ETHOS Issue 12, June 2013
The effective delivery of public services is a complex challenge. At a time when many governments face incredible fiscal pressure and increasing demands from citizens, the question of who does what has again taken centre stage. For some, the answer will always be that the private sector can do it best; for others, the state. But such one-size-fits-all approaches do not help us to deal with the increasing complexity of public service delivery. It is time to rethink public service delivery: just who are the providers of public services? When should governments externalise?
Rethinking who and when is just the beginning of rethinking public service delivery. We also need to determine: who decides and who produces, and what the right combinations of these activities might be; the appropriate mode of coordination between the parties; the motivations of various actors and how to tap these to deliver public services; the obstacles that government organisations encounter in effectively managing relationships; how we should recalibrate public organisations to manage this complex portfolio of providers and relationships in order to best deliver public value in the 21st century.
In Rethinking Public Service Delivery: Managing with External Parties, my co-author John Alford and I explore these ideas: we argue that using various modes of coordination to simultaneously manage a complex portfolio of providers with different motivations represents one of the most pressing public management challenges of our time.1
Rethinking who these external providers are opens up a much broader menu of options in the delivery of public services.
Rethinking the Providers
In our work, we identify an external provider as any entity outside of a government organisation that produces some or all of the service. This seemingly simple definition, however, opens up a much broader menu of providers than conventional wisdom suggests.
Three types of providers have long been part of the public service delivery landscape: private firms, non-profit organisations, and volunteers who give their time and effort to government organisations. In recent years, we have also seen an increasing interest in government organisations working with other government organisations in more joined-up or whole-of-government ways. In addition to these four commonly identified providers, we explore the contributions of three more sets of actors.
First are the clients of government organisations, the ones we usually think of as recipients, or at the business end, of public services: school children, hospital patients and job seekers.
The second are regulatees — mainly organisations — that are subject to government regulations. Good examples are firms who must comply with environment regulations, or restaurants that follow food hygiene regulations.
Finally there are those other actors that we call on to make contributions to public services in different ways. Child protection is a good example: this service needs contributions from a range of different providers. We ask teachers, doctors and neighbours to report suspected cases of abuse and we seek changes in behaviour from family members. All of them make some contribution to this public service, albeit in different ways.
Some may find these additions to our external providers list unusual. However, each, in their own way, makes contributions to public services. Recall our definition: any entity outside of a government organisation that produces some or all of the service. Both clients and regulatees make critical contributions to public services and the creation of public value. Clients co-produce public services: jobseekers, for example, look for jobs, undertake training to increase employability, and go to interviews; patients take medicines and follow doctors’ advice to improve health outcomes; schoolchildren do homework and engage in the classroom to co-produce education; restaurant owners follow food regulations to ensure public safety. Such contributions represent co-production of public services, enabling the achievement of governmental outcomes, and the creation of public value.
Rethinking who these external providers are opens up a much broader menu of options in the delivery of public services. On the one hand, this is not a radical change because these external parties are already performing these functions. On the other, we have not tended to think so broadly when we consider public services. Once we rethink who we might work with, we must then rethink when we should externalise to other parties.
Government organisations, like any other, have always had to confront the make-versus-buy decision. What has tended to surface, in the current debate about externalisation, (in particular on the topic of outsourcing), is a return to old positions: with a pro- externalisation bias on the “right” and an anti-externalisation bias on the “left”. Both positions are, however, misguided and we need a more nuanced discussion.
We define externalisation as any arrangement in which one or more external providers produces all or some of the service. Given our more expansive set of potential external providers, we make the case that the answer to the question of when to externalise is: it all depends. On the one hand, this may seem an ambiguous and unhelpful foray into the debate, but on the other, it can offer profound insight into the complexities of public services and externalisation.
Our argument is that, to date, views on the costs and benefits of externalisation have been far too narrow. We point to three major categories of considerations that should guide the decision.
The first category gets plenty of attention, in fact all of the attention in some cases. These are the service benefits and costs aspects of the argument, often expressed as “value for money”. Here we see governments focused on whether an external party can do something better and/or cheaper and this has often driven externalisation decisions.
The second category gets some attention, but not enough given the potential for this to add or detract from “value for money”. These are the relationship costs. Even if some other party can potentially do something better or cheaper, government organisations expend considerable effort and resources in making that happen. They must define services, often run processes to select providers, and then monitor that the provider is doing what is expected. None of these activities is cost-free for either party, but these rarely get discussed in any public debate about externalisation.
Views on the costs and benefits of externalisation have been far too narrow.
The third category barely rates a mention until there is a scandal. These are the strategic costs and benefits, such as how externalisation may enable government to take a more strategic rather than operation role (the classic “steering rather than rowing” narrative), how risk is allocated (or not allocated) between parties, the reputation building or destroying potential of outsourcing, the loss of core competences, and the handing over of legal force to other parties. Again, these factors tend to come to the fore when there is a scandal but do not otherwise get enough attention in externalisation decisions.
Whilst our argument of “it all depends” might on the face of it seem simplistic, it does, in fact, represent a much more sophisticated way of considering the externalisation decision. To answer the question of when to outsource then requires public managers to weigh up these various costs and benefits on a case-by-case basis. One-size-fits-all approaches cannot deliver when there is such complexity in determining what the potential benefits and costs may be.
Conclusion: Rethinking Public Service Delivery
With a broader set of providers and a more robust framework for weighing up the externalisation decision, we are just starting to rethink public service delivery. Once we make the decision to externalise, public managers are only part of the way there. They must determine who will do what — who will take on the deciding and producing roles and in what combination? They must decide what mode of coordination — compulsion, supervision, classical contracting, negotiation, or collaboration — can connect the parties together. They must consider the motivations of those they will work with and then determine what motivators, or levers, they can use to tap these contributions. Finally, they must consider how to build the organisational capabilities to manage external parties and in doing so, confront a range of potential government obstacles to effective relationship management — accountability, interdependency/complexity, turbulence, and cultural differences. All are potential barriers to optimising relationships for the delivery of public services and the creation of public value.
- John Alford and Janine O’Flynn, Rethinking Public Services: Managing with External Parties (Palgrave Macmillan, 2012).