The ‘empty nest’ syndrome: Dutch ministries after the separation of policy and administration Sandra van Thiel Erasmus University Rotterdam Paper for the panel Government at arms’ length: the pendulum shift? IRSPM 12 conference, Brisbane Australia 26-28 March 2008
***WORK IN PROGRESS; DO NOT CITE WITHOUR AUTHOR’S CONSENT **** Summary From the 1980s on, the number and types of executive agencies, operating at arms’ length of the government, proliferated in the Netherlands. Depending on what types of organisations are included in the count, there are nowadays between 670 and 3700 executive agencies in The Netherlands. Large proportions of the national service are or will be working in these organisations and expenditures are estimated as sizeable as the total State Budget. Evaluations show that there are several problems in the relationship between parent ministries and executive agencies. Anecdotal evidence reports conflicts and distrust, usually resulting in oversteering by the parent department and underperformance by the agency. The political debate concentrates on the lack of democratic accountability; ministerial accountability is often limited, or at least restrained by a lack of information and/or supervision. Countermeasures (legislation, guidelines, charters) are announced, but in practice often not implemented. In this paper I will argue that this lack of implementation is in fact a good thing, because the need for more control is the symptom of a disease that has affected Dutch ministries after the separation of policy and administration, called the empty nest syndrome. Measures to tighten control will be counterproductive and only cause further deterioration of the relationship between parent ministries and executive agencies. Better solutions can be found in creating a relationship based on trust and stewardship (Block, 1996), instead of the traditional principal-agent principles of information asymmetry and monitoring. A theoretical model will be presented to optimise the steering relationship between parent ministries and executive agencies.
Contact: Dr. S. van Thiel Associate professor Public Administration Erasmus University Rotterdam P.O. Box 1738 (room M8-27) 3000 DR Rotterdam The Netherlands Tel. +.31.10.4082140 Fax +31.10.4089099 e-mail
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Introduction From the early 1980s on the Dutch government implemented several administrative reforms to solve problems like the fiscal deficit and decreased public legitimacy. 1 Privatization was one of the first reforms, but never became very popular in the Netherlands (Pollitt & Bouckaert, 2004). Dutch politicians and civil servants preferred a ‘softer’ modernization of the state, by separating policy and administration. This meant that the execution of public tasks and/or the implementation of policies were delegated to executive bodies at arms’ length of the government. In some cases, existing societal, private or commercial organizations were charged with a particular task, but in most cases executive units from ministries were disaggregated and hived off. Modernization of the state thus resulted in a strong increase in the number of executive agencies, of different legal types (OECD, 2002). I will refer to this trend as agencification (Pollitt & Talbot, 2004). Several years after the onset of agencification, reports were published about the consequences of agencification, in particular regarding the ministerial and democratic accountability. 2 For example, in 1995 the Netherlands Court of Audit (NCA, 1995) found large deficits in the legal arrangements of executive bodies. In response, the cabinet announced a series of measures like guidelines for agency establishment and a charter law. In this paper I will argue that these measures are in fact a symptom of the ‘empty nest syndrome’ (a psychological ailment) that has affected politicians and ministries after agencification. As such they represent a maladaptive response to agencification that will lead to (further) deterioration of the relationship between ministers, politicians and ministries on the one hand and executive agencies on the other hand. A more effective ‘cure’ would be that ministers, politicians and ministries find and invest in their own new role in the situation that has come about after agencification. Below, I will use the metaphor of the empty nest syndrome to describe what happens to ministers, politicians and ministries after agencification. In the Dutch case, most of contacts with executive agencies are maintained by ministries and not by ministers or politicians (Yesilkagit & Van Thiel, 2008 [in review]; ‘t Hart & Wille, 2006; Kickert, 2001). Therefore, I will focus on the ministry-agency relationship but the propositions in this paper can be applied to every actor who is overseeing or steering executive agencies. This relationship is traditionally modeled as a principal-agent relationship. I will argue that the principal-agent model is not conducive to overcome the symptoms of the empty nest syndrome. Instead I will propose a principal-steward model (Davis, Schoorman & Donaldson, 1997; Block, 1996). Based on this model and the metaphor of the empty nest syndrome I will formulate some recommendations for governments to improve their relationship with executive agencies. While this paper has a Dutch focus, these lessons might be helpful for other governments as well. Agencification in the Netherlands To understand the Dutch context of this paper, I will first give a brief overview of agencification in the Netherlands. There are four types of executive agencies in the Netherlands (see table 1), but I will only discuss the two main types: contract agencies and so-called ZBOs. The other two types (statutory bodies called RWTs, and government foundations) have a high degree of overlap with ZBOs, and are much less in the centre of the political debate. Also, we know less about them because they have been less researched.
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Table 1. Number of ‘agencies’ in The Netherlands at national level 1993 2000 2004 ZBOs 545 (607) 431 (654) 630 RWTs* 3833 2562 Executive agencies 17 34 Government foundations 335 - executive agencies exist from 1994 on *including school boards Contract agencies (in Dutch: agentschappen) are former ministerial directorates. They are disaggregated from the ministerial budget to enable the use of an accrual accounting system (savings are maximized up to 5% of annual returns), and operate more business-like than the traditional government bureaucracy. The creation of contract agencies is referred to as ‘internal autonomization’. Contract agencies have no legal personality and still fall under full ministerial accountability. Within their financial boundaries, executive agencies have discretion to take managerial decisions independently, for example with regard to hiring and firing personnel but not with regard to obtaining loans or participating in limited companies. In most cases contract agencies maintain their office in the ministry (building). Since 1994, over 40 contract agencies have been established, including the National Building Agency (RGD), the Prison Service (DJI) , the meteorology agency (KNMI) , the National Waterways and Roads Agency (RWS), and several inspectorates (Pollitt, Talbot, Caulfield & Smullen, 2004). It is estimated that in a few years time approximately 50 contract agencies will employ approximately 80% of all national civil servants – note that agency employees remain civil servants. To become an agency a ministerial directorate has to meet twelve requirements – regarding for example the development of cost prices, performance indicators, and a risk assessment – and go through a one-year trial period, before the actual decision is taken by the minister of the parent department, the Minister of Finance, the cabinet and parliament to grant contract agency status. 3 ZBOs (zelfstandige bestuursorganen, in English: independent administrative organs) have a firm legal basis. They are either established by law (‘external autonomization’ of former ministerial units) or they are charged with a specific task by law (‘appointment’ of existing bodies). Examples are: the Student Loan Company, the Vehicle Registration Bureau, the Forestry Agency, the social security agency, the national bank, and the police authorities. ZBOs almost always have legal personality, which entitles them to for example obtaining loans or participating in limited companies. In this respect, ZBOs have more autonomy than contract agencies. About 40% of ZBOs is based on private law, usually foundations that already existed at the time when they were charged with a public task. 4 Ministerial accountability for ZBOs is limited, although there is no clear division as to what is still the responsibility of the minister and what not. In general, the minister is still responsible for (1) the policy that is being implemented, (2) the decision to charge a ZBO with this task and (3) the supervision of this ZBO. By law, ZBOs fall under the competencies of the law on public information and the national ombudsman. The number of ZBOs increased rapidly in the 1980s and 1990s. There are now about 630 ZBOs, including ZBO-clusters that have regional offices that are ZBOs too. It is estimated that the number of employees of ZBOs is equal to or even slightly higher than the number of civil servants in parent ministries (about 120.000), but exact and reliable numbers are not available. About half of the ZBOs have their own labour agreement; the other half uses the agreements made for civil servants.
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The relationship between parent ministries and executive agencies To describe the effects of agencification on the relationship between parent ministries (or more general: oversight authorities, either politicians or governments) and executive agencies, a metaphor is often used of children leaving home (Van Thiel, 2006a). There are indeed some remarkable similarities. When children leave the parental home, they start an independent household. Executive agencies are disaggregated from the government bureaucracy, sometimes physically as well by moving to another office. Children become responsible for their own sustenance for example by having a job or studying at a university. Executive agencies also are responsible for their own budget and determine their own operational procedures; that is all part of their autonomy. In most cases their budget is separate from the ministerial budget, and some agencies have their own revenues from fees and so on. Within the limits of their budget, agencies can decide independently about expenditures like running costs (personnel, equipment, etc.). Children often remain (partially) financially dependent on their parents, at least until they come of age. Most agencies obtain their budget from the parent ministry, and have to report about their expenditures and efficiency frequently. Ministers use this information to account for agency expenditures in parliament. So, in both cases there will be a regular flow of money and information between the two actors. The metaphor continues. Children that leave home will make new friends. They will value the opinion of these peers more than the opinion of their parents. This is part of the natural process of detachment. Agencies go through a similar process; agencies will emancipate (‘t Hart et al., 2002) or become detached as they develop their own identity and organizational culture (Veenswijk & Hakvoort, 2002). A Dutch example of this development is the Charter on Public Accountability that was published by a group of ZBOs in 2000. In this charter the ZBOS state that horizontal forms of accountability – to stakeholders and clients – should be appreciated more, even more perhaps than vertical accountability to the minister. The participating ZBOs committed themselves to a peer (sic!) review procedure, to benchmark each other’s performance. Since 2000, the number of agencies that participates in this charter has increased (see www.publiekverantwoorden.nl). Finally, children that leave home will experiment with new friends and activities, with all kinds of opportunities and risks. Many executive agencies explore new markets, or aim to acquire new tasks. (The Dutch government has set up regulations to prevent cross subsidization and other unfair competition by public organizations in private markets.) The metaphor is appealing but usually only one side is discussed: the behaviour of the ‘children’. See for example the debate on the democratic deficit below or the application of principal-agent theory with its focus on moral hazard by the agency (Braun & Gilardi, 2006; James, 2003; Van Thiel, 2001). This article aims to discuss what happens to the ‘parents’ that stay behind. I will posit that politicians, ministers and ministries may suffer from the empty nest syndrome. The empty nest syndrome 5 The empty nest syndrome is a maladaptive response to the post-parental transition (Raup & Myers, 1989:180). Parents, especially mothers, may suffer from all kinds of symptoms when their children leave home, like a sense of loss, grief and depression. These feelings of anxiety and stress can be further strengthened by concerns about the welfare of the children. Feelings of guilt may also occur for example about the (in)-adequacy of one’s parenting skills, but also guilt about feeling relief to no longer having to fulfil the active parenting role. Alternatively, parents may feel rejected because the children appear to no longer need their parents. All
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these (conflicting) feelings will hit over-involved parents, usually mothers, hardest (Oliver, 1977). Due to their socialization, the mothering role determines women’s (self)-esteem and the loss of the mothering role will affect her self-perception and her purpose in life. Therefore, the ‘empty nest’ does not only refer to children leaving home, but also to the feelings of emptiness that parents may suffer as a consequence. 6 In fact, Oliver (1977:87) states that the conflict centres more around the sense of the loss of power or control, than the loss of persons. There is some disagreement about the actual numbers of parents who suffer from the empty nest syndrome, but it is clear that over-committed parents run a higher risk than parents who have other, meaningful relations and activities in life such as a job, a good education, extended family networks and good skills to cope with stress (Raup & Myer, 1989; Oliver, 1977). Other risk factors are an unstable relationship between the parents, when the separation between parents and children happens abrupt or was not anticipated, ignoring the possibility that the syndrome may occur, and negative pressures in the environment for example when the media glorify parenting (mothering) skills too much. Prevention of the empty nest syndrome is difficult. High-risk situations should be screened, and parents should be taught good coping skills. But there are no guarantees; even parents who look forward to their children leaving home, may suffer from the empty nest syndrome (Raup & Myer, 1989). The transition can be easier though when parents anticipate the change and when children are already mobile and independent before they leave home. Treatment of the empty nest syndrome should primarily target the parents’ self-esteem (Oliver, 1977). They will have to find a new role, a new source of self-esteem, both for themselves, and for their relationship (marriage) and for their rapport with their (adult) children. However, this requires an active and aware adjustment of their life. This shows that children’s leaving home does not only affect the children but also the parents. As far as the relationship with (adult) children is concerned, parents are recommended to maintain contact but respect the children’s autonomy. Parent should be available for help and guidance in the background, but not for every little problem nor should help be forced upon the children. Children need to learn to handle their own problems, as part of becoming an adult. Parents should refrain from constant intervention and monitoring. Children will consider such behaviour meddlesome and distrusting – regardless of good intentions. This could cause conflict or a break. Parents should keep their distance and reservation, out of respect for children’s autonomy and in pursuit of building up a new, more mature relationship. This paper posits that politicians, ministers and ministries may suffer from the empty nest syndrome after agencification. I will substantiate this claim by first describing and then analysing the Dutch (political) debate on executive agencies, in particular ZBOs and contract agencies. The anamnesis and diagnosis will be followed by a prescription on how to treat the empty nest syndrome. Anamnesis: the Dutch debate on executive agencies In the Netherlands, agencification began in the early 1980s. Table 2 provides a short overview of the consequent political debate. At first, politicians, ministers and ministries did not show any kind of response (adaptation) or interest in the increased number of executive agencies and the new situation that had arisen in which policy implementation now occurred at arms’ length. It was not until the mid-1990s that the first reports appear and the political debate ensues. The most important trigger for this debate is a report of the Netherlands Court of Audit (NCA) on the accountability requirements of ZBOs, which appeared in 1995. The NCA found many flaws and shortcomings in the statutory laws. For example, some ZBOs did not even have to send in an annual report to their parent ministry. The cabinet responded in a white pa-
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per entitled “the restoration of the political primacy’ and announced a new investigation (carried out in 1996), and the development of guidelines for the establishment and statutes of new ZBOs. These guidelines were implemented in 1996 and included among others prescriptions about the official motives that would warrant the establishment of a ZBO: the need for impartial policy implementation, the need for self-regulation of a sector, or the lack of necessary expertise within the government. The efficiency motive, which was until then the most frequently mentioned motive, was no longer considered a legitimate reason to create a ZBO (based on the advice of the Committee Sint in 1994). The guidelines also stipulated that from now on only public law based ZBOs should be established. The guidelines needed to be used for each new ZBO establishment. A third measure that was announced in the white paper concerned the development of a charter law for ZBOs. 7 The first proposal was rejected. During lengthy negotiations between all parent ministries a second proposal was developed, which included only those requirements that everybody could agree on. It was a minimalist compromise stating a number of basic legal requirements. In 2004 the Second Chamber of parliament approved this proposal, with a large number of amendments. Deliberations in the First Chamber (senate) were however postponed pending the outcomes of a new government-wide investigation that was initiated by a new coalition that had just come into office. In 2005, the results of this investigation were published by the Committee Kohnstamm. The committee recommended the abolishment of almost all ZBOs, because their legal basis was too unclear and problematic. Instead, ministries should take up the execution of ZBO-tasks again. The committee made one exception; ZBOs with quasi-judicature tasks (like settling disputes) should remain independent. 8 In response, the cabinet acknowledged that there were problems with the unclear division of responsibilities between ZBOs and ministries, but considered a return of ZBO-tasks (and personnel) to the ministries an unrealistic option. The cabinet decided to launch yet another investigation to decide per ZBO whether the legal status should be changed or not, and reopened the parliamentary procedures for the charter law. In 2006 the charter law was finally approved. It incorporates the guidelines on the establishment of ZBOs that were put into place in 1996. The charter law creates some uniformity, but mainly to the rights of the overseeing minister and less to the internal management of the ZBO. For example, the charter law contains stipulations about the motives for the creation of new ZBOs, the rights that a minister should have to receive information or intervene in case of ill performance, and a number of accountability requirements. Furthermore, there are preferences for a public law basis for ZBOs and a civil service legal status for employees, but there are always possibilities to deviate from the charter law (‘exceptions’). Following the approval of the charter law, an official register was set up. 9 The implementation of the charter law has only recently begun (2007). A new committee was appointed to check for each ZBO which changes in the underlying legislation or statutes are necessary to meet the provisions of the charter law (Committee Gerritse). That checklist is now being applied by all the ministries and ZBOs. It is the intention of the cabinet that all ZBOs have to meet the charter law requirements, but exceptions have already been made for example for ZBOs that want to continue using their own labour agreement. Overlooking the ZBO-debate, we can conclude that it focuses mostly on the (lack of) control by ministers on executive agencies, and hence the risk of deficits in the ministerial and democratic accountability. The debate is highly political (normative). Members of parliament usually want more control, while parent ministries appear to take a somewhat schizoid position. Ministries want more control over executive agencies, but they do not want to share that control with other ministries (there is only one parent ministry) nor with parliament (all communication with agencies has to go through the parent minister).
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The political debate does not deal with the practicalities of daily operations or the management of ZBOs. Topics such as ZBO-management, their performance and their governance by parent ministries receive limited attention. In fact, one of the most critical reports (Committee Kohnstamm) explicitly states that there is not much wrong with ZBO performance. Evaluation studies and other research do show however that there are many problems with the relationship between ministries and agencies. There are reports of distrust and conflict (Van Thiel & Yesilkagit, 2008 [in review]; ‘t Hart & Wille, 2006; Boyne et al., 2003; Kickert, 2001). These issues are however not part of the political debate. The debate is fuelled by legalistic arguments and disputes. However, neither the charter law nor the ZBO-register have settled the definition issue that has plagued the ZBO-debate from the beginning. For example, while the charter law offers a definition, it excludes over a quarter of the organizations that had been listed as a ZBO before. The status of those organizations is still undecided. Furthermore, the debate is often triggered by incidents and scandals in the newspapers for example about the salary of board members and directors (bonus), poor performance and the costs of refurbishment of offices. There is no evidence to support the idea that such incidents are symptoms of a systematic problem. For example, studies show that the number of parliamentary questions about ZBOs is marginal (ROB, 2005). Nevertheless, the opinion of most politicians (and journalists) is very much anti-ZBO. And finally, despite all these measures and regulations, the number of ZBOs is still not declining significantly. The ZBO mortality rate is very low (between 3% and 6%). As there are not that many tasks left to charge to ZBOs, most of the recent establishments have in fact been mergers; the latest trend is the creation of mega-ZBOs in which organizations with a similar task are integrated into one. A good example is the Investigation Security Council (OVV) which investigations accidents in the air, on waterways, on roads and on railway tracks – which used to be done by four separate ZBOs. Contract agencies have received much less political attention. Moreover, their introduction in the Netherlands in 1994 is almost a direct consequence of the ZBO-debate, as they were seen as a solution to the problem with the deficits in the political control of ZBOs (Smullen, 2007; Pollitt et al., 2004). The contract agency model combined the benefits of autonomy (i.e. business-like management) with full ministerial accountability. Consequently, as of 1994 several tasks or ministerial units that were scheduled to become a ZBO, became a contract agency instead. The Ministry of Finance has been the main protagonist in the introduction of the contract agency model to the Netherlands. It oversees the procedure, offers support and advice to ministries and potential contract agencies, and coordinates the contract agency policy in The Netherlands. The Dutch contract agency model is largely based on the UK Next Steps model (Van Thiel & Pollitt, 2007; Smullen, 2007) but is adapted to the Dutch politico-administrative and legal context. The outcomes of two government-wide evaluations of existing agencies in 1998 and 2002 led to adjustments of the requirements, i.e. to adding new/more requirements. Nowadays, there are twelve requirements that ministerial directorates have to meet in order to become a contract agency. These include: all products and services have to be described in cost-prices and performance indicators, a SWOT analysis has to be carried out including a full risk assessment, expected efficiency gains have to be identified and targeted, the planning and control cycle has to be results-oriented and in line with an accrual accounting system. Then there is a one-year trail period after which the decision on the contract agency status has to be approved by the parent ministry, the ministry of Finance, the cabinet and parliament. These are tough requirements, and evaluations show that agencies often have problems to meet them. As a result becoming an agency is often postponed and may take up to several years.
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(The evaluations also show that parent ministries have problems with the requirements as well, as they have to adapt their accounting system to the new situation as well.) The number of agencies is however still increasing; from 3 in 1994, to over 40 in 2008. Moreover, there are already some examples of existing ZBOs that have been turned into a contract agency as a result of the political pressure on the ZBO-model (see above). It is however hard to predict whether these examples are the first of a new trend, or just incidental ‘casualties’ of the political debate. Compared to ZBOs, the contract agency model implies much more uniformity. However, daily practice still shows great differences between agencies, in their task, size, effectiveness and the degree of political attention they attract. Because of their stronger connection to parent ministries, contract agencies are less independent and more obedient to the demands of their parent ministry and/or the Ministry of Finance. Several (older) contract agencies nevertheless are showing signs of ‘emancipation’ like ZBOs, for example by joining the aforementioned Public Accountability Charter. As agencies gain more experience and expertise, it becomes more difficult for politicians, ministers and ministries to control them (Spence, 1997). Perhaps it is only a matter of time before the same critical tone is used when discussing contract agencies as is already done for ZBO-discussions. Table 2. Overview of the debate on executive agencies in The Netherlands 1982 New coalition sets up reform programme, including privatization. Number of ZBOs increases strongly. 1994 Committee Sint proposes more restrictive use of ZBOs and more contract agencies. First contract agencies (3) are established 1995 Report Netherlands Court of Audit on lack of democratic accountability for ZBOs 1996 Guidelines for the establishment of ZBOs implemented 1997-2004 Negotiations on proposal for charter law. 1998 First evaluation of contract agency model leads to tightening of requirements for becoming an agency 2002 Second evaluation of contract agency model leads to more changes in CAprocedure 2004 Second Chamber of Parliament approves charter law for ZBOs. 2005 Committee Kohnstamm recommends abolishing almost all ZBOs; advice is not obeyed. Charter law for ZBOs passes First Chamber of parliament. Home Office opens ZBO-register 2006 Charter law for ZBOs implemented. Committee Gerritse creates checklist per ZBO Diagnosis: the agency debate and the empty nest syndrome The political debate on executive agencies fits the symptoms of the empty nest syndrome. First of all, the debate clearly revolves around the loss of control rather than the loss of tasks, organizations or people. The possibilities for ministerial accountability dominate the debate, both when it comes to tightening the reigns of ZBOs and the introduction of the contract agency model. Empirical information about agency performance and management is largely ignored or considered not relevant. 10 The focus on control issues is reinforced by the incident-driven nature of the debate. There is no systematic attention for agencies, the debate comes and goes in waves, and decisions are often postponed or ‘outsourced’ to committees. In my opinion, this is indicative of limited coping skills of politicians, ministers and ministries to deal with stress. Incidents lead 8
to an extreme response, while in normal times attention is paid on other politically salient issues (Noordegraaf, 2000). A second symptomatic feature of the agency debate is the fact that there was a long delay in the response of politicians, ministers and ministries to the new situation that arose after agencification. The political debate started more than a decade after the first hype. And the same goes for the development of new organizational arrangements and instruments to manage all contacts and relationships with executive agencies (i.e. the regular flow of money and information). These delays in the response to the new situation are indicative of a lack of anticipation by the ‘parents’. Politicians, ministers and ministries did not anticipate in time what agencification would mean for their own role and position. There are several reasons for this lack of anticipation. Many decisions to establish an executive agency were taken under political pressure, and hastily. For example, in the Netherlands over half of the decisions to establish a ZBO between 1980 and 1992 did not offer a legitimisation (or motive; NCA, 1995). In my own research, I could not find any systematic patterns why politicians preferred the establishment of a ZBO for specific tasks (Van Thiel, 2001; 2004). Agencification seemed to be more a trend, or a fashion, than a well-considered choice. Political benefits like blame avoidance and a (virtual) slimming down of the bureaucracy outweighed other gains. Other explanations for the lack of systematic patterns in agencification point to the institutional context or history of certain tasks, organizations or policy sectors (Pollitt et al., 2004) or to differences in the styles of reform between sectors and/or ministries (Van Thiel, 2006b). As a result of this lack of attention, steering arrangements (to facilitate the flow of information and money) were not thought through very well either. For example, in the case of the Dutch railways the minister had to go to court to keep the company from raising tariffs twice in one year, because there were no stipulations in the contract about approval of tariffs. Since the establishment of ZBOs and contract agencies in the 1980s and 1990s, parent ministries have improved their act though. The implementation of the guidelines for ZBOs, the discussion on the charter law and the introduction of the contract agency model have made ministries more aware of the need to think their decisions through. Also, because of negative evaluation reports and the occurrence of scandals, ministries have invested in setting up special units to handle all contacts with the executive agencies in their field (Van Thiel & Pollitt, 2007). Most of this new awareness and investments in new organizational arrangements and instruments to handle agency contacts are found with the parent ministries that are in charge of the daily contacts with agencies. One could say that the ministries are recuperating better, faster or more from the empty nest syndrome than politicians. The political debate (in parliament) has not changed much and remains anti-ZBO and pro monitoring and control – often fuelled by negative stories from the media. Politicians still suffer (most) from the empty nest syndrome. Their continued efforts to control executive agencies are however undermined, both by the recuperating parent ministries and by the executive agencies that resist attempts to reduce their autonomy (Rommel & Chirstiaens, 2006; Yesilkagit, 2004). (Also, one has to admit that some of the proposed measures, like abolishing almost all ZBOs [by the Committee Kohnstamm] were never realistic options.) A third symptom that points to the existence of an empty nest syndrome, are the complaints of executive agencies about the relationship with politicians, ministers and ministries (‘t Hart & Wille, 2006; Boyne et al., 2003; Kickert, 2001). Agencies complain about having to negotiate contracts with different directorates, sometimes even with different ministries. This is further complicated by a general lack of coordination between all these principles. The number and complexity of negotiations increase the transaction costs and reduce agency effi-
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ciency. Agencies also complain about unilaterally imposing budget cuts, despite earlier agreements on finances and performance targets (Lapsey, 2008; Binderkrantz & Christensen, 2007; Hood, 2002). Agencies are often not involved in the development of new policies even though they are the experts and have to implement the policies. And when they are involved, it is often ex post after the decisions have been made already. Agencies complain that they have to deliver large amounts of information about their performance, but ministries and politicians seem to do very little with all the information. And in general, agencies complain about the lack of attention and appreciation for policy implementation – unless something goes wrong. Such complaints are signs of a dysfunctional relationship. However, it would appear that ministries and agencies have a different perception of what is going wrong; while agencies complain about too much interference with agency autonomy, politicians complain about their lack of monitoring instruments. In terms of the empty nest syndrome, we could say that ministries still derive too much self-esteem from controlling the agencies, instead of taking on their new role. This new role should be characterized by distance, respect for autonomy and building a mature relationship, i.e. acting as a business-like principal. The next section will offer some proposals on how to achieve such a relationship. Treatment: a cure for the empty nest syndrome? According to the (psychological) literature on the empty nest syndrome, the ‘cure’ for the empty nest syndrome is that parents become aware of the new situation, acknowledge that this will change their own position and role as well, let go of (their control on) the children, and find new sources of self-esteem (Oliver, 19977; Raup & Myers, 1989). In the case of agencification, politicians, ministers and ministries need to become aware of their new role, develop it, and invest in a mature, business-like relationship with executive agencies. This should preferably be done before an agency is established, to avoid problems and conflicts. Traditionally, the relationship between politicians, ministers and ministries on the one hand and executive agencies on the other hand is modelled as a principal-agent relationship (Besley, 2006; Miller, 2005; Braun & Gilardi, 2003; Laffont & Martimort, 2002; Spence, 1997; Pratt & Zeckhauser, 1991). The principal (politicians, ministers, ministries) charges the agent (executive agency) with a particular task, against a certain budget. This agreement is laid down in a contract. Note that such a ‘contract’ may not always be as legally binding and enforceable as in the private sector (Lane, 2000). A contract may also include other stipulations, for example on flows of money and information in terms of performance indicators, accountability requirements, and so on. There are three basic tenets in principal-agent theory. First, the principal and the agent are rational actors, pursuing their own goals given their preferences, resources and restrictions. In a perfect world, both actors are fully informed about all possibilities, benefits and costs of their actions, and will make the best choice, maximizing their utility i.e. achieving their objectives. In the real world, principals and agents are not capable of overseeing all options and risks, because of their ‘bounded’ rationality and will therefore make sub-optimal choices or even mistakes. Second, the objectives of principals and agents may be different. Opportunistic agents may not be interested in delivering high performance against low costs – which is the main goal of the principal – but rather be inclined to do as less as possible against the highest price. This problem is known as the moral hazard problem. And as agents will of course not reveal such an inclination to the principal, either before or after the contract is drawn up, principals will not always be able to select the best agent for a particular task (risk of adverse selection). This is facilitated by the third important element of the principal-agent
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model; agents can hide information about their performance because of the information asymmetry. Agents are experts and the principal often has no other sources of information about the performance of the agent than the agent itself. Particularly in the public sector where many executive agents are monopolists, there are no options to find comparable agents to benchmark performance. Following the logic of principal-agent theory, the principal has to invest in monitoring mechanisms to make sure that the agent will deliver the performance that was agreed upon in the contract. These (extra) monitoring costs are part of the so-called agency costs, which also include the costs of hiring an agent. These extra costs will reduce the efficiency gained by employing an agent to execute a certain task. The application of the principal-agent model to a relationship with executive agencies is problematic for several reasons. For example, the model is complicated because there are in fact cascades of principals and agents; voters are principal to politicians, who become principals to ministers, who become principals to civil servants, and so on (Braun & Gilardi, 2006; Spence, 1997). Another well-known problem concerns the fact that self-interest in the public sector is defined differently than in the private domain; personal gains are not possible. Instead, models have been developed about pursuing gains for the agent’s organization (bureaumaximization or bureau-shaping; Dunleavy, 1991). The most important problem however with principal-agent theory for this paper, is the fact that the model is rooted in distrust. Agents are expected to behave opportunistically, which calls for extensive monitoring by the principal. This situation is similar to the empty nest syndrome where parents cannot let go of the control over their children, and will continue interfering with the children’s lives. The principal-agent model will therefore not help to overcome the empty nest syndrome. Contrary to principal-agent theory, stewardship theory assumes that an agent – now called a steward – is not driven by individual self-interest but by altruism (Davis et al., 1997; Block, 1996). Instead, the steward’s utility is maximized by a good performance of the organisation, which in turn will please the principal. The objectives of the steward and principal are thus more aligned than in a traditional principal-agent relation (Tosi et al., 2003). To enable the steward to achieve this good performance, “empowering governance structures and mechanisms are appropriate. Thus, a steward’s autonomy should be deliberately extended […] because he or she can be trusted. Indeed, control can be potentially counterproductive, because it undermines the pro-organizational behaviour of the steward, by lowering his or her motivation […] Thus, stewardship theorists focus on structures that facilitate and empower rather than those that monitor and control ” (Davis et al., 1997:25-26). In other words, principals must allow agents self-management and self-control to be sure of a good performance, rather than control and scrutinize the agent’s behaviour. To give such freedom and trust requires however that a principal is willing to take the risk that the agent/steward will not abuse his freedom as the information asymmetry still exists (Van Thiel & Yesilkagit, 2008 [in review]; Koivumaki & Mamia, 2006; Bijlsma-Frankema, 2005; Nooteboom, 2002; Grey & Garsten, 2001; Bachmann, 2001; Kramer, 1999; Mayer, Davis & Schoorman, 1995). Note the similarity with the dilemma that parents face when a child leaves home. Stewardship theory offers an interesting alternative approach to traditional principalagent theory because of its implications for the management and control of executive agencies by politicians, ministers and ministries (see table 3 for an overview). Following stewardship theory, the management and control of agencies should not focus on hierarchal supervision and sanctions, but rather on negotiations between equal partners. This calls for different instruments than the traditional ones used to manage and control government bureaucracy (cf. Kickert, 2001). Examples of such instruments could be peer review, semi-independent boards instead of direct hierarchical steering, judicial review or ombudsman instead of government inspections, joint agreements and mutual exchange of information, joint development of per-
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formance indicators and targets, downward accountability (to clients and stakeholders), and so on (NCA, 2004). Table 3. Differences between principal-agent theory and stewardship theory Principal-agent Stewardship Motivation of A Extrinsic, self-interest Intrinsic, shared goals with P Management philosophy P Control Involvement, commitment Objective of P Cost control Performance enhancement Relation between P and A Hierarchical Equal, partners Mode of steering by P Orders, supervision Negotiations, self-management Source: adapted from Davis et al. (1997:37) Both the attitude and the types of instruments implied by stewardship theory fit with the treatment prescriptions for parents that suffer from the empty nest syndrome. However, Davis et al. (1997) argue that a stewardship approach can only be effective when both parties agree on the assumptions and way of working as implied by the stewardship model. If the principal and agent have different ideas or expectations about their relationship, frustrations may arise – on both sides – leading to distrust, non-commitment or even corruption (see table 4). Table 4. Effects of a mismatch between choosing principal-agent or stewardship model Executive agency PA model Stewardship Relationship based on muEMPTY NEST SYNDROME: PA model tual distrust, high degree of Frustrated agent is frequently subcontrol and monitoring by ject to monitoring and steering inprincipal to prevent adverse terventions. High risk of resistance Principal selection and perverse reporting Principal and steward trust each Stewardship Principal is passive and does not monitor the oppor- other; autonomous steward anticitunistic agent. High risks of pates principal’s expectations moral hazard (corruption) Prescriptions Politicians, ministers and ministries should instil a relationship with their executive agencies based on the principles of the stewardship model, provided that the agencies agree on that principle. By allowing the agency to self-regulate its daily operations (i.e. grant them autonomy), the principal will induce trust and commitment from the agencies to the principal’s objectives. This will in turn lead to good performance by the agencies (Van Thiel & Yesilkagit, 2008 [in review]; Koivumaki & Mamia, 2006; Bijlsma-Frankema, 2005; Nooteboom, 2002; Grey & Garsten, 2001; Bachmann, 2001; Kramer, 1999). However, becoming such a ‘distanced’ principal (letting go), and maintaining a mature and trusting relationship with executive agencies, is not an easy task. There are several complications. First of all, the organizations involved are complex, both in terms of size, being multilevelled and varying in legal types, tasks, and so on. This makes the creation and maintenance of a relationship much more complicated than in the case of individual parents and children. Moreover, the involvement of third parties like stakeholders and the media may also play an important role (Yesilkagit & Van Thiel, 2008 [in review]). Second, the principal has to handle many different aspects: the substantive content of a
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policy or task, all legal and financial aspects, how to determine and monitor agency performance, how to manage the flow of information, and so on. This requires a whole range of new competencies, which are very different from the traditional competencies of policy-making and politico-strategic thinking (Noordegraaf, 2000). Ministries therefore have to invest in acquiring these new competencies, and in their new role of being the principal to executive agencies. Such ‘cultural’ changes are however not easy to achieve and may even encounter resistance – not in the least because this change was not anticipated either as the separation of policy and administration was considered to be an opportunity for policy makers to concentrate only on their policy making task. A third complication is the fact that ministries have different positions at the same time: they are principal (ordering or buying products and services), owner (legally, or financially) and supervisor (Van Thiel & Pollitt, 2007). Dutch ministries handle this schizophrenic situation in different ways; some integrate the positions into one unit, a so-called interface, while others attribute each position to a separate unit, usually making a policy unit the principal, the financial unit the owner, and appointing an independent regulator (or board of regulators). However, role conflicts may always occur and cannot be “modelled away” (Spence, 1997). Most important to establishing a mature relationship is not only to design clear rules (contracts, liaisons, and so on) for the exchange of money and information, but also to honour those rules. Principals who make unilateral changes to existing arrangements or agreements are unreliable principals and will not induce commitment among executive agencies (Binderkrantz & Christensen, 2007; Bottom et al., 2006; Dicke, 2002; Majone, 2001; Kirby & Davis, 1998). Therefore, politicians, ministers and ministries should learn to refrain from hierarchical reflexes with every incident (in the media). Also, taking agencies back, or threatening to do so, is never a solution and will usually only lead to new conflicts and stress – as is the case with parents and children (Raup & Myer, 1989). The ‘parents’ will have to acquire many new skills in order to carry out their new role. Perhaps they can learn from other parents’ experiences, for example other ministries, governments at other levels (local, EU) or from other countries.
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Notes 1
Both national and sub-national governments implemented reforms. This paper will only deal with reforms at the national level. 2 The Netherlands has a system of individual ministerial accountability (Andeweg & Irwin, 2005). 3 For more information, see the website of the ministry of Finance that coordinates contract agency policy in the Netherlands (www.minfin.nl). 4 Legally speaking, ZBOs are public bodies, which means that organizationally they can be an organization, but also a board, committee, college or council. For example, the five Councils for Legal Aid are decision-making councils that are supported by (independent) administrative organizations. The members of these councils are appointed by the Minister of Justice. 5 The concept of an “empty nest” is indicative for the sexist use of the barnyard language to refer to women (birds, chicks, hens). More neutral terms are the post-mothering conflict (Oliver, 1977) and post-parental period (Raup & Myers, 1989). 6 For mothers, the empty nest syndrome will be harder when it coincides with the menopause and loss of the reproductive function. 7 A proposal to include ZBOs in article 134 in the Constitution was also developed but rejected. Even with advent of the Charter Law, the legal position of ZBOs is unclear due to definitional controversy. The Ombudsman and the Court of Audit both have to right to scrutinize ZBOs, ensuring the rights of customers. ZBOs also have to adhere to the law on access to public documents. 8 Interesting detail is that the chair of the committee became the president of a ZBO afterwards. 9 For more information see: http://www.minbzk.nl/zboregister 10 As an experienced observer of this debate, I suspect that politicians consider ‘empirical’ issues technocratic details, which should be sorted out by civil servants i.e. technocrats.
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