1. law, govt and politics
2. government

“AGENCIFICATION”:
PENDING QUESTIONS AND HOW TO
ADDRESS THEM
Paper for the Annual NIG Conference
Workshop 5: Trust at arms’ length: How can politicians trust agencies?
October 30-31, 2002, Rotterdam
Koen VERHOEST & Bram VERSCHUERE
Public Management Institute – KU Leuven
koen.verhoest@soc.kuleuven.ac.be / bram.verschuere@soc.kuleuven.ac.be
“Agencification”: pending questions and how to address them
Introduction
This paper is not aiming at presenting research results, it is to be seen as a discussion paper.
We will present the early stages of a research project we are currently developing towards
agencification and agencification processes in Flanders and in a later stadium also in an
international context. First, we deal with the demarcation of our research topic. Here we will
try to define the research objects that we will deal with. In a second part we will present the
conceptualisation of agencification and agencification processes we developed. Third, we will
pose some initial research questions and present some theoretical assumptions linked to these
research questions. To conclude, we will present a preliminary research design that will also
have attention to the research questions we posed earlier.
Demarcation of the research
Agencification often is placed under the umbrella of what is called ‘administrative
decentralisation’. Decentralisation is a trajectory (an intentional pattern, or a route that one
takes) of public sector reform (Pollitt and Bouckaert, 2000). It is to be classified under the
umbrella of organisational reform1, that is, a pattern that links an initial organisational
situation (of the public sector) and a desired or intended future public sector organisation.
Pollitt and Bouckaert (2000) argue that in order to understand the concept of
‘decentralisation’, you have to see it as a process that contains at least three strategic choices.
The first choice is this between ‘political’ and ‘administrative’ decentralization. Political
decentralization is transferring authority to elected political representatives at a lower level in
the state organisation (e.g. from central to local government), while administrative
decentralisation is transferring authority to another body (e.g. an agency). The second choice
is between passing authority to another body which is selected by competitive means (e.g.
through competitive tendering) and transferring authority by non-competitive means. The
third choice is between internal and external decentralization. Internal decentralization is
transferring powers within an existing organisation, while external decentralisation is passing
authority towards an independent external body or organisation (that is existing or newly
created). Within the scope of this paper, we are mainly interested in administrative
decentralisation, be it internal or external. Administrative decentralisation is sometimes
referred to as agencification (Peters, 2002, Smullen et al., 2001, Verhoest, forthcoming) and
can be defined as ‘standing besides decentralisation via markets and political decentralisation;
it does not reject state delivery of services but seeks to create organisations more consumer
responsive while retaining control ‘ (Hambleton, 1992). In the literature, there is commonly
made a distinction between ‘internal autonomous agencies’ and ‘external autonomous
agencies’. If decentralisation is the positioning of the state tasks in an existing or a new
organisation outside of the former central government organisation, it is external
decentralisation. If one talks about the creation of new organisational units or the enlargement
of the autonomy of existing units within the former central government organisation, it is
internal decentralisation (Bouckaert & Verhoest, 1997). Internal decentralisation also implies
that the full political responsibilities of the minister and the hierarchical ties between minister
and decentralised organisation remain unchanged, while in external decentralisation the
relation between minister and decentralised body becomes a relationship that is legally
described. Most often, an external decentralised body also has legal personality (Verhoest,
forthcoming). From what has been written above, it should be clear that ‘agencification’ has
to do with ‘organisational reform’.
Our research objects are administrative decentralised public sector organisations, or agencies,
or quango’s. These organisations however are not that homogenous a field as one could
presume. It is indeed a variety of public sector and semi public sector organisations that
covers a broad spectrum. Several authors did attempts to map the field. Greve et al. (1999)
1
Other organisational reform trajectories are according to the same authors: specialisation, co-ordination and scale
adjustments.
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
2
“Agencification”: pending questions and how to address them
argue that most efforts to solve the definition problem have so far not been successful on two
accounts. First, the attempt to make a deductive definition based on structural features of
organisations failed because some organisations were not listed for purely formal reasons.
Second, the studies that focused on government organisations which had their functions
decentralized functionally left out bodies that developed on a bottom up basis like voluntaries.
They come up with a continuum of quangos, ranging from departmental units over contract
agencies, public bodies, the voluntary/charity and privatisation/semi-privatization to
contracting out. For each type of organisation, five conditions are described: finances (how is
the organisation financed?), ministerial responsibility (can the minister be held responsible?),
control mechanisms (can the minister control?), public task (can the aim of the quango be
considered as a public task?) and public domain (distinguishes government related
organisations from private organisations). It is these conditions that are crucial to distinguish
between quangos.
Contracting
out
Private
organisation
contract with
state
Definition
Finances
Voluntary / Public Body
Charity
Bottom
up Arm’s length
body
but publicly
performing
funded
public
function
Market
mechanism
Privatization
/ semi-privat.
Former state
owned
company, now
wholly
or
partly
privatized
Capital
market, stock
Contract
agency
Quasi
autonomous
part
of
department
Departmental
unit
Hierarchical
unit
under
direct
ministerial
control
Donation,
subsidy
State budget State budget
or levying
State budget
?
no
no
partial
yes
yes
Contract
Market
regulation
Co-op,
contract
statutes
Framework
document
Direct
political
?
?
yes
yes
yes
yes
No
No
yes
yes
yes
yes
British Rail
Salvation
Army
Netherlands
National Bank Prison service UK
Home
Denmark
UK
Office
Ministerial
Responsibility
Control
mechanism
Public task
Public
domain
Waste
disposal
Dutch
communities
Source: Greve et al. (1999)
Example
Pollitt et al. (2001) start from the idea that one may envisage a two dimensional spectrum of
types of organisation running from the centre of government out across the public-private
borderline. Along one dimension one moves from organisations with no commercial purposes
to those that are largely suffused with commercial purposes (e.g. state enterprises) and
privately owned, profit seeking companies. This is the ‘state-market’ dimension. The other
dimension moves from wholly state owned and public law dominated institutions (e.g. a
ministry) through arm’s length but still public bodies (agencies) to public private partnerships
and finally to voluntary organisations that are part of the civil society. This is the ‘state – civil
society’ dimension. It is argued that different definitions of agencies fence off more or less
extensive strips along these two dimensions. Pollitt et al. (2001) see agencies as lying center
left on both the state – market and the state – civil society dimension. At the left hand pole of
both dimensions lie ministries. At the right hand pole of the state-market dimension state
enterprises and private companies are excluded. At the right hand side of the state-civil
society dimension voluntary associations are excluded. Bouckaert and Peters (2001) also
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
provide a list of what they call ‘an increasingly large collection of other types of public bodies
existing within the set of government with which we are concerned. They classify them in the
following way, based on a descending order of proximity to the formal, legal authority of the
state (also cf. supra): (1) components of ministries (hierarchically subordinated to ministry),
(2) independent but within ministry (legal personality can, but yet legally subordinated), (3)
legal entity but within ministry (American agencies are archetypically; status in public law,
but for many purposes subordinated), (4) legal entity public law (autonomous or semiautonomous organisation founded under public law), (5) legal entity private law (private law
organisations that yet perform public functions), (6) sui generis organisations (can be entirely
free from executive control, responsible to parliament, quasi judicial state entities, …). So
what are ‘agencies’ now for our purposes? What organisations will be included in our
research project? This question is not totally clear yet, partly due to the fact that there is a lack
of criteria that can identify the organisations that are interesting for our case. Therefore, up to
now, we will have to rely on a pragmatic way to deal with this problem. We discern 4
concentric circles. The middle circle is the core government organisation, or the departmental
unit in the terms of Greve et al. The next circles are the ‘internal autonomous (or
decentralised) agencies’ and the ‘external autonomous (or decentralised) agencies’. This is
also the distinction we made in the first part of this paper. The fourth circle is the most
difficult one because of its heterogeneity. This is the circle within which the hybrid
organisations, the private not-for-profit with links to governments, the public profit, … are
situated. Ultimately, it is the aim to engage these four circles in our research. Still some close
criteria about where we will draw the border need to be developed. We engage these four
circles because we hypothesize that the centre of policy implementation (and perhaps also
policy making) has been shifted from circle 1 (core government) to circles 2 and 3 (internal
and external autonomous agencies), but also for a large part to the semi-public ‘grey’ zone of
circle 4. It is these shifts that we want to detect as part of the research project (by doing
longitudinal research).
Conceptualisation of ‘agencification’
Administrative decentralisation (or ‘agencification’) is a trajectory within a scenario of public
sector reform or modernisation. This means that the incentives for this decentralisation must
lay somewhere in the desire of policy-makers to progress to a new, desired public sector
organisation and/or in the distrust of the previous or existing public sector organisation.
Agencification is a phenomenon that has been seen in all of the OECD countries but also in
developing countries and in former Eastern European countries (Talbot, Caulfield, 2001,
Beblavy, 2002). Some authors speak about an ‘apparent global convergence on the agency
form’ (Pollitt et al., 2001). The agency form has become popular for executing a varied range
of state functions in a large number of countries. For example in the UK (next steps agencies
and non departmental public bodies), New Zealand (Crown Entities), Japan (Independent
Administrative Corporations) and Jamaica (Executive Agency Programme) one went over to
agencification (Smullen et al., 2001). However, despite the fact that there often is argued that
one is ‘converging’ towards the agency-form all over the world, what is also the truth to a
certain extent, one should recognize that the agency-form maybe is not that homogenous as
one sometimes might think. It can be argued that although the numerous similarities among
these organisations being created all over the world, there is also a great deal of variation
among these organisations (Bouckaert and Peters, 2001). The variation occurs along a number
of dimensions: (1) governance structure and the relation with ministerial authorities, (2)
degree of autonomy these organisations have, (3) the variety of tasks these organisations
have. Also the sometimes prevailing assumptions of homogeneity and convergence have to
some extent reduced the development of analysis of and theory about the structural changes
occurring in the public sector. These numerous changes have produced a need to ask a wide
variety of questions about the number, variety and characteristics of the agencies. These
questions (amongst others) point out very clearly the need for a structural research agenda on
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
agencification. Hence we need to find a way to conceptualise and to operationalize the
concept and relevant dimensions of the process of agencification in order to be able to answer
our research questions. If we want to be able to solve these questions, we need to detect the
main variables, conceptualise them and also make them measurable. How did we detect these
variables? This was a matter of both a bottom-up and a top-down process. Prof. Bouckaert,
prof. Peters, Koen Verhoest and Bram Verschuere had a brainstorm on what the most
important aspects of the process of agencification are. Next to that we reviewed the literature
in order to find the variables that are of importance for answering our questions. Ultimately
we came up with five clusters of possible variables that constitute the process of
agencification: (1) organisational identity (ORGID), (2) organisational autonomy
(ORGAUT), (3) organisational steering and control (ORGSTC), (4) organisational culture
(ORGCUL) and (5) organisational performance (ORGEP). These five items seem relevant if
we put them next to some existing research on agencification. Wolf (1993) did a case survey
in order to test some theories on their predictive value for explaining effectiveness of
agencies. He used the case survey method to aggregate the collective judgements of previous
case study researchers regarding effectiveness and other key characteristics of US cabinet
agencies. He selected 14 independent variables on two criteria: to be crucial to one or more
schools of thought2 on effectiveness and disagreement among theories as to their likely effect.
These variables3 can all be placed under one of the five items we defined above and according
to the theory they are linked at, they can have a positive or negative effect on the effectiveness
of agencies:
ORGID: age, government monopoly on mission, resources targeted on critical task,
difficulty of agency mission, controversial mission, hierarchical structure
ORGAUT: political autonomy, delegation of operational decision making authority
ORGSTC: Formalization
ORGCUL: leadership skills, identification with agency, sense of mission, adaptability
ORGEP is the dependent variable here.
Bouckaert and Verhoest (1997) did a similar exercise. They looked at what some theories say
about conditions (independent variables) for an effective decentralisation. They grouped the
conditions in three clusters: (1) features of activities (e.g. homogeneity of activities, asset
specificity, …) which can be seen as having links with what we call ORGID, (2)
accompanying provisions (e.g. performance agreement, output-related financing, …) which
can be seen as having links with what we call ORGSTC and (3) conditions (e.g. market type
mechanisms, borrowing capacity, internal management change, …) which can be seen as
having links with what we call ORGAUT. No conditions were found that can be linked to
ORGCUL.
A last research project we will look at in the light of our conceptualisation of the notion of
agencification is Van Thiel (2000). She did her doctoral dissertation on trends, causes and
consequences of quangocratization (yet another terminology in the field of administrative and
functional decentralization). She hypothesed4 on expected effects on the efficiency and
effectiveness of policy implementation by quangos (her terminology). There were 7 variables
detected, their hypothesized effect will be mentioned as well5:
2
He looked at 8 schools of thought: agency life cycle, leadership theory, Weberian institutionalism,
professionalism, Wilson bureaucracy theory, economic responsibility, population ecology and political theory of
the firm. He also added a non-theory that argues that luck is the best explanation for effectiveness.
3
The variable ‘presidential support’ is not in the list here, because we don’t know under which item it should be
placed.
4
We will not go into the results here.
5
She also mentioned the notion of a performance paradox. This is a weak correlation between reported and actual
performance. The seven variables, and four more (diversity of performance indicators, clear policy objectives,
emphasis on efficiency and supervision) also influence the occurrence of such a paradox.
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
5
“Agencification”: pending questions and how to address them
3 of them seem to have links with our ORGID cluster:
• Competition (+); operationalised in the market position of the organisation,
the allowance to engage in commercial activities, …
• Corporatism (+); operationalised in the presence of interest groups in the
boards of the organisations.
• Size (-); operationalised in i.a. the size of the budget, the number of
personnel, …
1 might have links with ORGAUT:
• Ownership production rights (+); operationalised in i.a. the right to retain
surpluses, ways of financing, determination of tariffs, the right of the minister
to intervene.
1 seems to have links with ORGSTC:
• Accountability requirements (+); operationalised in the number of
accountability requirements
2 might have links with our ORGCUL cluster:
• Closeness to politiciansn (+); operationalised in i.a. loyalty, commitment to
politicians, intensity of contact between organization and department,
• Risk perception (+); operationalised in the way of dealing with
responsibilities and changes
As one can see, our five clusters seem relevant to study the field of agencification, at least
with regard to what we learned out of previous research. Therefore we will take a closer look
at these five clusters and try to refine them and make them operational and measurable.
Aspects of decentralisation
Autonomy (ORGAUT)
Together with ‘steering and control’, autonomy is the constituent element of agencification
par excellence (Verhoest, 2002). There is little systematic work in the literature about the
concept of autonomy. It is also often treated as a unidimensional concept, what is not totally
correct we will argue. It is indeed a multidimensional concept; autonomy can be operational
or strategic, and autonomy can be in relation to policy matters or management affairs
(Verhoest, 2002, Bouckaert and Peters, 2001). First we have policy autonomy. This is the
freedom to decide on content and/or results of the primary policy process. If an organisation
has a low level of policy autonomy, this means that the oversight authority has the decision
right on activities, conduct, policy instruments, outputs, outcomes and effects. Operational
policy autonomy is about the set of activities and procedures in the primary process. Strategic
policy autonomy is about the choice of policy instruments and outputs, the goals and effects.
It is worth noting that it is possible that strategic policy autonomy can be combined with no
operational policy autonomy in a particular organisation. We refer here in the first place to
Neelen (1993), who made a classification of alternative divisions of power of decision making
between principal and agent. On the one hand, he looks at where the authority to make a
specific decision lays: (A) is it the agent (agency) or is it (P) the principal (oversight
authority)? Second, he looks at the level of involvement of the principal in the decision
making process: (a) only slight involvement and thus a relatively independent agent, (c) a
moderate involvement and consultation between principal and agent, (p) a strong involvement
and heavy constraints on the agent. If you combine these two scales, you get six possible
combinations with a decreasing autonomy for the agency: (A,a); (A,c); (A,p); (P,a); (P,c); and
(P,p). Another author is Christensen (1999) who talks about dimensions of ‘bureaucratic’
autonomy. He distinguishes three dimensions; structural autonomy, financial autonomy and
legal autonomy. It is mainly the notion of ‘legal autonomy’ that is new for us here. It is
defined as ‘the authorization by law of the agency head to make decisions in his own
capacity, thus forbidding ministerial intervention in his decisions as well as his consultation
with the minister or the ministers advisers on decisions that, according to the law, are
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
6
“Agencification”: pending questions and how to address them
delegated to him’. Christensen developed a scale that goes from less to more autonomy: (1)
legislation leaves no or little discretion to departmental minister, contains no authorization to
issue general regulations, (2) legislation authorizes minister to issue general regulations to
fulfil the policy goals defined by the law, the agency head’s autonomy is a matter of
ministerial delegation, (3) legislation authorizes agency head to decide on individual cases
that cannot be brought to the minister, the minister is cut off from general and specific
intervention in case processing and (4) legislation authorizes agency to issue general
regulation to fulfil policy goals that are defined by goals. We also have management
autonomy. This is the freedom to the choice and application of inputs in the primary policy
process. Operational management autonomy is about decisions on choice and application of
individual inputs, strategic management autonomy is about decisions on general principles
and rules with regard to a kind of input. However, we not only have to deal with the question
what autonomy is, we also want to measure the level of autonomy that a certain organisation
has. We first deal with how to measure management autonomy. We withdraw here two types
of management autonomy; financial management autonomy and personnel management
autonomy. For personnel management autonomy, both on the strategic and operational level,
we look at autonomy concerning (1) payment and rewards, (2) evaluation of personnel, (3)
career management and development and (4) the selection and recruitment of personnel.
However a finer operationalization is needed, indications on the level of autonomy on these 4
dimensions can already give us an estimate on the personnel management autonomy of an
organisation. For financial management autonomy, again both on the strategic and operational
level, we look at autonomy on following matters: (1) cash management, (2) budgeting, (3)
income management and (4) investments or participations in other legal persons. Again, with
this primary operationalization, first indications on financial management autonomy can be
found. The whole picture of our conceptualization and embryonic operationalisation can be
found in the drawing underneath:
PERAUT
FINAUT
Strategic
Operational
POLAUT
Strategic
payme
nt
evalua
tion
payme
nt
evalua
tion
carr
man
Sel,
Rec
carr
man
Sel,
Rec
Operational
Legislative
Cash
man
Inco
Man
Cash
man
Inco
Man
Budge
t
other
leg pers
Budge
t
other
leg pers
Decision M aking
Figure 1: chart organisational autonomy
Steering and control (ORGSTC)
Organisational steering and control (from oversight authority to agency) is often seen as the
other side of the autonomy – medal. It is not an easy task to deal with because steering and
control involve a lot of considerations to make (Verhoest, 2002). First, how is steered? This is
the question to the mechanisms of steering. Generally spoken, there is (1) the bureaucratic
mechanism based on rules and standards, (2) the market mechanism, based on the price
mechanism and (3) the social mechanism based on socialisation and involvement of members
of the group (Ouchi, 1980). Second, what to steer? One can steer on outputs, outcomes or
effects, on processes and procedures and on inputs. Third, when to steer? One can steer (1)
ex-ante with a focus on planning and also inputs and (2) ex-post with a focus on evaluation
and monitoring of results. Fourth, on the basis of what criteria should we steer? These criteria
can be very diverse but when applied they tell something about what aspects of
‘organisational performance’ are central in the steering and control process. Examples of
criteria are legality, economy, efficiency, effectiveness, responsiveness, democratic values, …
Finally, who is steering? Steering and control can be internal or external, or, within the
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
7
“Agencification”: pending questions and how to address them
organisation or out of the organisation. So, in order to conceptualise and operationalize the
concept of steering and control we have to deal with all these questions. We preferred to work
out a scheme that deals with the most important aspects of steering and control and which is
also workable and reader friendly at the same time. First, we looked at the ‘when to steer’
question. So we split up between ex-ante steering (also called input-steering) and ex-post
steering (or result steering). One can see that while doing so, we immediately also involved
the ‘what to steer’ question to some extent (steering on results or inputs). Ex-ante steering and
control for example can look at nullification rights on decisions of the agent organisation for
the principal, at resources that are provided to the organisation, at conformity of
organisational decisions with the legal framework, at representation of the principal in the
governing board of the organisation, … Ex-ante is to be seen here as a priori oversight of the
decisions of the organisation. Ex-post steering or result steering and control lays the focus
mainly on measuring, reporting and evaluation of organisational results. It also can be
operationalised by looking at whether there are rewards and sanctions for the organisation in
case of good or bad results. An important aspect of result steering has also to do with setting
objectives and targets and accompanying indicators that can be monitored ex-post. At a more
detailed level, we look at the nature of these targets and indicators and possibly also at where
these targets and indicators are specified. In the same run we look at what criteria the ex-ante
and the result steering aim (the ‘criteria of steering’ question). Second, we also looked at two
more specific ways of steering and control: financial steering and control and steering and
control by having influence on the management and policy making units of the organisation.
Financial steering is conceptualised along the lines of the financial cycle: budgeting,
accounting and auditing. For the budget, relevant questions can be: has the organisation an
own budget? Who approves and designs the budget? What articles are in the budget? What
the accounts are concerned, one can ask the question towards what accounting system the
organisation uses; cash based for example. The audit system finally raises questions towards
who is auditing and what are the audits aiming at; finances, performance, … Steering and
control towards management and policy making units is conceptualised along the lines of how
the management in a certain organisation is structured. If there is a governing board and/or an
executive in the organisation, than the question towards (1) who appoints it, (2) who evaluates
it, (3) the accountability of the members of these boards and executives towards the principal
and the question towards (4) the composition of these boards and executives will be posed.
For a visual presentation of how we look at steering and control see the drawing below:
Way
FINSTC
RESSTC
EXASTC
Meas
&Rep
Rewa
rd
Board
Crit
Way
Crit
Obj &
Tar
Eval
Source
Nature
budg
et
Indic
Accou
nting
Indiv
Coll
Decis
Audit
Acco
unt
Exec
Appoi
nt
Nature
Source
Form/Cont
Nature
MANSTC
Who
Decis
Figure 2: chart organisational steering and control
Other variables
After having explored the organizational autonomy and the organizational steering and
control as the two most important constituent elements of the agencification process, we also
have to consider two other clusters of variables that might play a significant role in studying
agencification processes. These are organisational identification and organisational culture.
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
8
Eval
Com
pos
“Agencification”: pending questions and how to address them
Organizational identification (ORGID)
The aim of this cluster of variables is to provide a general DNA structure of the organisation
to study. It can be seen as a list of variables that identify the organisation, but it can also be
regarded to as a list of apparent relevant variables that cannot be placed under the umbrella of
any of the four other clusters of variables. As expected, a lot of variables can be detected here.
We try to list them here and to also provide a means to operationalise them here. We will start
with the more general items. First we have the country, the name, the governmental level (on
which the organisation is active) and the age of the organisation (when is it established?).
Second, we can look at the size of the organisation. According to Hood and Dunsire (1981),
‘size’ can be measured in two ways. One can look at the number of personnel that is active in
the organisation (in total or in full time equivalents) or one can look at the size of the budget
of the organization. Other variables on a more general level are; the name and the size of the
parent organisation of the agency, the policy field on which the organisation is mainly active
and whether the organisation has legal personality. If it has legal personality; the legal form of
the organisation (this can be public law, private law, or a hybrid form). If no legal personality;
has it got another affiliation (e.g. part of core ministry, independent within the core ministry,
…). The legal formats for public organisations have also been classified by Bouckaert and
Peters (2001) into: components of ministries, independent but within a ministry, legal entity
within a ministry, a public law legal entity, a private law legal entity and sui generis
organisations. Finally one can also look as to whether the organisation has a (governing)
board. If we look a little further, there are yet more variables to detect. These variables,
however, are situated at a more detailed level. The first two are more or less linked to the age
– variable. One variable is looking at how the organisation has been established: was it newly
created, was it a split from another organisation, was it a merger, … If it was a split or a
merger, what are the antecedent organisations? The other variable is looking at what
institution created or established the organisation: was it parliament, was it the government,
was it a royal or presidential act? The next variables are linked to the policy field on which
the organisation is active: first, what kind of activities does the organisation perform and
second, what is the phase in the policy cycle that the organisation is mainly situated in for her
main tasks? Bouckaert and Peters (2001) identified seven major classes of activities:
implementation, direct service delivery, transfer of funds, regulation, advice and policy
development, information, research, tribunals and public enquiries and representation. The
following variables at this more detailed level are connected to the management structure of
the organisation: what kind of board has the organisation got? Who is in this board? What are
the competences of the board and its members? We can also look at the top executive branch
of the organisation (e.g. CEO): what does it look like (single leading officer, more leading
officers, a leading committee, …). There are also some possible variables that have not yet
been discussed here but that also can be situated on a more detailed level of organisational
identification. A first one is the budget of the organisation, or better the budget structure.
Similar to what Dunleavy (1991) did, we can look at the budget structure of agencies.
Dunleavy analysed the budget structure of an organisation and then classified the
organisations in 5 categories of agencies. The elements of budget are: core budget, bureau
budget, programme budget and super-programme budget. The relative weight of each of these
elements within an agency’s global budget is a reflection of the budget structure which in turn
indicates the function-based role the agency performs: delivery, regulation, contracts, control
or transfer. We do more or less a similar exercise here, be it that we take a more concrete
typology, we define our budget structure in terms of: investments, working resources,
personnel cost and transfers. Another variable might be the income structure of an
organisation or agency. Possible income sources can involve: budget allocation by oversight
authority, transfers of other authorities, taxes and fees, gifts sponsoring and membership fees,
market income (services and products), … The next variable looks at the competitive
environment the organisation is situated in: is there competition for delivering the services
anyway? If yes, is it a market with a lot of suppliers? How can the clients be typed? Are they
public or private? Are it individuals or groups of individuals (organisations)? Another
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
9
“Agencification”: pending questions and how to address them
variable looks at the network in which the organisation is involved. Or, the level of integrated
co-operation of the organisation with other organisations. This level depends upon some
characteristics (Vanhoren and Struyven, 2000): (1) the degree of formalisation of the
relationship, (2) the commonness of goals, structure and planning, (3) the commonness of
resources and (4) the level of collective identity and responsibility. On the basis of these
characteristics, it is possible to develop a scale of integrated co-operation. Networks and
competitive markets can also, however they are situated here under the umbrella of
organisational identity, be regarded to as ways of steering and control, be it steering and
control by the environment in which the organisation is active. A last variable looks at the
internal structure of the organisation and deals with the sub-units the organisation has: how
many sub-units are there and what do they look like. The flood of ORGID variables is
(attempted to) visualised underneath (for a more detailed chart of the cluster of organisational
identification data see annex).
ID ORG
COUNTRY
SIZE
LEG FORM
BUDGET
GOVLEV
PARENT
ORG
BOARD
COMPETIT
ION
POLFIE
EXECUTIV
E
NETWORK
AGE
SUBUNITS
Figure 3: chart organisational identity
Organizational culture (ORGCUL)
Because many theories that try to explain the reasons for, the process, the content and the
consequences (effects) of agencification use variables that are closely linked with
organisational culture, it seems fruitful to integrate the concept of organizational culture in the
research project (also cf. supra). For example concepts like “leadership” (Leadership theory),
“formalization” (Weberian Institutionalism), “sense of mission” (Professionalism, Theory o/t
Firm), “professionalism” and “mission valence” can have a (positive or negative) influence on
the effectiveness of organizations (see also Rainey & Steinbauer, 1999). Therefore it might be
useful to develop the concept and to look for ways to measure the concept of organizational
culture. In the past, already some attempts in this direction were made. For example Kastelein
(1977) and Tepeci (2001) aimed at constructing scales. Kastelein conceptualised
organisational culture along six dimensions: participation, socio-economic expressivity,
adaptiveness, external orientation and value orientation. Tepeci will be discussed infra. We
should also mention Hofstede (1998). This author did work in differentiating (organizational)
culture along four 6 variables (dimensions). These dimensions are: process versus results,
people orientation versus task orientation, organisational identity versus professional identity,
openness versus closeness, loose versus tight and normative versus pragmatic. All these
authors have more or less developed measure instruments along these variables. These
instruments generally have proven to be well working (by piloting, testing and using them).
Now it is the question what measure-instrument and scale is best suited for our research
project. Primary idea is that we should choose the instrument (or the combination of
instruments) that reflects best the public sector values. Tepeci (2001) used the instrument of
O’Reilly (OCP, Organizational Culture Profile), but he extended it with some more values
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
that better reflect the values of the sector he studied; the restaurant sector. O’ Reilly initially
had seven dimensions of organisational culture: innovation, stability, respect for people,
outcome orientation, attention for detail, aggressiveness and team orientation. Tepeci also
introduced “service quality and customer orientation”, “honesty and ethics” and “employee
development and empowerment” (inter alia). These values seem at first sight also relevant for
the public sector. Moreover, the OCP has been used with success for studying the public
sector. Construct validity has been found in samples including government employees
(Tepeci, 2001). Here we will take over the framework of Tepeci. He developed his HICP
(hospitality industry culture profile) that includes 36 value items that are hypothesised to
measure 9 organisational culture dimensions (see drawing underneath).
ORGCUL
People
Orient
Team Orient
Fair
Compensation
Valuing Cust /
Serv Quality
Innovation
Employee
Development
Attention to
detail
Honesty &
value ethics
Result
Orient
Supp Empl
Resp indiv
Team atmo
Co-op cow
Fin Reward
Equit Pay
Serv Qual
Give C exp
Innovation
Risk taking
training
Prom within
Detail Orie
Att detail
Honesty
truthfulne
Result Orien
Task accomp
Care Empl
fairnes empl
Collaborat
Team Orien
Fair Comp
Hi Pay Perf
Valuing Cu
Rel Cust
Will Exper
Creativity
Advanc Opp
P&C Devel
Accuracy
Precise
Integrity
Keep Prom
Focus job
Hard work
Figure 4: chart organisational culture
The dependent variable
Organizational performance (ORGEP)
As it is the main aim of all governments all over the world and on whatever governmental
level to deliver good policies, services and products, organisational effectiveness and
performance is a crucial concept in studying public administration. Also in the rhetoric of
public sector reform – where decentralisation and agencification are part of, cf. supra – the
concept of performance is important. Given the importance of this concept as a standing fact,
there still remains the question about how to measure it. As Brewer and Selden (2000) put it:
‘improving the performance of government agencies is a central concern of public
administration, and speculation about the factors related to agency effectiveness is abundant
in the literature and elsewhere … little effort has been made to verify these factors
empirically. One reason is that organisational performance is a difficult concept to measure’.
Why is it difficult to measure? First, there is disagreement about what elements of
performance are the most important. Second, some elements of performance are preventive
(e.g. a disaster averted). Third, and especially in the public sector, performance has also
strong political implications (Brewer and Selden, 2000). So how do we have to measure this
‘dependent’ variable? Dependent, because ultimately we want to detect the factors that are
causing more or less performance of organisations like agencies. Only after we defined and
conceptualised the dependent variable, we can start looking after which factors explain which
outcomes (Tavits, 2002). Hence we need an instrument that allows us to say what
organisation is performing and to what extent. Tavits (2002) identified three research
traditions that have different conceptualisations of government performance: (1) The public
administration view on government performance that has a great emphasis on the use of
criteria that are judged to capture the essence of effective governments. Organisations
meeting most of the criteria are considered to have the capacity to be effective and high
performing. As this approach is also highly output driven, performance is understood as the
existence of clear objectives and measurement of outputs in relation to these objectives.
Performance measurement in this sense is about the performance of a programme,
organisation or an individual, not about the performance of the government as a whole. This
is often cited as a critique of this approach because this approach cannot answer questions of
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
general government performance on policy activism. Another fundamental critique towards
this approach is the measurability of services and programmes; not everything can be
quantified. A last critique is this that organisation centered performance measurement can
create a false sense of security by only paying attention to intended effects (ex-ante
determined objectives). Thus it might be possible that an individual organisation improves
performance, but at the expense of others or the government as a whole. (2) A second
research tradition says that public opinion is the best indicator of government performance
because in this view the ultimate aim of government is to satisfy the citizens. Also this
approach contains several problems: first, citizens might lose confidence for other reasons
than policy quality. Second, satisfaction with the work of an institution depends on the
relation between personal expectations and performance so if the expectations increase
confidence might erode although the performance remained the same. Third, the public might
be prejudiced or have a distorted view. Fourth, other factors might influence the citizens’
evaluations of government performance. (3) A third approach is the democratic performance
view. The most famous work in this approach is considered to be Putnam’s ‘Making
Democracy Work’. His dependent variable is ‘institutional performance’ and he uses a 12
indicator index. The indicators are grouped under three categories: policy process, policy
innovation and policy implementation. Here also some critics can be formulated: first, mainly
the quantity of government activity is measured rather than the quality. Second, most criteria
look at government efforts, only three criteria look at policy processes. After this short
overview of different approaches, we will focus briefly on the typology that was developed by
Tavits (2002). She discerns two dimensions of government performance: (1) administrative
efficiency, or the capacity to use limited resources and to implement policies formulated with
desired results. (2) policy activism, or the capacity to be responsive or considerate to demands
of the citizenry. A combination of these dimensions lead to a four fold typology of situations:
high activism/high effectiveness (dynamic government), high activism/low effectiveness
(populist government), low activism/high effectiveness (efficient government), low
activism/low effectiveness (unreformed government). She tested her typology empirically on
35 USA large cities. Therefore she operationalised her two dimensions into:
Administrative efficiency: financial management capacity, HRM capacity, capital
management capacity, managing for results, responsiveness.
Policy activism: expenditure on highways, economic development activism,
expenditure on health, expenditure on community development, legislative
innovation.
Factor analysis tests showed that the 10 variables seem to contribute to the two different
concepts of government performance; the variables cluster rather consistently around the two
different concepts. So the hypothesized dimensionality of government performance seems
rather convincingly proven.
Another interesting work is that of Heffron (1989). She starts with the statement that ‘there
are as many definitions of performance as there are definers. Also the existence of such a
diversity of organisations within a sector (the public sector e.g.) inhibits the use of universal
criteria to measure government performance’. The result of this is that there exist no universal
criteria for measuring effectiveness and performance and that multiple criteria have been
developed. Campbell (in Heffron) has identified 30 criteria that have been used as measures
of organisational effectiveness. When criteria for public organisations are added, we get 35
criteria. The criteria are grouped by approach into five clusters:
Goal approaches: achievement emphasis, productivity, efficiency, profit, quality,
planning and goal setting, goal consensus, internalisation of goals, readiness.
HR approaches: job satisfaction, motivation, morale, value of HR, training and
development, absenteeism, turnover, accident rates, role and norm congruence
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
Internal process approaches: control, conflict/cohesion, managerial interpersonal
relation skills, managerial task skills, info management and control, participation and
shared influence
Systems approach: stability/maintenance, growth, flexibility/adaptation, utilization of
environment, evaluations by external actors
Political approach (particularly relevant to the public sector): responsiveness,
accountability, representativity, constitutionality, adherence to democratic values.
As effectiveness is a multi dimensional concept, the criteria do not necessarily correlate. Thus
an organisation cannot be effective on all criteria. The measurement of effectiveness is also
further complicated by two factors: (1) time dimension; what means that the time frame
chosen for assessment is a critical factor; also the age of the organisation should be
considered. (2) necessity for comparison; because effectiveness criteria tend to be relative
rather than absolute.
So, what approach are we likely to follow for our research purposes. First we need to consider
the multi facets of effectiveness and performance. Second, we need indications for both
overall government performance as well as for organisation specific performance. Third we
want to consider also the two dimensions that have been detected by Tavits. Therefore we will
rely on the framework off Heffron, but not without considering the remarks made above. We
will not, however, take over all the criteria (35) but only a sample. We will also add some
other indications for organisational effectiveness and performance: e.g. the use of instruments,
techniques and/or tools that are applied in the organisation (EFQM, CAF, ISO, balanced score
card, …). One and other is made visual in the map underneath.
ORGEP
goal perspective
HR perspective
Inter Proc Persp
System Perspect
motiv
mana
g
stabil
Public Sect Persp
effic
effec
satisf
cohes
ion
respo
ns
flexib
qual
Use of tools
acco
unt
demo
cr
Figure 5: chart organisational effectiveness and performance
As one can see the multi criteria approach is respected here (Heffron). The problem with not
considering the general government performance when looking at organizational performance
can – if criteria and variables can be operationalised more detailed yet – be solved by the
criteria that are in the public sector perspective and the system perspective (e.g stability and
democratic values). When looking at Tavits’ two dimensions, we can see that the
administrative efficiency dimension can be linked to our goal perspective and our HRM
perspective. The policy activism dimension can be linked – to some extent – to our flexibilitycriterium in the system perspective (if we equal flexibility or adaptability to e.g. meeting
needs or societal pressure). However, this dimension seems a little bit underrepresented in our
design as it is now, we have no clear criteria for measuring quantity. To finish, also here we
need a clearer operationalisation of our criteria in order to measure the concept of
organizational effectiveness and performance more detailed and accurate.
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
13
“Agencification”: pending questions and how to address them
Research questions and theoretical assumptions
Dealing here with all the potential research questions we want to address would take us too
far. Nevertheless we will try to cluster them in some general categories and also want to link
them to some assumptions that have been made in existing theories so far. Generally spoken,
our research interests focus on three types of questions:
Descriptive; these are mainly organisational identity research questions.
Applied; what are the conditions for an effective agencification?
Explanatory;
• What is the effect of agencification on effectiveness and performance (causal
relations)?
• Why do these effects happen (explanation of causal relations)?
Examples of descriptive questions are: in what policy domains and sectors are agencies
established? To what extent (numbers)? In what forms (organisational as well as judicial)?
What do these agencies look like, do they have boards, if yes, who seats in this board? How
autonomous are they? How are they steered? Examples of applied questions are: what is the
optimal (judicial and organisational) form the agency, given all the contingent factors it is
subject to, should have in order to be as well working as possible? Examples of explanatory
questions are numerous. What is the effect of a certain kind of autonomy on the performance
of the agency? What is the effect of departmental steering? To what extent do cultural and/or
identification factors explain the success (or failure) of agencies? How and why do these
factors affect the results of the organisations we study?
Ronness (2001) argues that institutional analysis of organisational change (or reform) has to
meet at least two requirements:
Identifying structural features and institutional characteristics of the organisation, if
possible at different points in time
Clarifying whether and how these features and characteristics actually affect and are
affected by actions and outcomes6.
affect
structural features
actions
institutional characteristics
outcomes
affect
Figure 6
a) Structural features
6
As one will see further in the paper, our research intrests are rather on the effect of structural features and
institutional characteristics on actions and outcomes than the other way around.
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
What are the structural features of organisations like agencies? As we mentioned above, the
two most important structural characteristics of agencies are their level of autonomy
(ORGAUT) and the way they are steered and controlled (ORGSTC) by their oversight
authority. In this sense, organisational change or reform can be regarded to as changing
organisational autonomy and/or organisational steering and control. Other structural
characteristics of an organisation can be found in their identity kit (ORGID). For example the
existence of a board, its composition and competencies. Another example can be the fact
whether the organisation has legal personality or not, or, what the main tasks are that the
organisation has (both in the policy cycle and substantive). Structural features can also be
regarded to as ‘institutional arrangements’, this is the set of arrangements that empower
and/or constrain the organisation. The arrangements tell us something about the relation
between the principal and the agent. This relation is according to Jensen and Meckling (1976)
a contract under which the principal engages an agent to perform some services on their
behalf which involves delegating some decision making authority to the agent. According to
Jensen (1983), the principal has three steering arrangements at its disposal to make sure that
the agent complies with the principals demands: bonding, monitoring and rewards. According
to these steering arrangements, Jensen (1983) argues that organisational institutional
arrangements can be described along this three part taxonomy: (a) the performance
measurement and evaluation system (monitoring), (b) the reward and punishment system
(rewards) and (c) the system for partioning and assigning decision rights in the organisation
(bonding; contractual restricting of agent’s discretionary powers to decide).
b) Institutional characteristics
Steunenberg (2001) gives a review of the definitions of ‘institutions’ that are used in the
literature. A first definition sees institutions as rules that structure a decision-making situation,
common to what North (1990, in Steunenberg) says: ‘rules of the game in a society or, more
formally, the humanly devised constraints that shape human interaction’. A second definition
sees institutions as procedures for decision making. In this sense, institutions make a relation
between individual options for action and social outcome. A third definition states that
institutions become visible through the behaviour of actors, both at individual as well at group
level. For example Rowe (1989, in Steunenberg): ‘institutions are identical to some or other
facet of human action and belief. A social institution is nothing more than a particular way of
acting and believing for some agents who are thus said to be members of, or participants in,
that social institution’. Institutions can thus be defined in various ways. Ostrom (1986, in
Steunenberg) argues that there is no agreement in social sciences about what institutions are.
They consist of a broad range of social phenomena that have to do with rules, procedures and
behaviour of actors. Another author is Scott. He argues that institutions consist of (a)
normative, cognitive and regulative structures and activities that provide stability and
meaning to social behaviour. Institutions are transported by (b) carriers; cultures, social
structures and routines (Scott, 2001). According to this definition, Scott argues that
institutions can be found at three kind of pillars; a regulative, a cognitive and a normative one:
Pillar →
Basis of compliance
Regulative
Expedience
Normative
Social obligation
Basis of order
Mechanisms
Logic
Indicators
Regulative rules
Coercive
Instrumentality
Rules, laws, sanctions
Binding expectations
Normative
Appropriateness
Certification, accreditation
Basis of legitimacy
Legally sanctioned
Morally governed
Cultural-Cognitive
Taken for grantedness
Shared understanding
Constitutive schema
Mimetic
Orthodoxy
Common beliefs, shared
logic of action
Comprehensible,
recognizable,
culturally
supported
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
The importance of this classification for our research is the fact that each pillar can be linked
to aspects of organisational structure. It should be noted that organisational structures can
affect behaviour, but structure itself can also be affected by behaviour. For example, in the
regulative pillar the organisational structure can influence the actor’s assessment of costs and
benefits of alternative actions for example. In the normative pillar, the organisational structure
can influence the assessment of what is appropriate for an actor to do in a given situation. In
the cultural-cognitive pillar the importance of the organisational structure depends on the
extent to which it corresponds to what is common and also history can be important since
prevailing ideas in the environment will affect some aspects of the organisation.
Scott continues by stating that institutions are embedded in various types of carriers. Or, how
do these institutions manifest themselves? He discerns four types of carriers: symbolic
systems, relational systems, routines and artefacts and shows for each of these carriers how
they can be manifested in accordance to three pillars of institutions:
Pillar→
Carrier↓
symbolic systems
relational systems
routines
artefacts
Regulative
Normative
Cultural-Cognitive
Rules, laws
Values, expectations
Categories, typifications,
schema
authority Structural isomorphism
Governance
systems,
power systems
Protocols,
standard
operating procedures
Objects complying with
mandated specifications
Regimes,
systems
Jobs, roles, obedience to Scripts
duty
Objects
meeting Objects
possessing
conventions, standards
symbolic value
Another author, Peters (2000), gives us four features of institutions that are relevant for
research:
Institutions are structural features of a society and/or policy. These structures can be
formal or informal. In this sense an institution transcends individuals to involve
groups of individuals in some sort of patterned interactions.
Institutions are stable over time.
Institutions affect individual behaviour, it must constrain (formally or informally) the
behaviour of the members of the institution.
There should be some sense of shared value and meaning among the members of the
institution.
Our main concern is now how to integrate ‘(characteristics of) institutions’ in the research
design. Therefore we should keep in mind what Aspinwall and Schneider (2000) state:
Institutions encompass both formal and informal structures that influence human
(organisational, bv) behaviour.
The effects of institutions on human (organisational, bv) behaviour can be
constraining or empowering.
Institutions can function as independent, intervening and dependent variables.
From a more theoretical point of view, we take a look here, very briefly, at what the different
strands of institutionalism tell us about the structure-agency problem, or the way how
institutions affect behaviour and vice versa. We follow here the classification of Peters
(2000):
Rational choice institutionalism: behaviour is a function of preferences that are
constrained by rules and incentives. Institutions are systems of rules and inducements
to behaviour in which individuals attempt to maximize their utilities. Also in this
strand, and more functionalist, institutions are seen as emerging to meet (social and
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
economic) needs. A sub theory is the principal agent theory. One of the main
problems here is to design structures to ensure that the agent fulfils the principal’s
demands. Institutional design is thus an attempt to resolve the principal – agent
problem (and thus behaviour). Also game theories face the compliance problem
(compliance of the agent with the principal’s demands). Agents and principals
participate in a game in which they both attempt to commit the other to complying
with the terms of their bargain. So all players have exogenous preferences,
constrained by institutions, that shape their behaviour and interactions. According to
Aspinwall and Schneider (2000), rational choice institutionalism sees institutions as
providing a context within which individual decisions are set. They are equilibrium
theories that seek to explain characteristics of social outcomes on the basis of agent
preferences and optimising behaviour and on the basis of institutional features.
Institutions provide a set of formal rules and procedures, or informal practices that
structure relationships. As institutions in this strand are not assumed to precede
human action, rationalists see institutions merely as intervening rather than
independent variables.
Historical institutionalism: in this strand initial and earlier made choices, and the
institutionalised commitments that grow out of them, determine subsequent decisions.
Policies are thus path dependent. Individuals accept the constraints imposed by the
institution because they know it and individual behaviour is shaped by the decisions
made earlier. This strand goes also into the role ideas play in shaping behaviour.
Intra-organisational ideas are sold to members of the organisation and these members
accept it. Institutions are seen as having mainly an independent role and individuals
and organizations are seen as rooted in particular contexts. In this strand institutions
can be defined as ‘formal or informal procedures, routines, norms and conventions
embedded in the organisational structure of the policy or political economy (Hall and
Taylor, 1996). According to Hall and Taylor, there are four features that distinguish
this strand from the other schools:
•
•
•
•
broad conceptualisation of the relationship between institutions and
behaviour
emphasis on the asymmetries of power associated with the operation of
institutions
view of institutional development that emphasizes path dependency and
unintended consequences
concern to integrate institutional analysis with the contribution that other kind
of factors, such as ideas, can make to political outcomes.
Sociological institutionalism: Peters argues that this strand appears much stronger in
explaining the process of creating and changing institutions than in explaining the
effects of institutions (on behaviour e.g.). Exemplary here is DiMaggio and Powell
(1991) notion of isomorphism, or a convergence of organisational structure in an
organisational field. Nevertheless, Peters argues that the emphasis on the creation of
‘meaning’ (Meyer and Rowan, 1977) and the relevance of ‘values’ in this strand (see
also March and Olsen, normative institutionalism) can be useful in counterbalancing
the individual and utilitarian values of the rational choice strand. The emphasis is then
on the manner in which individuals within organisations become habituated to
accepting the norms and values that apply to their organisation. Hall and Taylor
(1996) see three features that distinguish this strand from other neo-institutionalist
schools:
•
Institutions are defined more broadly by not only including formal rules,
procedures or norms, but also symbols, cognitive scripts and moral templates
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
•
•
that provide the frames of meaning guiding action and behaviour. This
implies that there is a challenge to the (widespread in political science)
distinction between institutional explanations based on organisational
structures and cultural explanations. Another implication is that this approach
redefines culture into institutions.
A distinctive understanding of the relationship between institutions and
individual action. Institutions affect behaviour along a normative dimension
(internalised role or function-based norms) but also a cognitive dimension
(scripts, categories and models that help to interpret the world and other
behaviour). So institutions not only affect individual’s strategic calculations,
but also their most basic preferences and identity.
The third distinction applies to the explanation of how institutional practices
originate and change.
The three institutionalisms described above are used by several authors to classify between
institutionalisms. In the literature, they constitute the core of institutionalist thinking (see also
Ronness, 2001, Premfors, 1998, Aspinwall and Schneider, 2000, Hall and Taylor, 1996).
Peters goes on by introducing some other strands of institutionalism:
Empirical institutionalism: the structure of government makes a difference in the way
in which policies are processed. The main question is whether institutions do matter.
For example the difference between presidential and parliamentary systems. Or the
difference between majoritarian and consensual parliamentary systems (Lijphart). For
this strand the behaviour is largely influenced and determined by the institutions.
Normative institutionalism: emphasis on norms of institutions as means of
understanding how they determine and shape behaviour. Exemplary for this strand is
the notion of ‘logic of appropriateness’, introduced by March and Olsen. In addition
there should be some ‘enforcement’, formal or informal pressures to conform.
As a conclusion to the relation between institutions and (individual) behaviour, we repeat the
main question how institutions shape behaviour. There are differences in the emphasis the
various strands put on this relation. In broad terms, new institutionalists provide two kinds of
responses to this question; the ‘calculus’ and ‘culture’ approach (Hall and Taylor, 1996). The
calculus approach focuses on the aspects of behaviour that are instrumental and based on
strategic action. One wants to maximize the attainment of a set of goals that are driven by an
exogenous (to the institutions) preference set. According to the same approach, institutions
affect behaviour by providing actors with greater or lesser degrees of certainty about the
present and future behaviour of other actors. The key point is that institutions affect action by
altering the expectations an actor has about the actions that others are likely to take in
response to or simultaneously with his own action. In the cultural approach, behaviour is
bounded by an individuals worldview. Without denying that behaviour is rational or
purposive, the cultural approach emphasizes the extent to which one turns to established
routines or familiar patterns of behaviour to attain their purposes. Institutions provide moral
or cognitive templates for interpretation or action. An actor is seen as embedded within a
world of institutions, composed of symbols, scripts and routines that provide filters for
interpretation. Similar to the ‘calculus-culture’ distinction, some other dichotomies can be
made (see Ronness, 2001):
Hall and Taylor (1996)
March (1994)
Peters and Pierre (1998)
Calculus
Logic of consequence in decision
making: how is a choice to be made
among the alternatives in terms of
the values of their consequences
Calculations
as
sources
of
institutional change
Culture
Logic of appropriateness in decision
making: what decision, as the person
I am, in this organisation given this
situation
Values as sources of institutional
change
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
c) Actions
Actions can be regarded to here as the behaviour of an organisation, or what does an
organisation do and how does the organisation do it. Actions are concerned with the
application of the organisational means and resources, such as personnel, money,
infrastructure, … in order to do the organisations job.
d) Outcomes
Outcomes are the effects of organisational action. Action can be effective, this is when the
desired outcome is (for a substantial part) realised or ineffective when the desired outcome
has not been realised.
Preliminary analytical framework.
Institutions:
- regulative
- normative
- cognitive
Demand
Institutional
arrangements:
- way of steering
and control
- level of autonomy
Structural features:
- organisational
identity
Processing of demand:
- Logic of appropriateness / culture
Action /
behaviour
Outcome
- Logic of consequence / calculus
Institutions:
- regulative
- normative
- cognitive
Organizational
culture
Figure 7: preliminary analytical framework
The drawing has to be interpreted in the following way:
The principal wants a public function to be performed by an agent. Therefore some
institutional arrangements are made. These arrangements structure the relationship
between principal (demander) and agent (performer). They are a set of rules and
contractually specified arrangements that depict the structural constraints and
freedoms the agent has for performing the tasks. They mainly apply to the level of
autonomy of the agent and to the way the agent is steered and controlled. These can
be operationalised in e.g. the management contract, the foundation law, the
performance contract, the organisational budget etcetera. Next to that there are the
structural features of an organisation (see Ronness). These features are for example
task features, the structural organisation of the management of the organisation, the
legal form, …
The demand of the principal then is translated in the organisational black box: the
agent, subject to the institutional arrangements and the structural features of the
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
organisation, processes the demands into organisational action and/or organisational
behaviour. The result of this organisational behaviour is the policy outcome. A
remark has to be made to the processing. This can be – in general terms – happen
according to the logic of appropriateness and / or to the logic of consequence (or
culture and calculus).
There are according to Scott the external institutions that can be regulative (rules,
laws, regulations), normative (norms and values) and cognitive (beliefs, symbols, …).
An example might help to make things more clear about this distinction. Take the red
traffic light. How does this institution (the rule of the red traffic light) influences my
behaviour? In a regulative sense, I do not drive through it because I know I will get
sanctioned by the police (institution as a traffic law). In a normative sense, I stop
because I know that driving through is not allowed and I might cause damage to other
people who come from the other direction (institution as a socialised traffic norm). In
a cognitive sense, I do not drive through because the light is red and not green; I’ve
always been told that you only can drive when lights turn green (institution as a
traffic symbol).
There is also the notion of organisational culture. This culture affects and is affected
by all the elements described above. It can be affected by the institutional
arrangements, the structural features of the organisation and the extra organisational
institutions. In turn, organisational culture can itself have an influence on the way the
principal’s demands can be transmitted into outcomes and on the institutional
arrangements.
This drawing contains a lot of relations and hypotheses. Perhaps too much. We tried
to be as exhaustive as possible to integrate institutional theory into our research topic,
but we nevertheless need a more specified research demarcation. If we go back to our
initial categories of research questions, we can see that this framework can be suitable
for answering some explanatory and applied research questions. Our main interest
lays in the ways organisational structure features and institutional arrangements of
the organisation can contribute to the performance of organisations. Therefore we
will specify the drawing with regard to this question. Actually this question can be
sub-divided into more specific questions:
•
•
•
•
•
•
To what extent and how do institutional arrangements contribute to the
organisational performance? Here institutional arrangements (internal
institutions) are the independent variable and organisational performance the
ultimate dependent variable.
Why do institutional arrangements contribute to or have an effect on the
organisational performance?
To what extent and how do other structural features contribute to the
organisational performance? Here structural features of the organisation are
the independent variable and organisational performance the ultimate
dependent variable.
Why do structural features contribute to or have an effect on the
organisational performance?
Do external institutions have an impact, and if yes how and to what extent, on
the way the organisation behaves (translates the principal’s demands into
action and ultimately outcome)? Here institutions are seen as having an
impact on the way the organisation behaves. Organisation’s behaviour is
dependent on the institutions of which it is subject to.
Can institutional arrangements and structural features of the organisation
modify the adverse effects of these institutions (and enforce the positive
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
effects of the institutions) in order to make the organisation perform better?
Here institutional arrangements and structural features are intervening
variables in the relation between institution and organisational behaviour.
This framework has links with and tries to work out further on some conclusions that
Verhoest made in his doctoral dissertation (Verhoest, 2002):
NPM like institutional arrangements (e.g. result control, financial incentives,
competition) as motivator for organisational results: the agent organization is
motivated to achieve better results and more performance (with regard to the
principals demands and goals) by means of certain steering mechanisms and levels of
autonomy (or institutional arrangements) under certain conditions and under certain
restrictions.
Legitimacy building as motivator: a second and more fundamental motivation to
better results is the incentive of the agent to build up trust following from the
necessity to strengthen the legitimacy of the organisation towards the political
principals and clients in response to legitimacy threatening factors in the
environment. Here the question arises (Verhoest, 2002) whether the principal can
steer the agent in the desired way by generating and structuring such a legitimacy
need.
The institutional arrangements - where steering by the principal is a part of - is
partially a function of the trust the principal has in the agent but also of other factors
such as capacity to steer, the variance of goals, … An agent can build trust by
principal or customer oriented strategies, but it can also be stimulated or inhibited by
institutional, cultural and other conditions.
Preliminary research design
The question is here; how will we deal methodologically with the research questions we pose?
As said earlier in this paper, we have both research questions that go into more descriptive
aspects and research questions that go into more explanatory aspects of agencification
processes. Next to that, we conceptualised our five constituent clusters of agencification, as
can be seen in the charts, on both a general and a more detailed level. This is to say, some
variables are rather general and can be detected easily for a lot of organisations, while other
variables stand at a more detailed level and can only be detected by a more in-depth scrutiny
of the research object (organisations). We think that on a first, general level of detail of
variables, our research field (this is the number of organisations to study) should be as
exhaustive as possible. For all these organisations, we must be able to detect some general
information. This means that we will have to do this by the survey method because the
number of organisations is that large. For the more detailed analysis, this is exploring the
level 2 and perhaps also level 3 variables, we cannot involve all the organisations. Therefore
we need to apply another research strategy, for example the (multiple) case study method.
How do these research strategies correspond to our research questions, or what answers do we
want to find by applying these techniques?
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
Datagathering 1: SURVEY
answer to
descriptive research
questions
Hypothesis formulation
hypothesis
adjustments
hypo test
Datagathering 2: CASES
Theory building and refining
answer to
explanatory research
questions
Figure 8: preliminary research design
The survey method should allow us to answer the more descriptive research questions. E.g. in
what context (policy field, legal forms) are agencies established, or what are the ways in
which they seem to be steered? Yin (1994) prefers the survey method for questions of the
‘what’ type (or who, where, how many). It is the aim to collect as much as possible empirical
data. Although survey research is not entirely devoid of theory, surveys tend to focus more on
data then on theory (Denscombe, 2000). The survey data also should allow us to formulate
hypotheses about agencification processes. In the survey data for example strong indications
can emerge that the more autonomy an organisation has, the better performing it is. Also
indications why organisations perform better or less could emerge out of the survey analysis.
Off course also hypotheses can be derived from existing theories and other research on
agencification. To be able to test these hypotheses, we will have to look closer to the more
detailed (level 2 and 3) variables. Therefore we use the case study method. Results of these
case studies can help us to refine, adjust, reject or accept the hypotheses we formulated.
Ultimately this strategy should lead us to theory building or theory adjustment. This will also
allow us to answer our explanatory and applied research questions. Yin (1994) argues that the
case study approach has a distinctive advantage to other approaches when the research
question is a ‘how’ or ‘why’ question asked about a contemporary set of events over which
the investigator has little or no control. How, to what extent and why do institutional
arrangements, structural features and external institutions affect organisational behaviour,
action and outcome? This whole design, in the end, is an emerging one. We will use empirical
data as a starting point and build hypotheses around it. However, this does not mean that we
are not aware of theory, existing hypotheses and research. The research will be an ongoing
process of testing the hypotheses, refine them and test them again in order to build and refine
theory. This design looks an ambitious one, however, there are still some questions about it
that need to be cleared out. First, but already addressed supra, what organisations do we
involve in the survey? Second, what cases do we have to study? We can think of individual
organisations, but also of policy fields, or even countries. This question is linked to another
question; can we distract general (generalizability) and valid conclusions out of case studies?
This question is particularly relevant with regard to our explanatory research questions and
even more with regard to our hypothesis adjustment and ultimately theory testing and
building. Yin (1994) states that this critic is made when contrasting case studies to surveys.
Survey samples generalise to a larger universe, but this is a statistical generalization. On the
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
other hand, case studies rely on analytical generalizations. This means that the investigator
strives at generalizing a particular set of results to a broader theory. However the
generalization is not automatic. The theory should be tested through replication of the
findings in a second or third case. When such a replication has been made, the findings might
be accepted for a much larger number of cases even though further replications have not been
performed. Denscombe (2000) makes a remark on this: although each case is in some respects
unique, it is also a single example of a broader class of things. The extent to which findings
from the case study can be generalized to other cases in the class depends on how far the case
study example is similar to others of its type.
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Annexes
Legend figure 1
- POLAUT : policy autonomy
- PERAUT : personnel management autonomy
- FINAUT : financial management autonomy
- Carr man: carreer management
- Sel, rec: selection and recruitment
- Inco man: income management
- Other leg pers: investing and participating in other legal
persons.
Legend figure 2
- EXASTC: ex ante steering and control
- RESSTC: steering and control on results
- FINSTC: financial steering and control
- MANSTC: steering and control on managerial
affairs
- Way: way of steering and control
- Crit: criteria on which to steer and control
- Meas&Rep: measurement and reporting
- Eval: evaluation
- Obj&Tar: objectives and targets (of policy)
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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“Agencification”: pending questions and how to address them
- Indic: indicators
- Decis: decision on
- Form/Cont: form and content of
- Exec: executive management
- Account: accountability of
- Appoint: appointment of
- Compos: composition of
Legend figure 3
- GOVLEV: governmental level on which the organisation is active
- PARENT ORG: parent (oversight) organisation of the organisation
- POLFIE: policy field on which the organisation is active
- LEGFORM: legal form or affiliation of the organisation
Legend figure 4
- People orient: people orientation
- Supp Empl: supporting employees
- Care Empl: care for employees
- Resp indiv: respecting individuals rights
- Fairness empl: fairness for employees
- Team Orient: team orientation
- Team atmo: team atmosphere
- Collaborat: collaboration focus
- Co-op Cow: co-operation among coworkers
- Fin Reward: financial rewards
- Fair Comp: fair compensation
- Equit Pay: equitable pay
- Hi Pay Perf: high pay for high performance
- Serv Qual: focus on service quality
- Valuing Cu: valuing customers
- Give C exp: give customers what they expect
- Rel Cust: focus on relation with customers
- Will Exper: willingness to experiment
- Advanc Opp: advancement opportunities for
employees
- Prom within: promotion from within
- P&C Devel: personal and career development
- Detail Orie: detail orientation
- Att detail: attention for detail
- Truthfulne: truthfulness
- Keep Prom: keeping promises
- Result Orien: result orientation
- Task accomp: focus on task accomplishment
Legend figure 5
- Effic: efficiency
- Effec: effectiveness
- Qual: quality
- Motiv: motivation of employees
- Satisf: satisfaction of employees
- Manag: quality of management
- Stabil: stability of the organization in the
environment
- Flexib: flexibility of the organization to meet new
demands
- Account: accountability towards citizen
- Respons: responsiveness
- Democr: democratic values
Koen Verhoest & Bram Verschuere (Public Management Institute – KU Leuven)
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