Performance management, decentralization and management development: local government in Europe.(Local Government: Management in Flux and Transition)

Introduction

Over the last decade, terms such as responsiveness, quality, service delivery and performance culture have become commonplace in the debates on local government. New tasks are added to the repertoire of local authorities, and present tasks are supposed to be performed with higher productivity. Competence and responsibility are decentralized from central government to local authorities, and within these to decentralized units. The expectations of stakeholders (the public, the local business community, the employees, etc.) are articulated to a higher extent and are causing qualitative changes in the demand for and supply of public services. Changes in the division of labour between the private and public sectors are seen in the area of privatization, market orientation and emphasis on profit generation of (some) local authority tasks. A pressure for environmentally conscious conduct, internationalization and the implementation of information technology advances are adding to the list of challenges to European local authorities. At the same time there has been growing pressure for budgetary controls or even cutbacks.

These trends are not found just in Britain. As Batley[1] points out, it is quite remarkable how far the language and debates about public sector reform are shared across countries. References to the need to respond to diverse and changing values are common in Germany[2,3] just as in Norway[4]. The decentralization of service delivery and one-stop shops are discussed in Denmark[5] just as in Britain. While the scope; terminology and nature of interventions vary between countries, the reform programmes generally share a variety of -- sometimes conflicting -- objectives such as increased efficiency, quality and consumer orientation, budget cuts, decentralization of service provision and, to some extent, decision making[6-10]. In the majority of countries, interventions in local authorities have explicitly included the area of employment, HRM and management development. The theme was just as much a need to respond to the change in value among customers as among public sector employees themselves. There have been differences in approach, particularly in the attitude to trade unions, with British local government reforms generally taking place in a more hostile environment than elsewhere. Whatever the national context of the reforms, however, they share overall a focus on a more managerial approach, emphasizing the role of leadership and resulting in an expansion in the scope and complexity of the average managerial job in the public sector. Attempts to respond to external pressures of consumer demands and financial stringencies have highlighted the need for internal reforms of management culture and management systems. Management development is accorded an important role on the way to achieving the new objectives.

The reconsidering of traditional roles has included the area of human resource management The public sector employment model, with its "cardinal bureaucratic principles of equity, consistency, equality before the rule, accountability and procedural propriety"[11, p. 13], has been criticized as too inflexible to deal with increased demands from consumers and deliver efficiency. In response there has been a discussion of the need to manage public sector employees much more actively in order to manage an effective response to more differentiated and complex external demands. A common theme has been the need to decentralize personnel management decisions and give greater scope to individual authorities, and individual units within authorities, to develop their own approaches. Within the different national approaches and types of measure used, several common policy areas emerge in relation to human resource management[7]: a greater emphasis on performance management; greater scope to use pay as part of performance management; an increase in decision-making powers of line managers; the need for management development to prepare managers for their new tasks and, within this, an encouragement of private-public sector mobility.

These discussions and policy prescriptions are not of course unique to local authorities. They have originated in the main in the teaching and research related to human resource management in the private sector. Indeed, private sector practices are actively held up as ideal types of managerial reform[9, p. 499].

In this article we look at selected human resource management policies and practices in local government We analyse trends in the compensation area as the increasing use of variable pay, merit/performance-related pay, are very typical of the reaction of public organizations to the new external and internal demands. We look also at performance appraisal as these measures are discussed to an increasing extent as making visible the individual contribution to organizational objectives and helping to refocus performance. The described trends have significant implications for the managerial role. We discuss these and examine the local authority response in the area of management development

In discussing trends, we are concerned also with a comparative dimension: whether the common language of public sector reform across six European countries -- Denmark, France, (West) Germany, Norway, Sweden and the UK -- is reflected in common responses in human resource management. We include comparisons with private sector patterns of human resource management as a reference point to the national context for trends in human resource management in local government. Our concern is with how far there is a distinct local authority pattern, comparable across countries, or whether there is evidence of a convergence of human resource policies/practices between private and local authority employers along national lines.

The original data in this report are drawn from the Price Waterhouse Cranfield Project, the largest independent survey of organizational level human resource management in Europe. The research is based on a postal survey of personnel directors in local government and the private sector. Table I gives the sample size for local government and the private sector for each country. With the exception of France there are significant size differences between the local government and the private sector samples, with on average local authorities employing more people. In Sweden only local authorities not responsible for health care have been included. The data reported here were collected mainly during the winter and spring of 1992. Only organizations with 200 or more employees were included in the survey (see [12]).

 
Table I. 
Number of respondents 
in each sector 
 
                        Germany 
                        (West)     Denmark      France 
 
Local authorities         45          65          51 
Private                  703         192         487 
 
                        Norway      Sweden        UK 
 
Local authorities         70          33         126 
Private                  118         168         795 

Remuneration policies and performance management

Traditionally, the image of employment policy in the public sector, compared to the private sector, is one of uniform practices and centralized policy making. Terms of employment have to a high degree been determined by general legislation or nationwide agreements. As compensation systems have usually been based on educational background, seniority and other so-called "objective" criteria, centralization was perceived as a rational and fair way of undertaking the HR responsibility. However, the decentralization of service delivery to and within local government has increasingly led to demands for a corresponding decentralization of control over the basic tenets of human resource management policies to more local levels. In this field pay is a key area.

All countries (apart from Germany) in the study have made some attempts at reforming the traditionally centralized pay negotiation Systems in public services[7]. These attempts were motivated by two objectives: to control public sector pay by making it more responsive to local conditions; and to deal with recruitment and retention problems in increasingly competitive labour markets. As has been pointed out elsewhere[13], the two objectives (of cost …