Predictable Paradoxes of Performance Management

Public service responses to the accountability systems of the New Zealand public management model

By Richard NormanVictoria University

Wellington, New ZealandRichard.Norman@vuw.ac.nz

Public sector reforms• Reinventing Government / banishing

bureaucracy• From military and religious systems to

business-like management• Letting and making managers manage• Accrual accounting, outputs and indicators

Trends in public sector reform• Big questions of public management: (Behn,

1995)– Micro-management (the gold-fish bowl)– Motivation (incentives?)– Measurement (fuzzy goals or goal

displacement?)• Tides of Reform (Light, 1997)

– Scientific Management– War on waste– Watchful eye– Liberation management

Dilemmas of managing• Dispersed leadership v high visibility leaders• Independence v inter-dependence• Long-term v short-term• Creativity v discipline• Trust v change• Bureaucracy busting v economies of scale• Increase services v cost containment

Thomas Stewart, Fortune, 18.3.96, citing research of Hubert Saint-Onge, Canadian Imperial Bank of Commerce leadership centre.

FROM

Consolidated bureaucracies, long hierarchies, self contained system

Life time vocation, professionals as managers

Managing by the rule book, inputs and cash

TO

Smaller organisations, flat structures, separate policy & delivery, contracting out

Variety of employment styles, managerial experience favouredLetting and making managers manage, with outputs and accrual accounting

Adapted from Hood and Jackson - Administrative Argument, 1991.

New Zealand changes, 1986 onwards:

Study of perceptions of change• 41 capital city decision makers, - interviews and

survey, 2000• Four outputs, 50 interviews, 2001• Qualitative research

– Exploratory– Question based– Interpretive

• How do control systems that seek to provide managers with autonomy and hold them accountable for results, work in practice?

Control principles• ‘If managers are clear about what is expected of them

(clarity of objectives) and are given the power to achieve their specified objectives (freedom to manage) and then made accountable for achieving the objectives by being judged (accountability) with quality information (adequate information flows)on how well they met their stated objectives (effective assessment of performance), managers will makeefficient resource allocation decisions andobtain objectives in the most efficient way’(SSC10, 1999: 13)

Thermostat control: Simons, 1995… the formal, information-based routines and procedures managers use to maintain or alter patterns in organizational activities.

Thinking at the top, delivery at the bottom

The thermostat at the heart of the New Zealand model

Proverbs and paradoxes of public management

• Paradox: ‘Simultaneous presence of contradictory, even mutually exclusive elements’ (Cameron and Quinn, 1988)

• Organisational tensions:– Innovation and order– Centralised coordination and localised

focus

Freedom to manage* Clearer lines of accountability ... have empowered people to be better managers* The extent to which you are given trust and held accountable is a very strong incentive. .. BUT

* Freedom to manage the small numbers in return for central control over the large numbers* Managerial freedom over inputs encourages politicians to seek greater control

•Early freedoms followed by accretions of control•Operational rather than strategic freedom

Freedom to manage?

Publ

ic m

anag

ers a

re m

ore

empo

wer

ed

Politicians are more empowered

0

100 10

Politically driven management

Managementdriven politics

Political strategy, managerial implementation

Clear objectives• Results focus of management by objectives

But tensions between:* planning for self management and * externally imposed control

• Difficulty of achieving clarity in the political arena

• Likelihood of defensive routines and undiscussable issues (Argyris, 1990)

• Report formally what you can prove to an auditor. …may not be the softer indicators that really tell you how well the organisation is doing

• People refuse to do certain work because ‘it’s not in my job description’. Important activities can fall between the cracks

• ‘Put down standards that won’t embarrass one’s chief executive’

How clear is the public sector task?Based on Gregory 1995, and Wilson, 1989.

0

101 10How observable is the outcome?

How

obs

erva

ble

is th

e ou

tput

? Production

Produce things

Procedural

Maintainsystems

CraftCoping

Achieve outcomes

Change behaviour

Paradoxes of clarity

• Clarity improves performance

• Outputs spell out required results

• The system depends on politicians spelling out their strategies

• Clarity encourages reporting the safe, measurable, trivial and readily achievable

• Outputs promote focus at the expense of coordination, narrow the breadth of activity to the safe and predictable, and crowd out innovation and risk-taking

• Politicians dislike spelling out strategies and setting priorities

0

101 10

What type of clarity? External focus on accountability

Inte

rnal

focu

s on

perf

orm

ance

impr

ovem

ent

Intrinsicfocus

Outputsand outcomes

Extrinsicfocus

Quality information

• Enables external parties to assess performance

• Accrual accounting -‘purchase’ and ownership dimensions

• More information means more effective assessment

• Assists ‘doing’ rather than ‘reporting’

• Accounting is historic, segmented, overlooks capability

• Overload of information & reliance on informal insights

• Thirst or drown? • Explicit or tacit knowledge? (Nonaka & Takeuchi, 1995)

Interviewee comments• ‘An elaborate .. game that must be played’• Operational agencies can pull the wool

over the eyes of policy ministries• Producing documents may have become

more important than management and achieving results

• Formal reports do not answer the really big questions

• Conspicuous consumption of information –a signal and symbol of rational decision making (Feldman and March, 1981)

Do you get quality information?

0

101 10

Exte

nt o

f exp

licit,

form

al k

now

ledg

eExtent of ‘tacit’ informal knowledge

One-dimensionalformalreporting

Unsystematicpersonalisedknowledge

A means formaking judgements

In the dark!

Accountablity

• Spurs improved performance

• Greater distance spurs objectivity

• Diverts from real work to focus on formalities and image cultivation.

• Distance impedes communication

• Explain, justify, or tell a story to one’s superiors

• More freedom means more insecurity for public sector managers (Maor, 1999)

Interviewee comments

• Performance is more ‘sophisticated and fluid’than contracting or agency theory

• A focus on what’s measurable and written down as opposed to what’s really important

• Documents can get in the way of building trust

• Instructions come down from on high• Prioritising is difficult to do! • The parliamentary process is fundamentally

about ‘digging for dirt’

0

101 10

Political accountability

Focu

s on

long

term

stra

tegy

Focus on short term politics

Strategist &political tactician

Risk of ‘ivorytower isolation

Reactive politics

Central Agencies: Treasury

• Give away control over the small numbers

• Assess

• Retain control over the big numbers

• Assist

• Budgeting as life support for public policy (Wildavsky)

• A guardian against spending agencies• Dream of fostering competition between

outputs

Accountability or old fashioned cuts?• ‘Second guesses departments, avoids accountability

for budget cuts’• ‘Young, arrogant, unwilling to understand

departmental issues and positional in negotiating’• ‘Budgeting in ‘jam jars’ of Ministerial portfolios’• ‘Funding is effectively based on inputs’• Baseline control and analysis of a very small pool of

new money • Incremental budget lives! Try to get by, avoid

trouble, satisfice• An electric fence against over-spending

State Services Commission• Fifteen years of downsizing and change• From operational to strategic, with multiple

and conflicting roles• Big hat, no cattle• Leader, partner or policeman? • Politicians’ representative or leader of the

club?• Organisational change to address problems

Audit Office• ‘Healthy relationship’, useful role .. But• ‘Can’t see the wood for the trees’• New status and power as a result of

decentralisation and MMP politics• Clear and widely accepted role; active

involvement in shaping the model • Assistance of a ‘learned vulnerability’

(Wilson 1989)

Accountability to Central AgenciesEx

tent

of l

ocal

ied

intia

tive

Extent of centralised direction

0

100 10

Focused,competitiveunits.

Centralisedbureaucracy

Joined-upGovernment?

Efficient and effective?• Benefits of efficiency

and fiscal control• Reduction in national

debt and size of the public sector

• Managers focus on efficiency, politicians focus on strategy

• Costs of fragmentation and capability

• Run down in public services, with resources provided only in response to disasters

• Too much focus on efficiency reduces emphasis on outcomes, and democratic values

0

101 10

Emph

asis

on

outp

uts

Emphasis on outcomes

Outputs and outcomes

Efficiency& effectiveness

Operationalefficiency

Political rhetoric?

A pendulum swing of doctrines 1984 - 2002

Reducing consultant use. E-Govt part of SSC

Contracting of support services

A self-contained system

Concern about the distance between policy & delivery

Separation of policy and delivery

Consolidated organisations advising and delivering

Concerns about fragmentation, focus on amalgamation and networks

A variety of smaller organisations with flatter structures

Large bureaucracies with long hierarchies

Technical / professional backgrounds, favoured again in the health sector

Managerial skills for senior roles

Technical skills for senior roles

Unchanged as yet

Chief executives on fixed-term contracts

Permanent heads of departments

Public sector standards board

Employment variety

Life-time vocation

Concern about qualitative information about outcomes

Accrual accounting

Cash accounting

Increased focus on outcomes and capability

Accountability for outputs

Accountability for inputs

Code of conduct, expectation of collaboration

Let managers manage and hold them accountable for results

Management by rule book

Control model

Business Strategy

Strategicuncertainties

Core Values

Risks toavoid

Criticalperformance

variables

INTERACTIVE DIAGNOSTIC

BOUNDARYSYSTEMS

BELIEFSSYSTEMS

Position Perspective

Patterns in action Plan

Levers of Control, Simons, 1995

Yin / yang management

Competing valuesQuinn (1988)

DecentraliseDifferentiate

Competitiveposition

Maintenanceof system

Centralise, integrate

Con

trol

Flex

ibili

ty

Internal External

Human Relations Open systems

Internal Process Rational Goal

Managing paradoxes• ‘Both and’ responses rather than the tyranny

of the ‘either or’ (Collins and Porras)• Balancing of empowerment and control

(Simons, 1995)• Public sector tasks require a high tolerance

for ambiguity and intellectual ability (Lynn, 1996)

• Navigating paradoxes as a core management task

References• Argyris, C. (1990) The Dilemma of Implementing Controls:

The Case of Managerial Accounting. Accounting, Organizations and Society 15(6): 503–511.

• Behn, R. D. (1995). The Big Questions of Public Management. Public Administration Review 55(4 July / August): 313 - 324.

• Cameron, K., and Quinn, R. (1988) Organisational Paradox and Transformation. In Quinn, R., and Cameron, K. (Eds) Paradox and Transformation: Toward a Theory of Change in Organisation and Management. Cambridge, Mass., Ballinger.

• Collins, J., and Porras, J. (1994) Built to Last – Successful Habits of Visionary Companies. London, Random House.

• Feldman, M., and March, J. (1981) Information inOrganisations as Signal and Symbol. Administrative Science Quarterly 26: 171–86.

• Gregory, R. (1995a). The Peculiar Tasks of Public Management: Toward Conceptual Discrimination. Australian Journal of Public Administration 54(2): 171 -183.

• Hood, C., and Jackson, M. (1991). Administrative Argument. Aldershot, England, Dartmouth.

• Light, P. C. (1997). The Tides of Reform: Making Government Work, 1945-1995. New Haven, Conn., Yale University Press.

• Lynn, L. (1996) Public Management as Art, Science, and Profession. Chatham, New Jersey, Chatham House.

• Maor, M. (1999) The Paradox of Managerialism. Public Administration Review 59(1): 5–18.

• Nonaka, I., and Takeuchi, H. (1995). The Knowledge -Creating Company. How Japanese Companies Create the Dynamics of Innovation. New York, Oxford University Press.

• Quinn, R. (1988) Beyond Rational Management. San Francisco, Jossey-Bass.

• Simons, R. (1995) Levers of Control. How Managers Use Innovative Control Systems to Drive Strategic Renewal.Boston, Harvard Business School Press.

• SSC (1999). Improving Accountability: Setting the Scene.Occasional Paper 10. Wellington, State Services Commission: 28.

• Wildavsky, A. (1992). The New Politics of the Budgetary Process. New York, HarperCollins.

• Wilson, J. Q. (1989). Bureaucracy: what government agencies do and why they do it. New York, Basic Books.