Research project:
Autonomization and result oriented control. An analysis based on principal-agent theory (1998-2002)

Content of the research

The crisis of legitimacy of government and the introduction of performance management in the public sector result in a shift in the institutional arrangements for public service delivery in most OECD countries. Public services are delivered not any longer by strict input controlled and incrementally financed units within monolithic government bureaucracies that have a monopoly. But they are provided more and more by (quasi-) autonomous public organisations to whom the centre has devolved financial and human resources management competencies. The devolution of managerial capacity to such organisations is supplemented by the contractualisation of their relationship with central government and the introduction of performance enhancing incentives like performance-related financing or market pressures. In Belgium and Flanders too, there is a trend towards result control and market control as new modes of control of public service providers.

It is assumed that such a shift in the control of public agencies (from input control to result control and market control) enhances their performance in terms of economy, efficiency, effectiveness and quality. The assumptions, which underlie the rhetoric of international and national authorities with respect to these reforms are central to the New Public Management practitioner theory (NPM). However, the validity of these assumptions is insufficiently tested in existing empirical research in a systematic way.

The main goal of this exploratory research is to make these assumptions more explicit theoretically, to formulate them into hypotheses and to put these hypotheses to a first test. As such, this research/study is a first step in a long term research programme on agentification and control. The scope of this research is focussed on the steering of the Flemish government with regard to the Flemish Autonomous Institutions (FAI’s) in the period 1992-1999. Within this scope, one FAI is selected as a so-called ‘critical case’ through the means of a detailed analysis of the steering relations between the Flemish government and the FAI’s. This detailed analysis shows that the Flemish government has reoriented its steering along NPM-lines only to a limited extent and in ad hoc cases.

In a first step, agency theory is used to develop a theoretical framework which enables to hypothesise and study the combined effects of (changes in) different control mechanisms on the performance of the service delivery organisations. Confronted with the empirical evidence of the case of the selected FAI, the initially designed agency model is in a second step complemented with three other theoretical models on the relationship between trust, control and performance. Finally, the in-depth casestudy results in a complex model for which additional research on three other FAI’s indicates a broader external validity.

The research shows that executive public organisations are induced to performance enhancing behaviour by means of management autonomy, in combination with more result control, financial incentives and competition, only under specific conditions. However, the need of an executive public organisation for trust-building towards its users and especially towards its political principals (in particular ministers, government and parliament) in response to certain legitimacy-threathening environmental factors results in a second but more fundamental motivation for performance enhancing behaviour. On the one hand, the research suggests a number of refinements for result control and market control of executive public agencies by central governments. On the other hand, new ways of control of executive public organisations, based on the targeted and balanced stimulation of their need for legitimation, are suggested.

Research team

Promotor: Prof. dr. Geert Bouckaert
PhD: dr. Koen Verhoest