Halliday

327

Strategic Change Management in the Public Sector: An EFMD European Case Book

Total Quality Management in the Public Sector

Crisis in Public Sector

Strategic Management: Awareness and Change

Transcending New Public Management: The Transformation of Public Sector Reforms

Transcending New Public Management: The Transformation of Public Sector Reforms

Tourism: Politics and Public Sector Management

Public Sector Performance: Management, Motivation, And Measurement

The Responsible Contract Manager: Protecting the Public Interest in an Outsourced World (Public Management and Change)

Resource Allocation in the Public Sector: Values, Priorities and Markets in the Management of Public Services

Case studies in strategic bombardment

Budget Theory in the Public Sector

Public Sector Payrolls

Public Sector Accounting

New Public Management: An Introduction

Financial Management in the Voluntary Sector: An Introduction

Climate Change Adaptation in the Water Sector

Transforming Managers: Engendering Change In The Public Sector (Gender, Change & Society.)

Organizing Innovation: New Approaches to Cultural Change and Intervention in Public Sector Organizations (Innovation and the Public Sector)

Fiscal Management (Public Sector, Governance, and Accountability) (Public Sector, Governance, and Accountability Series)

Strategic Management

Strategic Planning for Nurses: Change Management in Health Care

Strategic Public Finance

Innovation in the Public Sector: Linking Capacity and Leadership (Governance and Public Management)

Revisiting Waldo's Administrative State: Constancy And Change in Public Administration (Public Management and Change)

Strategic Choices in Reforming Public Service Employment: An International Handbook

Strategic Change Management in the Public Sector: An EFMD European Case Book

Total Quality Management in the Public Sector

Crisis in Public Sector

Strategic Management: Awareness and Change

Transcending New Public Management: The Transformation of Public Sector Reforms

Transcending New Public Management: The Transformation of Public Sector Reforms

Tourism: Politics and Public Sector Management

Public Sector Performance: Management, Motivation, And Measurement

The Responsible Contract Manager: Protecting the Public Interest in an Outsourced World (Public Management and Change)

Resource Allocation in the Public Sector: Values, Priorities and Markets in the Management of Public Services

Case studies in strategic bombardment

Budget Theory in the Public Sector

Public Sector Payrolls

Public Sector Accounting

New Public Management: An Introduction

Financial Management in the Voluntary Sector: An Introduction

Climate Change Adaptation in the Water Sector

Transforming Managers: Engendering Change In The Public Sector (Gender, Change & Society.)

Organizing Innovation: New Approaches to Cultural Change and Intervention in Public Sector Organizations (Innovation and the Public Sector)

Fiscal Management (Public Sector, Governance, and Accountability) (Public Sector, Governance, and Accountability Series)

Strategic Management

Strategic Planning for Nurses: Change Management in Health Care

Strategic Public Finance

Innovation in the Public Sector: Linking Capacity and Leadership (Governance and Public Management)

Revisiting Waldo's Administrative State: Constancy And Change in Public Administration (Public Management and Change)

Strategic Choices in Reforming Public Service Employment: An International Handbook

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