Academic journal article Canadian Public Administration

Public Sector Performance and Decentralization of Decision Rights

Academic journal article Canadian Public Administration

Public Sector Performance and Decentralization of Decision Rights

Article excerpt

Introduction

Governments have undergone several waves of reform over the last 25 years. Many of these changes entailed the adoption of management mechanisms that were traditionally associated with the private sector. Public sector organizations have seen an increase in their accountability, a greater emphasis on results rather than compliance with rules, and the introduction of many performance indicators (Ingraham, Selden and Moynihan 2000; Moynihan and Ingraham 2003).

This article looks specifically at the impact of varying degrees of decision-rights decentralization on performance. Public organizations are first assessed over time. If changes are beneficial, public organizations should see their performance increase after the introduction of the changes. Second, public organizations benefiting from different levels of decentralization are compared. If the decentralization of decision rights enables public organizations to increase their performance, the ones with more freedom to make their own decisions should see their performance increase by a larger margin than those with less freedom to make their own decisions.

Twenty public sector organizations were studied. These organizations experienced a shift from rule-based control mechanisms to outcome-based ones, along with a decentralization of decision rights. Moreover, the organizations were granted different levels of decisional power, creating variance among them and making it possible to assess to what extent different levels of flexibility in decision making resulted in different performance levels.

Results show that there is a link between the degree of decision-rights decentralization and the performance increase among the organizations studied. The agencies benefiting from greater freedom with respect to financial and human resources decisions saw their performance increase by a larger margin. The autonomy given to the managers enabled them to make their organization perform better.

The article is organized as follows: first the relevant literature is reviewed; second, the methodology is presented. Information from several documents, performance contracts, annual reports and web sites was analysed, and 86 interviews were conducted to obtain the results presented. The influence of the decentralization of decision rights is assessed, as are several control variables. Finally, these results are discussed and conclusions are offered.

Literature review

In recent years, public administrations have been under pressure to increase efficiency. Even if the traditional notion of competition does not really exist for public services (Bolton 2003), there is an increasing awareness that countries, regions and cities are competing with each other. Tax rates and services are compared, companies are ever more mobile, and commerce deregulation makes it increasingly difficult for a given administration to be ineffective without being penalized. If a public administration is not performing well, economic activity will shift toward areas where public sector performance is better. This means that the quality of public administration is an important factor for a country's economic performance. Indeed, the good governance of public organizations is one of the drivers of overall economic performance (Nicholl 2006). However, because competition for services usually does not exist within a jurisdiction, the mission fulfilment for the government agency has to be motivated by something other than traditional competition (Bolton 2003).

Emphasis shift: from processes and rules to performance and results

In order to become more efficient and responsive, public administrations have adopted a plethora of changes (Boyne 2003). Several different types of reforms have been introduced (Walker and Boyne 2006). In developed economies, many of these changes have been associated with corporatization (Bilodeau, Laurin and Vining 2006) or "managing for results" (Moynihan and Ingraham 2003). …

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