Public Services Choice and Efficiency - Literature review Example

Student Name> Public Services Choice and Efficiency Delfaauw and Dur rightly claim that civil servants have a reputation for being lazy. Jokes on civil servants’ laziness and stories on bureaucratic errors are quite popular. The lack of incentives in public sector organizations is known for attracting workers who are most averse to exerting effort. This pessimistic view is also quite prominent in the economics literature. For several decades, this literature had identified civil servants as pursuing their narrow self- interest, usually at the expense of the interest of the society. Boyne however claims that in the last two decades, there has been a pandemic in public sector reforms with governments across the globe reorganizing and restructuring public sector organization in attempt to produce and provide better services. In this paper, I attempt to explain the efficiency or the lack of it in public sectors. Public Sector Laggings: The debate over whether public sector organizations should emulate private sector managerial practices in terms of contextual differences is long running. A range of areas have been examined in terms of stakeholders, legal constraints, accounting practices and external reporting requirements, in trying to understand the fundamental differences between the public and private sectors. Traditionally, public sector organizations have not had to compete for scarce resources but rather are highly subsidized, hence promoting inefficiency and discouraging goal setting and strategic actionMontanarie and Bracker, 1986 J.R. Montanarie and J.S. Bracker, The strategic management process at the public planning unit level, Strategic Management Journal 7 (1986), pp. 251–265.. Whereas there are usually many competing providers within the private sector; historically the customer of public services often has no other alternatives, further reducing the public manager’s incentive to take strategic action. These problems are well recognized, and governments and institutions have been taking many steps to address them from compulsory public tendering, to creating customer choice in areas, such as education, where choice might not have existed before. Incorporating financial and Human Resource Management functions of the private sector, the emergence of a new “managerialist” form of public management enables a shift from purpose to process allowing public service providers to venture further from politics and nearer to the market. Critics, however, argue that formidable barriers such as managerial resistance, financial constraints, the largely prescriptive nature of reforms and relative inexperience of public managers not only impedes the goals of public “managerialism” but perhaps renders them unattainable (Voss, Tsikriktsis, Funk, Yarrow and Owen). Ever since the concept of service captured the attention of operations management scholars in the 1980s, a widespread global movement focusing on the management of services has emerged with most service literature concentrating explicitly on the private, competitive and for-profit business landscape; even though the public sector has a comparable need for strategic service integration that is largely ignored. Strategic management scholars have also highlighted that strategic management of the non- profit public organization in general is little explored, Ring and Perry, 1985 P.S. Ring and J.L. Perry, Strategic management in public and private organizations: implications of distinctive contexts and constraints, Academy of Management Journal 10 (1985) (7), pp. 276–286.Full Text via CrossRefindicating that this problem of disparity is neither a fresh nor an isolated concern (Voss, Tsikriktsis, Funk, Yarrow and Owen). Public Service Inefficiency: Public service has a clearly defined role in promoting the well being of citizens. However for various reasons, such as public skepticism and macroeconomic productivity, policy makers have a natural interest in ensuring that the enormous national resources devoted to the public services are used efficiently. The existence of inefficiency may suggest that public service resources could be better used elsewhere in the economy, or that more outputs could be generated within the public services without additional resources. Furthermore, variations in efficiency might lead to unequal quality of services and a consequent perception of unfairness. Manifest inefficiency and unfairness may undermine the public’s support for tax funding of public services (Smith and Street, 402). Denhardt and Denhardt claim, that public management has undergone a revolution in the recent years. Rather than focusing on controlling bureaucracies and delivering services, public administrators are admonishing to ‘steer rather than row’ and to be the entrepreneurs of a new, leaner, and increasingly privatized governments. Hence a number of positive results have been implemented in the public sector. Public administrators should essentially focus on their responsibility of serving and empowering citizens as they manage public organizations and implement public policy. In other words, with their primary focus on citizens, public servants should not place high emphasis on steering or rowing the government boat, but rather should be interested in building public institutions characterized by integrity and responsiveness. The past decade has witnessed a surge of empirical research on strategic interaction among local governments especially in the setting of tax rates, expenditures on public services, and standards and regulatory measures. In particular, a strand of this literature has explored the issue of welfare competition. In the presence of welfare recipients' mobility, decentralized welfare policies would be set strategically, in the sense that an authority would look to neighboring jurisdictions' benefit levels before setting its own to avoid becoming a “welfare magnet,” and would respond to the policies enacted by its neighbors, leading to a race to the bottom and a possible erosion of the welfare state. Drawing from the example of UK, the bulk of welfare policies are set at the national level (minimum income guarantee, jobseeker's allowance and housing benefits), yet local authorities devote a share of total revenues to social expenditures, in terms of care and assistance to the elderly, help to families and children with social needs, as well as a number of services to people with disabilities and health needs (Revelli). Revelli proposes that in the presence of a decentralized welfare system and welfare recipients' mobility, local welfare policies would be set interdependently. Since every jurisdiction realizes that the number of welfare recipients depends both on one’s own and on the neighboring jurisdictions' policies, local welfare policies will tend to be set strategically, and welfare expenditures will end up being spatially auto-correlated. However, spatial auto-correlation in local expenditures is compatible with alternative theoretical explanations. Yardstick competition arising from a local information spill-over is one of them. The basic idea underlying yardstick competition is that voters are imperfectly informed about the actual cost required for providing public services, and policymakers are heterogeneous with respect to efficiency in public service provision, in the sense that some politicians are more prone to waste resources or to divert public revenues to private aims. However, in a decentralized system of government, though, imperfectly informed voters can improve selection of politicians, by evaluating the efficiency of their own government relative to governments in nearby localities. Furthermore, as a result of the information spill-over from neighboring jurisdictions, officials would exert more effort in order to enhance their performance relative to their neighbors, and would end up mimicking and getting inspired by the policies of nearby governments. If spatial auto-correlation were due to welfare competition, then the introduction of the national performance assessment system should have no or little effect on it, because it does not affect the incentives for local authorities to compete with their neighbors to avoid in-migration of welfare recipients. Furthermore, it could be argued that performance rating might, by spreading more information and raising transparency about the quality of social services, even exacerbate rather than weaken inter-governmental welfare competition in the presence of imperfectly mobile welfare recipients. On the other hand, if yardstick competition based on local information spillovers was responsible for the observed spatial auto-correlation in social spending, then one should observe a significant reduction in spatial auto-correlation after the introduction of the performance assessment system that raises the level of publicly available information based on uniform national standards. Public Service Choice: In reference to the literature available on social policy, increasing choice is normally not thought to be problematic. Dowding and John quote Perri as defining choice as ‘the opportunity to make decisions expressing preferences between options’ and distinguish between ‘consumer choice schemes’ where people can make applications that may not be successful, and voucher schemes where the government pays part of the amount that can be spent by the consumer on a provider of their choice. Choice might be valued instrumentally: for what it brings, and it can be valued intrinsically: for what it is. The instrumental value of choice is that it provides signals for providers which subsequently increase productive and allocative efficiency. Clearly, classical economics models assume that market efficiency is driven by choice. If there are multiple providers and a large number of consumers, then the consumers have the luxury to pick and choose the products and the firms that produce those products in lieu of the type of goods they want, and also in context of the price and quality of those goods. The variety of products produced occurs due to the signals that the consumers provide through their buying practices and habits. Moreover, these allocative signals can also lead to productive efficiency. Assuming them to act rationally, consumers are likely to purchase the type of products they want at the cheapest price available. The Goal Model of Improvement: George Boyne claims this to be the oldest and one of the simplest models of organizational effectiveness. The basic underlying assumption of this model is that formal organizations are meant for a purpose: to achieve objectives that individuals, communities or families cannot achieve on their own. Hence at the time of their establishments, organizations define for themselves a major goal or a set of goals. With the passage of time these goals may alter or be embellished but they continue to guide the strategic action of the organization. Furthermore, the extent to which such goals are achieved can be used to assess the degree of success or failure of these organizations. In principle, this model has direct relevance to the meaning and measurement of public sector improvement. For instance, the major goal of the national health institute is assumed to be to raise the standards of the population’s physical and mental well being. Whether this improvement has occurred can be viewed by assessing the facts and figures of national mortality and morbidity across time. Boyne further on quotes Rainey and Steinbauer as stating that a public agency is effective if it ‘achieves the mission as conceived by the organization and its stakeholders, or pursues achievement of it in an evidently successful way.’ Despite some problems with the goal model, it has powerful resonance with the current debates about improvements. Public services are clearly expected to achieve something and to produce some tangible results that satisfy their key stakeholders as well as their customers. Difficulties in Contingent Valuation of Public Sectors: Schlapfer and Hanley claim that a necessary condition for applying cost- benefit analysis in the public sector is an accurate estimate of the total economic value non- marketed goods and services. Traditionally, economists have for a very long time measured the value of private goods and services routinely bought and sold in markets, estimating the benefits of environmental improvements and other public goods and services is more tenuous. The validity of stated preference information for decision making over public goods has been the subject of various heated debates over the past few years. External validity tests which are one of the ways of measuring this validation has been based on revealed choice about private goods such as housing exposed to varying levels of air pollution or about charitable donations. Clearly, the external validity of stated choices about private goods and services has little to say or reveal about the validity of stated preferences for public goods and services. Important issues in public good surveys like for instance the absence of opportunities for learning from others or past choices are clearly not addressed in the external validity tests. Moreover, internal validity testing has proven to be extremely difficult. For instance, the lack of sensitivity to scope or quantity of the good or service provided may not accurately indicate how much willingness to pay should vary with scope. With the exception of tests measuring for the anchoring effects, internal validation has rarely allowed any strong results from the validity of contingent valuation estimates of the total economic value of the public goods and services provided. Sources of Public Service Turnaround: Boyne claims that many national and international bodies and service providers are searching eagerly for turnaround strategies that can alleviate the problems that the public sectors are currently facing. However, little academic theory or evidence on public sector organizations is available to help them in their quests. Published work on public service turnaround mainly consists of case studies of single organizations as opposed to whole sectors. The basic problem with such studies of turnaround success is that the strategies that supposedly led to organizational rescue and recovery may also have been used in organizations that continued to perform poorly none the less. Unfortunately no research based on comparative methodology of strategies used by turnaround and non- turnaround has been undertaken on the public sector. It is important to define turnaround at this point; a turnaround situation is characterized by financial failure and the imminent collapse of the company. The broad pattern of evidence of turnaround situations is consistent with a ‘3R’ model of turnaround which suggests that firms are more likely to recover from failure if they follow a combination of retrenchment, repositioning and reorganization. Retrenchment refers to the strategic response to organizational failure which consists of reduction in the scope or size of the firm. With regard to the private sector, this emphasizes making cuts in parts of the business that are unproductive and unprofitable. Consequently this can release resources for investment in areas that seem likely to deliver higher performance and profits. This turnaround strategy can include exiting from the markets where the firm is performing poorly or the contraction of activities in the market by selling assets or reducing the scale of operations, with the aim of increasing efficiency. Whereas retrenchment can be viewed as the efficiency strategy, repositioning is viewed as an entrepreneurial strategy that places emphasis on growth and innovation. This response to failure involves a new definition of the mission and core activities of an organization by becoming more dominant in an existing market or by diversifying into new markets and products which appear to be potentially profitable. Lastly, the term reorganization applies broadly to any change in the internal management of an organization. The underlying purpose may be to support strategies of retrenchment and repositioning, or simply to improve the implementation of the current strategy without any alteration in the size or market position of an organization. Reorganizing may involve changes in planning systems, the extent of decentralization, styles of resource management or organizational culture (Boyne). Concluding Remarks: Hartley claims that definitions of innovations such as ‘novelty in action’ and ‘new ideas that work’ emphasize that innovation is not just a new idea but it is also a new practice. And David Albury believes that innovation is essential to the improvement of public services; it is not an optional luxury but needs to be institutionalized as a deep value. He believes that even in periods of increasing expenditure on and investments in public sector, there still exist downward cost pressures. Without innovation, these can easily translate into increased workloads for already heavy- pressed professional and other staff. The key is not to work harder but to work smarter. Hence a steady flow of innovations is necessary to sustain improvement in the delivery of public services. These ever- growing pressures for efficiency and improved performance are now being underpinned by a deeper challenge to develop universal ‘personalized’ public services, which are services that are responsive to the needs and aspirations of individuals and communities, which treat users with respect and dignity, and which enable greater self- organization and individual and collective engagement in the achievement of desirable social outcomes. Boyne rightly states that public service improvement may slip down the policy agenda, as it is partly accomplished or overtaken by other domestic and foreign policy issues. However, academics should make a sustained attempt to analyze the nature and determinants of improvement to be better equipped to satisfy the customers and to contribute effectively to policy debates the next time around. Clearly, the public sector is in dire need of a turnaround. Works Cited Albury, David “Fostering Innovation in Public Services.” Public and Money Management (January 2005). Boyne, George A. “What is Public Service Improvement?” Public Administration (June 2003). Boyne, George A. “A ‘3Rs’ Strategy for Public Service Turnaround: Retrenchment, Repositioning and Reorganization.” Public Money and Management (April 2004). Delfgaauw, Josse and Robert Dur “Incentives and Workers’ Motivation in the Public Sector.” The Economic Journal (January 2008). Denhardt, Robert B. and Janet V. Denhardt “The New Public Service: Serving Rather than Steering.” Public Administrative View (November 2000). Dowding, Keith and Peter John “The Value of Choice in Public Policy.” Public Administration (2008). Hartley, Jean “Innovation in Governance and Public Services: Past and Present.” Public Money and Management (January 2005). Revelli, Federico “Performance Rating and Yardstick Competition in Social Service Provision.” Journal of Public Economics (February 2006). Schlapfer, Felix and Nick Hanley “Contingent Valuation and Collective Choice” KYKLOS (February 2006). Smith, Peter C. and Andrew Street “Measuring the Efficiency of Public Services: the Limits of Analysis.” Journal of the Royal Statistical Society: Series A (Statistics in Society) (March 2005). Voss, Chris, Nikos Tsikriktsis, Benjamin Funk, David Yarrow and Jane Owen “Managerial Choice and Performance in Service Management- A Comparison of Private Sector Organizations with Further Education Colleges.” Journal of Operations Management (February 2005). Read More