Description
Turnaround Management Strategies And Recovery In Local Authorities
1
TURNAROUND MANAGEMENT
STRATEGIES AND RECOVERY
IN LOCAL AUTHORITIES
ITAI BEERI
2
National University of Ireland, Cork
Faculty of Commerce
Department of Government
Department of Management and Marketing
TURNAROUND MANAGEMENT
STRATEGIES AND RECOVERY
IN LOCAL AUTHORITIES
PH.D. THESIS SUBMITTED BY ITAI BEERI
March 2009
Head of the Department of Government: Prof. Neil Collins
Head of the Department of Management and Marketing: Prof. Sebastian Green
Supervisors: Dr. Aodh Quinlivan and Dr. Carol Linehan
3
Contents
List of illustrations 6
Acknowledgements 9
Abbreviations 11
1. INTRODUCTION
12
2. LITERATURE REVIEW
20
2.1. The Evolution of English Local Government - Social, Civil, and
Ideological Historical Background of England
20
2.1.1. Historical Developments from Saxon Times 22
2.1.2. The Impact of the Industrial Revolution 25
2.1.3. The Post World War Periods (1920s to 1970s) 29
2.1.4. The Welfare State and Traditional Public Sector 31
2.1.5. New Public Management Reforms 37
2.1.5.1. The Political Ideological Perspective
37
2.1.5.2. The Political Perspective - Local Government under
the New Right
39
2.1.5.3. The Managerial Perspective
43
2.1.5.4. New Public Management and Local Government
under the Third Way
49
2.1.5.5. Summary
55
2.2. Best Value Regime: Recent Efforts to Improve the Performance of
Local Authorities
56
2.3. Organisational Cycles of Failure and Recovery in Local Authorities 64
2.3.1. Failure in Local Authorities 64
2.3.1.1. Definitions and Perceptions of Failure
64
2.3.1.2. Causes of Failure in Local Authorities
68
2.3.2. A Six Stage Theory for Cycles of Failure and Recovery 77
2.3.3. Cycles of Failure and Recovery in the English Context 88
2.4. Turnaround Management Strategies in Local Authorities 93
2.4.1. Turnaround Management Strategies 93
2.4.2. Classification of Turnaround Management Strategies 97
2.4.2.1. Retrenchment
98
2.4.2.2. Repositioning
99
2.4.2.3. Reorganisation
99
2.4.3. Turnaround Management Strategies: Characteristics and
Suitability for Recovery Situations
102
2.4.4.Stages of Organisational Turnaround - a Managerial
Perspective
106
2.4.5. Turnaround Management Strategies? Current state of Research 111
4
3. METHODOLOGY
121
3.1. The Study Population and Sample of LAs 123
3.2. Collecting Qualitative Data 126
3.3. Collecting Quantitative Data 130
3.3.1. Sampling of Participants 130
3.3.2. Descriptive Statistics of the Local Authorities 131
3.3.3. Distributing the TMSLA Questionnaire 135
3.3.4. Descriptive Statistics of Participants 136
3.3.5. Study Variables 145
3.3.5.1. Extent of Implementation of Turnaround Management
Strategies
145
3.3.5.2. Recovery of Performance
146
3.3.5.3. Demographic Variables
147
3.3.6. Analyses and Statistical Procedures +describing and justifying 147
4. CASE STUDIES
152
4.1. Walsall and Swindon Turnaround 152
4.1.1. General Description of the Councils 152
4.1.2. Poor Performance 155
4.1.3. A Comprehensive Recovery Plan and General
Improvements
163
4.1.4. Recovery 176
4.1.5. The 'Black Box' - Turnaround Management Strategies 184
4.2. North East Lincolnshire and Sunderland
197
4.3. Summary
209
5. RESULTS AND DISCUSSION
212
5.1. Measuring Turnaround Management Strategies in the Public
Sector
212
5.1.1. TMSLA Construction 212
5.1.2. Testing and Evaluating the Validity and Reliability of
TMSLA
219
5.1.2.1. Evaluating the Content Validity
219
5.1.2.2. Testing the Construct Validity
220
5.1.2.3. Testing the Reliability
225
5.2. The Extent of Implementation of Turnaround Management
Strategies
230
5.3. The Relationship between Turnaround Management Strategies
and Recovery
248
5
6. CONCLUSIONS
269
7. BIBLIOGRAPHY
275
8. APPENDICES
296
Appendix 1: Local Government Act, 1999 300
Appendix 2: The White Paper - Strong Local Leadership – Quality
Public Services
308
Appendix 3: The Audit Commission Methodology for the Core
Services Performance Rank
316
Appendix 4: The Qualitative Tool - a Semi-Structured Face-to-Face
Interview
319
Appendix 5: The Quantitative Tool - a Questionnaire 323
Appendix 6: The Quantitative Tool - a Questionnaire – On Line Version 327
Appendix 7: Table 27: Correlation Matrix for TMSLA Individual
Strategies (N = 118 - 126)
Appendix 8: Table 28: Descriptive Statistics of Individual TMSLA
Strategies for LAs According to Performance (N = 126)
328
329
Appendix 9: Comparing Persistently Failing, Recovered, and Well
Performing Local Authorities.
330
6
List of illustrations
Tables
Table 1: Local Authorities? Comprehensive Performance Assessment Over 2002
and 2005 - N (%)
62
Table 2: Studies used in public service turnaround success stories reviewed by
Boyne (2006)
113
Table 3: Studies that Use the Language of Turnaround 115
Table 4: Three Groups of Local Authorities According to the Secondary Data 125
Table 5: Descriptive Statistics of the Local Authorities? Sample (N = 43) 132
Table 6: Descriptive Statistics of the Participants (N = 114-126) 137
Table 7: Descriptive Statistics of the Participants? Local Authority?s Performance
N=126)
142
Table 8: CPA Scores for Walsall (2002-2006) 180
Table 9: CPA Scores for Swindon (2002-2006) 181
Table 10: CPA Scores for North East Lincolnshire (2002-2006) 205
Table 11: CPA Scores for Sunderland (2002-2006) 208
Table 12: The „Extent of Strategic Change? Scale (Barker and Duhaime, 1997) 214
Table 13: The Turnaround Management Strategies in Local Authorities Scale 217
Table 14: Exploratory Factor Analysis for the Turnaround Management
Strategies in Local Authorities Scale
222
Table 15: Correlation Matrix for TMSLA Factors (Cronbach?s alpha in
parentheses)
226
Table 16: Equivalence Reliability and Representativeness Reliability tests for
TMSLA Factors
228
Table 17: Central and Dispersion Measures of Overall TMSLA and the Eight
Factors for the Whole Sample (N = 123 – 126)
232
Table 18: Central and Dispersion Measures of Overall TMSLA and the Eight
Factors for Failing LAs (N = 83 - 85)
Table 19: Central and Dispersion Measures of Individual TMSLA Strategies for
Failing LAs (N = 81 - 85)
Table 20: T-Tests for TMSLA Scores for Failing and Well-Performing Local
Authorities
Table 21: Mann-Whitney U Tests for Individual TMSLA Scores for Failing
versus Well-Performing Local Authorities
Table 22: T-Tests for TMSLA Scores for Persistently Failing and Recovered
Local Authorities
236
238
240
242
250
7
Table 23: Mann-Whitney U tests for Individual TMSLA Scores for Persistently
Failing and Recovered Local Authorities
Table 24: Spearman Rho Correlation Matrix for the Relationship between
TMSLA Scores and Extent of Recovery (N = 83 – 85)
Table 25: Spearman Rho Correlation Matrix for the Relationship between
Individual Strategies and Extent of Recovery (N = 83 – 85)
Table 26: Logistic Regression Report for Recovery (as dichotomy) Predicted by
TMSLA in Failing LAs (N = 85)
Table 27: Correlation Matrix for TMSLA Individual Strategies (N = 118 - 126)
Table 28: Descriptive Statistics of Individual TMSLA Strategies for LAs
According to Performance (N = 126)
Table 29: One-Way ANOVA Tests for TMSLA Scores for Well-performing,
Persistently Failing, and Recovered Local Authorities
252
257
259
263
324
325
326
Figures
Figure 1: The Comprehensive Performance Assessment (CPA) Framework 61
Figure 2: Stages in Turnaround Management (McKiernan, 2003) 79
Figure 3: Stages of Organisational Turnaround- A Managerial Perspective 106
Figure 4: CPA Rates in 2002 for Local Authorities (%) (N = 43) 133
Figure 5: CPA Rates in 2005 for Local Authorities (%) (N = 43) 133
Figure 6: Recovery (Dichotomy) of Local Authorities (%) (N = 43) 134
Figure 7: Extent of Recovery within Failing Local Authorities (%) (N = 30) 134
Figure 8: Gender of Participants (%) (N = 126) 138
Figure 9: Age (in years) of Participants (N = 118) 138
Figure 10: Education (in years) of Participants (N = 117) 139
Figure 11: Tenure (in years) of Participants (N = 118) 139
Figure 12: Position of Participants (%) (N = 126) 140
Figure 13: Title of Participants (%) (N = 126) 140
Figure 14: Participants? Local Authority?s CPA Rates in 2002 (%) (N = 126) 143
Figure 15: Participants? Local Authority?s CPA Rates in 2005 (%) (N = 126) 143
Figure 16: Participants? Local Authority?s Recovery (Dichotomy) (%) (N = 126) 144
Figure 17: Participants? Local Authority?s Extent of Recovery (%) (N = 86) 144
Figure 18: Overall TMSLA for the Whole Sample (N = 126) 233
Figure 19: Overall TMSLA and the Eight Factors in the Whole Sample
(N=123-126)
233
Figure 20: Mean Values for Overall TMSLA and the Eight Factors for the Whole
Sample (N = 123 - 126)
234
8
Figure 21: Mean Values for Overall TMSLA and the Eight Factors for Failing
Local Authorities (N = 83 - 85)
235
Figure 22: Overall TMSLA in Failing Local Authorities (N = 85) 235
Figure 23: Overall TMSLA and the Eight Factors in Failing Local
Authorities (N = 83 - 85)
237
Figure 24: Medians of Individual Strategies in Failing Local Authorities
(N = 81 - 85)
237
Figure 25: Mean Values of TMSLA Scores for Failing versus Well-Performing
Local Authorities (N = 123 - 126)
241
Figure 26: Medians of Individual TMSLA Strategies Scores for Failing versus
Well-Performing Local Authorities (N = 121 - 126)
245
Figure 27: Mean Values of TMSLA Scores for Persistently Failing versus
Recovered Local Authorities (N = 83 - 85)
251
Figure 28: Medians of Individual TMSLA Strategies Scores for Persistently
Failing versus Recovered Local Authorities (N = 81 - 85)
255
Figure 29: Matrix Scatter Plot for the Relationships of TMS and Extent of
Recovery (N = 83 - 85)
258
Figure 30: Matrix Scatter Plot for the Relationships of Individual Strategies and
Extent of Recovery (N = 83 - 85)
261
9
Acknowledgments
The writing of a dissertation can be a lonely and isolating experience,
especially for a non-Irish student. Yet, in my experience this was not the case.
Thus, my sincere gratitude goes to my wife, parents, brothers, family members, all
my friends, colleagues and superiors in the Government Department, in the
Department of Management and Marketing at the National University of Ireland,
Cork, and in Cork.
I wish first to thank my supervisors, Dr. Carol Linehan from the Department
of Management and Marketing and Dr. Aodh Quinlivan from the Government
department for their professional, patient, and supportive teaching. Without doubt,
the way they took encouraged me to think two steps ahead and demand from myself
the most. Thanks to them, I am sure I had an excellent lesson for my future as a
scholar. I wish to thank Dr. Seamus O'Tuama from the Government Department,
who was my supervisor over the first year of my PhD, for the warm welcome to the
faculty and Ireland, for his special kindness, for the trust, and for the opportunities
he gave me.
I am grateful to the staff members of the Government Department, Prof.
Neil Collins, Head, Dr. Andrew Cottey, Dr. Theresa Reidy, and Ms. Ann McCann,
with whom I worked and had interesting and enriching conversations. Thanks to
them, I felt welcomed, productive, and required as a team member. Special warm
thanks go to my mates and partners in the Government Department, my friends,
William Pedrazzini, Monica O?Mullane, Ted Bikin-kita, and Anthony O'Halloran.
My studies and experience would not have been the same without the
support and friendship of many members of the Cork Jewish Community and Cork
Community, Tzipi and Avishay Heart, Trish and James Doherty, Fred and Claire
Rosehill, and many others, who made my stay in Ireland so enjoyable and for being
a second home and family. My thanks go to family members, friends, and
colleagues, who their long-distance support kept me warm and efficient, the Beeris,
the Rendels, the Sellas, and the Gutmans. Great and unique thanks to Prof. Eran
Vigoda-Gadot of Haifa University who significantly contributed to my efforts and
success as a scholar.
10
Finally, endless thanks and love to Silvana, the one and only, my dear wife,
for her help, inspiration, and confidence. I cannot express her huge contribution to
my decision to come to Ireland, to my dissertation, to my well-being, and to my
personality. Without her, I would have not been the same, and probably, would not
complete this dissertation. Finally, many thanks to my dear son, Ethan, who gives
me the drive to try harder, again and again, for so many years.
Itai Beeri
March, 2009
11
Abbreviations
AC- Audit Commission
CCT- Compulsory Competitive Tendering
CEO- Chief Executive Officer
CGI- Corporate Governance Inspection
CPA- Comprehensive Performance Assessment
CSCI- Commission of Social Care Inspection
DfES- Department for Education and Skills
GLC- Great London Council
JPs- Justices of the Peace
LA- Local Authority
LEAs- Local Education Authorities
NPM- New Public Management
OECD- Organisation for Economic Co-operation and Development
OFSTED- Office for Standards in Education
PIR- Public Interest Report
PIs- Performance Indicators
QGAs- Quasi-Governmental agencies
SSI- Social Services Inspectorate
TMS- Turnaround Management Strategies
TMSLA- Turnaround Management Strategies in Local Authorities
12
CHAPTER 1: INTRODUCTION
The public sector is owned and financed by society (Wamsley and Zald,
1973), thus its aim is to maximise society's welfare (Rainey, Backoff, and Levine,
1976; Revelle, Marks, and Liberman, 1970). However, this utopian ideal was
continuously and gradually disturbed from the end of World War II, as the
traditional public sector struggled to cope with huge challenges. On one hand, it
experienced increasing demands for services, both quantitatively and qualitatively.
On the other hand, the public sector suffered from a severe lack of resources, inter
alia, revenues and poor management (Bishnu and John, 2005; Grout and Stevens,
2003; Martin, 2002; Osborne and McLaughlin, 2002; Smith, 1993; Wholey, 1993).
Though both the private and the public sectors function side by side, the public
sector usually tends not to follow market forces like competition and profit
orientation, and to suffer from unproductive organisational climate (Solomon,
1986; Wimalasiri, 1993). As a result, the traditional public sector was perceived by
stakeholders as ineffective, inefficient and therefore was widely criticised.
These negative circumstances, and the struggle between political ideologies
such as Socialism and Liberalism, contributed to the rise of New Public
Management (NPM), which was supported by the OECD (Organisation for
Economic Co-operation and Development), by politicians, and by the public in
Western states (Christensen, Laegreid, and Stigen, 2004). In a nutshell, NPM
reforms encouraged public managers to modernise public agencies and promote
excellence in political and administrative systems (Carvalho et al., 2006; Mueller et
al., 2004; Talbot and Johnson, 2007) by employing competitive market strategies
(Willis, 2005). Consequently, NPM has changed the face of public administration
(Boyne, 2002) and become the normative model for the public sector, as it signalled
a profound shift in the role of public administration and its performance.
Nevertheless, NPM has not cured the ills of the entire public sector and it has been
criticised for not supplying the desired results. The reforms created an ambivalent
and tensioned governmental policy of increased expectations and demands on one
hand, and huge cuts of revenues and expenses on the other hand (Martin, 2002).
These conflicting policies resulted in a deep crisis within some areas of the public
sector (Corrigan and Joyce, 1997). Since democratic values such as equality in
public services were suppressed by NPM reforms (Dunleavy and Hood, 1994),
13
dissatisfaction was common (Carter, 2000; Cunningham, 2000; Hamilton, 2003;
Newman, 2002; Newman, 2002b). Additionally, given that NPM gave rise to
preferable standards of services, stakeholders increased their expectations and
demands from public agencies (Backoff, Wechsler, and Crew, 1993) and became
intolerant to public failures (Boyne, 2002; Christensen and Laegreid, 1999; Glynn
and Murphy, 1996). Thus the issue of organisational failure is of practical, political
and academic interest. The challenge of grasping how failure is understood, and
perhaps more importantly, recovered from, is the key driver of this thesis.
Since there is a great variety of public organisations, one research project
would not be able to cover the analysis of the problems in all kinds of public
organisations. Therefore, this research will be limited to the analysis of failing local
authorities (LAs). The decision to concentrate on underperformance and recovery
in the context of local government is not accidental. It is based on a mixture of
theoretical and methodological considerations. From a theoretical point of view,
LAs have a unique aspect that differentiates them from other public organisations.
Their top management: the council members and the cabinet members, usually
represent political parties and interests; they are elected democratically and directly
by the citizens. In parallel, though Chief Executives Officers are non-elected
members, they could be appointed according to political considerations. The unique
aspect of LAs is that its representatives are elected directly by the locals, which
results in more complex, direct, and frequent face to face interactions between
voters and elected members and between LAs and central government. The
obliging relationship creates in LAs greater accountability of the top management
and greater expectations among stakeholders. Hence, it is important and interesting
to investigate recovery processes in this context. For the sake of this study, the
definition of senior management is broad and encompasses not just traditional
administrators like the CEO and Finance Officer but also the Mayor and leading
politicians, which is effectively the group of people at the strategic apex of the
organisation, some are appointed managers and some are elected public
representatives.
From a methodological view, recent efforts made to classify and measure
the performance of LAs in England and in other states (e.g., Callanan, 2005; Israeli
Interior Ministry website; Local Government Management Services Board;
14
O?Keeffe, 2005) have made it possible to identify failing and well performing
organisations. Poor performing organisations became more visible, in part, because
of the extensive use of performance measurement system in the field (Joyce, 2004).
Over the last five years (since 2002), English LAs were almost the only public
organisations subjected to consistent auditing, supervision, and quality performance
measurement. These procedures supply a great amount of information that can be
used to empirically explore the „black box?, that is the kinds of managerial actions
that can lead to recovery, which are the core of this study.
Within the context of public failure, unprofessional, ineffective and poor
municipal services prevent citizens from having the best conditions required for
normal, secure, and fruitful life as members of their families, communities, and
society. Due to the essential function of maintaining normality, governmental
failure dramatically affects shared values, human rights, and even human lives
(Witteloostuijn, 1998).
Public intolerance towards local government failure and its severe
consequences did not spare the British political system, and governments have not
remained indifferent to this phenomenon. Local government has been subject to
continuous changes in ideologies, policies, and reforms, for example, the shift in
ideologies due to the change in central government from Tory dominance to Labour
dominance. These continuous changes have created a highly eclectic and disparate
approach to steering the local government system as it simultaneously promoted
issues of governance, joined up government, and community government. This
tendency symbolises policy makers, politicians, and managers in the UK, especially
under the Best Value regime, who were particularly concerned about
underperforming LAs that had difficulties fulfilling their core missions (Cornforth
and Paton, 2004). Consequently, underperforming LAs and recovery processes
have been an object of comprehensive intervention, which was mainly led by the
Audit Commission, an independent governmental body that inspected and
supervised LAs' senior management.
Since LAs are the main unit of research, it is vital to present the justification
for these governmental institutions. In cases in which resources are limited, conflict
of interest between the central and the local government might arise. For example,
15
while the plans of the central government might envisage that cutting down local
services is an effective way to deal with budget problems, the council will prefer to
avoid such a solution due to its political price. According to this view, the
conflicted dual levels of government have a continuous and wide influence on local
government. Consequently, this conflicted relationship would clarify the
background and circumstances that led to failure and recovery in some LAs. The
central government policy toward LAs, including expectations for quality of
services, regulations, budgeting, and auditing will draw the borders between
success and failure in those agencies.
Many of these circumstances concern the Audit Commission. In order to
assure civil rights and deal with failing LAs, a range of change strategies were
triggered by the Audit commission and adopted by top management. However,
since many of these cloning managerial practices were borrowed or taken from the
private sector, they were not always appropriate and helpful; they revealed limited
achievements in organisational transformation (McNulty and Ferlie, 2004).
According to Maddock (2002), the problem in the implementation of change
strategies derives from the English national government tendency to think radically
and act conservatively, from the belief in risk-free solutions (e.g., avoiding large
innovative investments, avoiding decision making that may involve significant
political price), and because of the poor local leadership. However, bringing about
recovery in LAs is particularly complicated, multifaceted, and difficult, since these
organisations are large, complex, diverse, and hierarchical (Boyne, 2002).
Moreover, change strategies are not only difficult to implement but
sometimes the influence of managerial actions is unclear (Brown, Waterhouse, and
Flynn, 2003). As a consequence of these massive difficulties, governmental bodies,
politicians, and particularly public managers still have no experience in dealing
with public failures and they seek professional, reliable, and practical knowledge
regarding change strategies and recovery in LAs. For instance, the appropriate tools
to predict a failure, how to prevent a crisis, and how to deal with crises after they
occurred, are yet to be understood (Mellahi, Jackson, and Sparks, 2002; Mellahi
and Wilkinson, 2004; Paton, 2003). Paton and Mordaunt (2004) argued that due to
this lack of knowledge, policy makers might be justified in their concerns about
chronic under performers.
16
The lack of knowledge within governmental bodies, politicians, and public
managers is accompanied by lack of literature and research. Despite the fact that
successful recoveries offer benefits to politicians, policy-makers, local managers,
and local stakeholders, public management researchers have given scant attention
to this topic. While the literature deals overwhelmingly with the study of
commercial recovery, according to various scholars, only a few examinations of
public failures and recoveries have been conducted (e.g., Jas and Skelcher, 2005;
Meier and Bohte, 2003; Meyer and Zucker, 1989; Paton, 1989; Walshe et al.,
2004).
The literature in the private context deals with both comparisons of large
groups of persistently failing and recovered corporations (e.g., Furman and
McGahan, 2002; Smith and Graves, 2005) and case studies that follow success
stories of recovery such as the turnaround of big companies like M&S and IBM
(e.g., M&S: Mellahi, Jackson, and Sparks, 2002; IBM: Balgobin and Pandit, 2001).
Research in the private context has developed the concept of Turnaround
Management Strategies (TMS) as a descriptor for strategies employed to bring
about recoveries. Consequently, public sector researchers called for the
investigation of how TMS might be applied to recover public organisations. As part
of this call, this study explores the question whether TMS with adequate adaptation
could yield efficient results in public sector organisations such as LAs. In addition,
scholars have recently pointed out both the general lacuna concerning public cycles
of failure and recovery, and the specific need to explore one type of organisational
change strategies, which is TMS (Jas and Skelcher, 2005).
Accordingly, the major aim of this study is to investigate whether TMS
could be a possible route for bringing a failing LA back on track. The relevance of
TMS in cases of failure in LAs, the extent to which they are implemented, as well
as their effectiveness, are observed, evaluated and tested.
TMS are defined by Pandit (2000) as „the actions taken to bring about a
recovery in performance in a failing organisation?. In accordance with this
definition, it can be assumed that the implementation of TMS may directly
contribute to recovery processes (Mellahi, Jackson, and Sparks, 2002). Thus, we
will explore TMS as a possible method of change strategies. Unfortunately, very
17
little systematic research has been conducted on the impact of TMS on the recovery
of public services (Boyne, 2004). Walshe et al. (2004) added that more research is
needed regarding the context and the process of effective recovery interventions. A
deep understanding of the process of TMS in the public sector is essential for a
theory of recovery, which is currently either non-existent (Pearce and Robbins,
1993) or inadequate (Barker and Duhaime, 1997). Cornforth and Paton (2004) have
also called for research on public TMS. They claimed that most of the present
research on performance has focused on excellence and best practice, rather than on
poorly performing cases. Additionally, the authors argued that exploring the untidy
realities of failure and recovery in a professional, managerial, and governance
domains is essential but lacking. Thus, the absence of grounded knowledge
concerning cycles of failure and recovery in public organisations and the lack of
measurement tools resulted in a call for research on TMS in the public sector
context (Boyne, 2004; Cornforth and Paton, 2004; Jas and Skelcher, 2005; Walshe
et al., 2004). Therefore, as suggested by Jas and Skelcher (2005), this research aims
at filling the gap in knowledge concerning TMS. Thus, its object is to investigate
the cycles of failure and recovery in LAs and the relationship between TMS and
recovery through available evidence and empirical examination.
In accordance with the theoretical lacuna recognised above, the crisis
experienced by the public sector, the vague results NPM supplied, and the
helplessness that public managers and policy makers face in relation to
understanding and achieving comprehensive recovery, the objective of this study is
to explore the linkage between public performance, public management, and public
failure. Consequently, this study is focused on several research questions. Firstly,
this study makes an effort to clarify what the nature of organisational failure is,
specifically in LAs, and points out internal and external aspects of organisational
failure. Secondly, this study makes a step toward understanding what the concept of
TMS is (i.e., TMS' definition, nature, and characteristics) and how TMS should be
measured (i.e., construction and validation of a measurement tool). Thirdly, this
study observes to what extent TMS are in practical use within failing LAs and
exposes an extensive use of them. In other words, this study explores the 'Black
Box', the activities led by management that may lead to recovery. Fourthly and
most important, this study examines the effectiveness of TMS in achieving
18
recovery.
In addition, the study provides some directive advice, both to (i) public
managers in reference to how TMS should be implemented in order to maximise
the value of these strategies. We conclude that LAs leadership should pay attention
to the order, the timing, and the match between the strategies and the causes of
failure. (ii) and academics in reference to future studies. Further research should
control the following variables: 'formulation of recovery plan', 'causes and
symptoms of failure', and 'match between the strategies and the causes of failure'.
Analysing these variables would supply a deeper understanding of the recovery
process.
In sum, this research is designed to accomplish the following objectives: It
aims at presenting a better understanding of cycles of failure and recovery in British
failing LAs, and of the nature of failing LAs, the causes of these failures, the
triggers leading to organisational change, and the implications of organisational
failure in LAs. At the same time, it aims at exposing the phenomenon of persistent
failure of some LAs and the partial success to recover them through the efforts
made under the NPM reforms and the Best Value Regime. As one possible option
to tackle failure in LAs we conceptualise TMS and define their characteristics.
Then, based on this conceptualisation, we construct and validate a newly adapted
measurement tool of the extent of implementation of TMS in LAs. The distribution
of this scale aims at an exploration of the extent of TMS implementation in LAs,
the differences between persistently failing and recovered LAs regarding TMS
implementation, and the relationship between implementation of TMS and
recovery. Finally, having explored the extent of TMS use and their relationship to
recovery, this thesis then reflects back to the implications for NPM practices such
as audit and inspection.
Achieving these aims required employing several methodological
procedures. First, the relevant literature was critically reviewed. Second, two case
studies of failing English LAs were qualitatively analysed based on four face-to-
face interviews with their senior leaders and documents published by the LAs and
the Audit Commission. This exploratory phase enabled the conceptualisation of
TMS, the descriptive account of a process of change, the exploration of the 'black
19
box', i.e., the managerial actions, and the construction of a measurement tool to
assess the level of implementation of TMS. Then, a survey distributed among 126
English senior councillors and executive directors, which included the adapted
developed measurement tool of TMS, enabled the researcher to test the extent to
which TMS were implemented and to compare their effectiveness in recovered
versus persistently failing LAs. This comparison was achievable due to recent
efforts and extensive use of performance measurement system in the field made by
the English Audit Commission (Joyce, 2004).
As a general guideline, the following paragraph outlines the thesis?s
structure. The next chapter, the literature review, will go deeply into the core
concepts of the research beginning with wide background information regarding the
political and ideological shifts since the 18
th
century, the evolution of local
government, the traditional public sector and NPM reforms. Next, the review will
describe the characteristics of English LAs and discuss recent efforts made in
England to improve their performance. Then, the literature review will go on
gradually to develop a concept of Turnaround Management Strategies. The third
chapter describes the methodology used in this study. The chapter details the
techniques, procedures, and tools used for collecting the qualitative and quantitative
data. The methodology chapter will define the population, explain the sampling
process, describe the samples of LAs and participants, and illustrate the statistical
procedures and data collection. The fourth chapter follows a detailed report of two
case studies of poor performing LAs. The report portrays the LAs' failures, triggers
for change, plan formulation, TMS implementation, and extent of recoveries. The
case studies will present a theoretical framework for the nature of failing LAs,
TMS, and their measurement. The quantitative results of this study will be
presented, analysed, and discussed in the fifth chapter, while attempting to develop
a theory concerning the relationship between TMS and recovery. The sixth chapter
will present the research conclusions, the practical implications of the findings, the
limitations of the study, and suggestions for further research in this area.
20
CHAPTER 2: LITERATURE REVIEW
2.1. The Evolution of English Local Government - Social, Civil, and
Ideological Historical Background of England
Since this study follows Turnaround Management Strategies (TMS) in the
public sector context and in English local government, it is essential to be familiar
with the characteristics of the system and the framework in which TMS take place.
The review follows social, civic, and ideological historical developments since the
18
th
century and especially those which influenced the evolution of public sector
and local government in England. The relevance of this review to our research
question should not be underestimated since the present perception of failing LA
and standards of recovery are rooted in the central-local relations.
The history of local government in England is a story of gradual
development. It has changed its face over the years reflecting ongoing changes in
public policy. The initial rationale for the development of British LAs is based on
two interconnected ideas. First, assimilation of democracy, which found expression
in becoming closer to locals, increasing accountability, limiting the overweening
power of the central state, encouraging pluralism, facilitating the participation of
the electorate, and providing political checks and balances. Second, enhancing
effectiveness, for instance, by emphasising decentralisation and providing services
that are more flexible, diverse, and matched to local needs (Atkinson and Wilks-
Heeg, 2000). The rationale behind this idea is based on the assumption that the
central government cannot cover on its own all the needs of citizens, especially
given the fact that these needs differ from one geographical area to another.
Accordingly, there is a justification for the will to promote local leadership in
governmental branches, which give clear direction to specific local needs. These
branches are named Local Governments, Local Authorities, or Councils and they
draw their authority and purposes from legislation at the state level (Backoff,
Wechsler, and Crew, 1993).
Given the rationale for LAs? existence, the purpose of any LA is directed
towards serving the public and its welfare (Baker, 1995). Since relative to other
public organisations LAs have wide ranging aims, various responsibilities, and
many units, their roles cannot be easily defined. Yet, Skelcher (1992) points out
21
three main roles for LAs:
(1) The democratic role- the expression and representation of collective interests
and choices of citizens.
(2) The regulatory and enforcement role- the duty to implement laws and policies.
(3) The service provision role- the provision of facilities to benefit the population.
Given these broad roles, LAs provide a wide range of services, for instance, police
and fire services, education, roads and traffic maintenance, social/welfare services,
housing, health, garbage collection, and culture. Theoretically, fulfilling these roles
would accomplish LA?s mission. Yet, the reality is much more complex, and it is
hard to define the point at which the roles can be regarded as being fulfilled.
However, a far more critical point of view suggests that local government in
Britain is largely based on the will to provide administrative efficiency or stable
democracy for the central state rather than on ethical grounds of liberty for
communities that justify local government as an independent entity in its own right
(Chandler, 2008).
The fact that local government obtains its power both from the local
population and central government creates a tensioned dual loyalty to both sources
of legitimacy. The debate around this question is based on two different perceptions
of the role of local government. On one hand, the Agency Model reflects the idea
that local government should be an agent, an extension, of the central government
with little of its own authority, justified on grounds of efficiency, property, and
stable democracy (Kingdom, 2003). Chandler (2001) called this narrow role
steward rather than the agent, with some discretion but no real independent power.
On the other hand, the Dual State, or the Partnership Model, recognises some
degree of LAs autonomy and cooperation between equal partners (Saunders, 1984),
justified on grounds of democracy, independence, quality of life, and political
participation (Kingdom, 2003). As it will be discussed next, the struggles between
these two models, which have started centuries ago, shaped the perceptions of
failure and success in LAs till today.
22
2.1.1. Historical Developments from the Saxon Times
For centuries, civilisation has been organised in families and tribes. These
families or tribes functioned as independent units, supplying for their members
protection, food and clothing. Gradually, the families and tribes settled upon land
until they created what it is seen today as a village. The development of local
institutions of government can be traced back to shires in the Saxon times (the 5
th
century). During such times, a village became a town when it was surrounded by a
fortified wall to protect the community and the common area became a place for
barter and trade. In those towns, local businesses were conducted under the King
Law (Henney, 1984). Thus, English LAs were from the beginning subordinated to
higher level of authority. This pattern characterises English LAs till these days,
therefore it has a great deal in explaining recent development in central-local
relations and perception of success and failure in these organisations.
Under the Saxon rule, boundaries of hundreds of shires were developed
(Clarke, 1955). However, gradually, towns evolved into cities. The concentration of
population required organisations able to supply local common needs and to solve
common problems. Therefore, until the end of the nineteenth century, local
governments were developed to deal with the rising needs. Over the centuries, the
powers of the monarch were delegated to powerful landlords and later on to sheriffs
(Chandler, 2007). Thus, ever since, the delegation of powers necessitated the
formulation of public policy toward local agencies. This necessity has not
disappeared and it has troubled central government till these says.
During the 16
th
century, in order to limit the power of the sheriffs, the king
nominated Justices of the Peace (JPs). Though the JPs were appointed by the king,
overtime they increasingly stood for local interests. JPs activated their own laws
and administration as there was no central control at that time. The boroughs were
in no respect democratic and charters were based on self-elected bodies. Generally,
there was very little central legislation for local government. One of the first
examples for the intervention of the central government in local affairs was the
enactment of the Elizabethan Poor Law Act 1601. JPs were required to provide
relief for the poor, in addition to foreign and military affairs. Some of the JPs
developed homes, schools, hospitals, and workplaces, but many did very little
23
(Henney, 1984).
In contrast to this policy, which saw the need to increase the powers and
responsibilities of the government towards its population at the end of the 16
th
century, the Age of Enlightenment suggested a different approach to social
problems. Philosophers like Hobbes, Locke, Montesquieu, Rousseau, Smith, and
Mill suggested a political model based on Liberalism. Liberalism is a broad array of
related ideas and theories of government that consider individual liberty to be the
most important goal. In other words, liberalism is based on Individualism
(McClelland, 1996) and freedom (Kingdom, 2003). According to Smith and Mill,
the liberty of the individual is central to political well being since every man knows
best how to handle his own affairs and he has a right to do so through local groups
that should be free to undertake actions that affect it and the community (Chandler,
2008).
While others thought the modern state should take care of social problems,
liberals were suspicious of the state. They were committed to the idea that the state
did not exist to form men's opinions but for their own views. Thus, government
should reflect the sum of opinion already formed. Accordingly, things can be
changed either by determining what went on people's mind through an authorised
agency, or independently through mechanisms of its own. Since governmental
change should come only when society is ready for it, political change had to wait
until a formed and influential enough body of public opinion clearly sees the
benefit of change and wants it to take place. This would lead to a battle for public
opinion, since nothing is worse than forcing political change on an unwilling
public. Thus, Liberalism took a negative view of the state and its intervention in the
life of its citizens. According to liberals, the state is not virtuous in itself and good
government should be minimal in scope and power (Kingdom, 2003). In other
words, according to the view of liberals, the state should watch over society but not
be its own vital spring (McClelland, 1996). The ideological gap between the liberal
view of the role of the state and the view that saw the state as an active social actor
affects the political and social dialog until today.
During the 17
th
and 18
th
century ad hoc local governments were formed in
24
an individual way. Until then boroughs had few functions, and thus a great number
of special purpose authorities such as water providers, highways, lighting, and
sewers arose. These bodies often had diverse and overlapping territorial and
authoritative boundaries which often resulted in chaotic and corrupt administration
(Henney, 1984).
While in France at the end of 18
th
century there was already a system of
local government including a municipality in each town, borough, parish, or rural
community with the same constitutional status, mayor, and assembly elected by
universal suffrage, in Britain there was no such system (Wilson et al., 2006).
However, relative to other periods, during the 18
th
century localities had
considerable autonomy since there was no need for central government interference
with local affairs. This unique privilege was ensured by JPs who controlled local
decision-making and stood up for these decisions against the central government
(Chandler, 1988). This was partly the consequence of the Civil War. In addition, at
this point the Crown understood it has to work with, rather than against, Parliament
(Chandler, 2007). The independence of the local government can be attributed to
the fact that during the mid-1800s Parliament seats were controlled by local patrons
(Chandler, 1988).
As shown, up to the end of the 18
th
century the development of local
government was slow. However, the Industrial Revolution led to significant social
change, which created new challenges for local governments. The Industrial
Revolution rapidly gathered population into industry centres creating large urban
areas. The concentration of population in urban areas required improved methods of
sanitation, disposal of refuse and sewage, prevention of diseases, provision of
hospitals, clearance of slum areas, regulation of lodging houses, prevention of
overcrowding, maintenance of highways, regulation of buildings, protection of
food, provision of water, lighting of streets and houses, relief of poor, and dealing
with unemployment. Consequently, the change in the life and social circumstances
of people created a significant need for the increased activity of the local and
central government (Clarke, 1955). Yet, as will be portrayed later, the Industrial
Revolution was not the last but one of the greatest first social changes that created
new needs and demands for services from local providers. In other words,
industrialisation was the source for the social forces that restructured the British
25
political system and the system of local government in the following centuries.
2.1.2. The Impact of the Industrial Revolution
As the social and economic problems of industrialisation and growing urban
populations became more apparent, local communities found it more difficult to
handle the problems by themselves. Therefore, the central government increased its
interest in local affairs (Henney, 1984). The laissez-fair philosophy was not
practical any longer and economic growth required intervention. Thus, central-local
relations were redesigned (Chandler, 1988).
During the 19
th
century, various attempts were made to ensure central
control over local functions and services. These attempts included massive
legislation and regulation, nominations of commissioners, and ad hoc supervised
agencies (Chandler, 1988). For instance, in order to improve police forces, the
Prison Act, 1823 that required common form of organisation and reporting, was the
first governmental legislation determining the shape and functions of local
administration. Yet, rather than extending the powers of corporations and county
justice, Parliament set up separate boards, creating a dual system of local
administration. The boards of guardians, established by Act in 1835 to administer
the Poor Law took over responsibility of parishes, and were controlled by central
commissioners. A similar process took place in the public health (1848) and
education (1876) systems (Henney, 1984).
At some point in the 19
th
century, when the English nation began to feel the
horrors of poverty and disastrous famine in Europe, murmurs of dissatisfaction
grew louder and louder. As a result, a series of English Poor Law Acts were
introduced. For instance, the Act of Settlements and the 'Bread Scale' promised the
rights of settlers and fixed wages as a scale of cost of living (the price of wheat and
the number of individuals in the family) (Clarke, 1955). From today's perspective it
can be seen that control and regulation over local government authorities have
never stopped from being relevant for national level politicians. Though these
regulations have changed their face over time, they still deal with the roles of local
government and the role of central government as an inspector promising their
accomplishment.
26
Alongside the trends of legislation and regulation, the progress of political
events demanded strong central government. Consequently, many of the powers of
local government were taken by the central government. The evolution of local
administration was influenced by the view expounded by Jeremy Bentham which
was based on the concept that the greatest happiness of the greatest number of
people will be achieved throughout an elected Parliament with unlimited powers
(Chandler, 2007). This view pushed for administrative centralisation and uniformity
based on the view that it is in the interest of the people and should not be blocked
by local interests. The power and influence of central government over local
government grew through the imposition on local government of duties,
inspectorates, and audits to ensure competence and propriety rights. The reform
included the appointment of a Central Board to control Poor Law administration, to
frame and enforce a uniform system of regulations (such as relief, accounts,
appointment and removal of officers) and to form a Union of Parishes for the
purpose of providing a common workhouse for the district. In addition, a distinct
Central Authority consisting in three commissioners and representatives elected by
direct popular vote in each union of parishes was authorised to carry out the
provisions of the Poor Law Act. The administration, orders, and regulations of the
government of workhouses and the guidance and control of guardians were subject
to the direction and control of the commissioners (Clarke, 1955). This model of
strong central control will guide the English legislator during the time to come.
Until 1835, the municipal corporations and their powers and functions
existed under local custom. Many examples for corruption and incompetence, with
absentee offices, multiple offices held by one person, ways of pocketing fees, and
disproportions of fees were part of the administration (Henney, 1984). From 1835,
the Municipal Corporation Act established, for the first time, a uniform system and
general principles for municipal corporations, in 178 incorporated towns. Political
abuses were reduced, administrative and judicial powers were separated, the
borough police force was placed under a special Watch Committee, trading
monopolies were abolished, and financial administration was reintroduced. The Act
maintained the power of the Crown and regulated the constitution and the function
of local bodies, the town councils. Though a Minister responsible to Parliament was
not appointed until 1919, the hierarchy which administrated the Poor Law from
27
1834 to 1908 was a gradual efflorescence (Clarke, 1955).
In 1871, centralisation took another step forward with the creation of the
Local Government Board, which took over the duties of the Poor Law
Commissioners along with the control and inspection of the health boards. Hence, it
promoted the role of a ministry for local government. In 1888, the Local
Government Act took administrative powers from JPs and created elected county
councils. Later, non-county borough councils, urban district councils, and rural
district councils were elected as well. Large towns were excluded from the county
areas and were made into county boroughs with complete control and
independence. Small towns shared responsibility with counties (Henney, 1984).
In addition, from 1835 a very important central control over LAs was
introduced by a significant legal change. Previously, corporations had the power to
do whatever the law did not expressly prohibit, while after 1835 they could do only
what the law allowed. In other words, the intra rather the ultra vires principle was
introduced. This important position was reinforced and affirmed in 1914 by the
Departmental Committee on Local Taxation, which stated that LAs and their
revenues are creatures of Parliament and subject to its direct and indirect control
(Clarke, 1955). Since their foundation, LAs operated under the broad doctrine of
intra vires (within the powers) and consequently, tensions arose while persistent
central attempts were made to restrict LAs that sought for a more independent role
(Atkinson and Wilks-Heeg, 2000). The intra vires principle has been a vital
element in central-local relations, which influences local government till today. The
tensions that arouse around the division of power between central and local
government will accompany the relationships between local and central
governments and will shape LAs. This point is especially outstanding in British
politics since in Britain there is no written constitution, thus the legal powers of
local government derive from the central government and not independently from a
constitution (Henney, 1984). For instance, the Secretary of State has the powers to
define Best Value authorities, and order their duties, inspection, and audit
procedures, including determent of national Performance Indicators (PIs) (Local
Government Act, 1999). These powers would influence many of the day-by-day
activities of local servants and experiences of local citizens, inter alia, within LAs
that go through a recovery process.
28
By the end of the 19
th
century, the problems resulting from the industrial
revolution and crowded cities caused significant developments in LA growth
(Atkinson and Wilks-Heeg, 2000). Yet, the industrial revolution also made the
public demand greater local activity (Clarke, 1955). Whenever it was under
pressure, the reaction of the central government to every new problem was the
creation of a new agency (e.g., boards of guardians, highways, health, port sanitary,
and schools), each having power to levy a rate to meet its expenses. According to
Henney (1984), 1890-1900 was one of the two periods of local government growth,
when expenditures increased at about 5% annually (the other one was 1955-1975).
This period was even named the golden age of local government (Kingdom, 2003).
Yet problems grew more rapidly than solutions, and the ad hoc authorities were
found to be inefficient. Consequently, since local government was perceived to be
chaotic in authorities, rates and areas of activity, Parliament had to introduce reform
in order to produce uniform administration, combination of authorities, and
consolidation of rates.
Thus, during the early 1900s three major reports were published leading to
the reconstruction of local government: the Report of the Royal Commission
(1909), the County Council Association report (1911), and the Local Government
Sub-Committee of the Ministry of Reconstruction report (1918). The reports
evaluated the entire social welfare legislation and recommended the reorganisation
of local government administration and regulation. They concluded that the
functions and areas of activity of boards of guardians overlapped those of other
authorities. Similarly, the chaos in national finance resulted in the weakest
authorities being helped least (Clarke, 1955). As will be discussed later, this pattern
of behaviour can easily be identified throughout the history of English local
government where the focus on excellence is obvious. In other words, over the
years, governments have chosen to deal with those who can be easily improved
while neglecting those who find it difficult to help themselves.
The main recommendations mentioned in these reports were the abolition of
the boards of guardians and poor law unions and the transfer of their functions to
the county and county borough councils. However, the introduction of these
recommendations was postponed by the First World War (1914-18).
29
2.1.3. The Post World Wars Periods (1920s to 1970s)
As previously shown, during the years and especially after the Second
World War, although according to the liberal model of the modern state the state
was meant to have small powers, it became one of most powerful social actors.
Alongside passions for liberty and individuality, desires for more goods and power
created widespread socio-economic gaps. In a wider view, since European countries
were cluttered with legally entrenched conflicted interests, many of them local,
liberals had to find an agency that could roll back centuries of social and economic
control. That agency could only be the state. Persistent poverty, inequality, and
unemployment weakened the liberal view that freedom and individuality could
promote common good. Liberals realised that freedom in modern society is more
complex. Consequently, the New Liberalism saw freedom not as a product of
nature but as a creation of the state and part of its role, so that the state turned out to
be a dominant social actor (Kingdom, 2003). Nationalism and everything that
emphasised governmental centrality (e.g., taxation), in contrast to local leadership,
was thus adopted (McClelland, 1996).
In terms of local-central relationships it is widely accepted that, after the
Second World War, the system moved from the partnership model to the agency
model (Rhodes, 1981). Especially when the economic situation deteriorated, central
government divested local government from several of its major functions and
increased the guidance and control over LAs by legislation, subsidies and pressure.
Although legislation entrusted LAs with new roles, the autonomy of local
government was limited.
As part of the recommendations made by the above-mentioned reports and
in accordance with New Liberal views, the Local Government Acts of 1929 and
1933 were enacted. These laws imposed considerable changes in local government
and provided the basis of widening and developing the areas of charge as
following:
? Transfer of the administration of functions of boards of guardians to the councils
and thus, improving the coordination of hospitals, public health, welfare service,
and education of children.
? Registration of births, deaths, and marriages.
30
? Roads construction, maintenance, and town planning became the responsibility
of county councils and enabled more flexible and adjusted decisions.
? Powers to promote or oppose to bills in the parliament were extended.
? Regulation of rating, grants, and financial provisions.
? Regulations related to constitution, officers and elections. For instance, the
disqualification of paid officers, and employees from being elected to the local
authority and vice versa.
? Committees and joined committees – all LAs had a general power of appointing
these bodies while at least two third of the total are members of the authority.
? Regulations concerning offices and buildings.
? Regulations related to alterations of areas and acquisition of land.
? Regulations related to expenses, borrowing, accounts, and financial returns
(Clark, 2003; Clarke, 1955).
Nevertheless, alongside newly given responsibilities, dependency on central
sources of revenues increased (Chandler, 2007). In addition, governments restricted
LAs' powers and created large regional authorities that undertook locally provided
services while leaving LAs a secondary role in the welfare state. Moreover, there
was neither a planned pattern of growth for local government nor a single
supervision unit because responsibilities were split between Commissioners,
Boards, Regional Offices, and Departments. Again, indifference characterised the
attitude of the central government toward local government and its interests
(Chandler, 1988).
However during the 1940s to the late 1970s some changes took place. On
one hand, the post war consensus and significant shifts in population led to
increased commitment to the welfare state. This, in turn, led to fundamental and
rapid growth in the role of local government, which was at the forefront of the
application of public policy (Atkinson and Wilks-Heeg, 2000). From the 1960s till
mid-1970s, the communication between central and local government improved.
The central government financed much of the increased expenditure on local
31
services (Wilson et al., 2006).
However, although spending in real terms grew massively, the number of
areas where LAs were engaged in providing services or making investment was
dramatically reduced (Dunleavy, 1984). Some functions were lost to the central
government and nationalised boards. For instance, responsibilities for
unemployment were transferred to the Unemployment Assistance Board (1934) that
later became the National Assistance Board (1948), and in turn to the
Supplementary Benefits Commission (1966). Similarly, responsibility for building
and maintaining trunk roads (1946), canals and harbours hospitals (1946),
municipal electricity and gas (1948), water and sewerage (1974) were centralised
and nationalised. The transfers were rooted in the belief that such services are
national in scope and that the artificial boundaries of LAs constrain their efficient
operation. Therefore, they would be better supplied by single-purpose organisations
(Henney, 1984).
Alongside the changes in the scope of local government authorities,
structural changes took place. In 1965, London local government was reorganised
in a two-tier system consisting of the Great London Council (GLC) and 32 London
Boroughs plus the City. As a result, the structure of local government in the rest of
Britain was increasingly criticised as being outmoded and inefficient. Thus, the
Local Government Act, 1972 introduced a two-tier structure (Henney, 1984).
While over the post World Wars period, legislation was focused on the
quantity of services provided by LAs, recently, legislation is focused on their
quality. Hence, the focus on quality of services redefines expectations in relation to
performance and then, demands from those who fail to deliver the expected quality
of services.
2.1.4. The Welfare State and Traditional Public Sector
As the welfare state grew larger, an adequate administration was required to
provide a wide scope of services. Public administration or the public sector was
traditionally defined by Wamsley and Zald (1973) as "the organisations which
[are] owned and found[ed] by the government". In more recent literature the public
32
sector has been regarded as "the government activity and its consequences", as "the
state general decision-making and its outcomes" (Jan-Erik, 2000), and as "what
government does" (Shafritz and Russell, 2005). Indirectly, the public, society, and
the political community are the owners of public organisations. Therefore, the main
objective of the public sector is to maximise the welfare of society and not to enrich
private hands (Rainey, Backoff, and Levine, 1976; Revelle, Marks, and Liberman,
1970). In accordance with this principle, Westlund (2003) mentioned that the public
sector aims are social purposes, democracy and the public good. Similarly, Blau
and Scott (1962) defined the public sector as "organisations whose prime
beneficiaries are the public in general". These principles are well rooted in the
ideological base of Socialism, which shaped the welfare state and was later
challenged by the New Right and Neoliberalism from the 1980s.
Socialism is a political movement that usually begins outside the political
system, therefore, at first, it lacks institutional bases and expects existing
institutions to be hostile (except e.g., trade unions). In the mid-19
th
century, Marx
and Engels published 'The Communist Manifesto' as a continuation to the 1789
French Revolution and as a reaction to capitalist large-scale industrialism. They
claimed that capitalist industrialism is a new generation of ancient slavery and
Feudalism, which contributes to de-humaneness. Yet, it was quite clear from the
beginning that there is no point struggling industrialisation but capitalism should be
the focus of the struggle. While revolutionist Socialists called for Humanism,
investment in human resources and satisfying human needs, they did not always
know what to change and how to change at the state level in order to promote those
principles and values (McClelland, 1996).
According to Marx's theory the state and high official personnel should stop
untruly presenting themselves as neutral and should regulate trade till the point
there is only one social class. Nevertheless, the state opted for the capitalist way
although, according to socialists, the modern world which created efficient
industrial and agricultural production could solve the false scarcity (McClelland,
1996). The contrast between capitalist views and socialist view would stand in the
middle of an ongoing struggle between high officials and the proletarians, the
central and local governments, respectively.
33
According to Marx's 'Capital- A Critique of Political Economy' (published
in 1867), this struggle takes place between the proletarian and official agents of the
state. The proletarian fight for the state to become their state, yet, the modern state
would always have more power since it has legitimately monopolised violence
(McClelland, 1996). This description once again reminds the conflictual central-
local relationship that addresses the questions 'whose is that state?' These questions
have continued to symbolise the struggle concerning the nature of modern state and
the role of public administration as it will be portrayed next.
According to the traditional public administration view, the public is not
only the beneficiary of public organisations but also finances their activities. The
resources for the activities of public agencies are largely based on taxation. Given
this, the public sector is controlled and constrained by political forces and the
political system, and is not usually driven directly by market forces (e.g.,
competition) and the economic system. Since public organisations involve the
wider public, public failures usually affect a great number of people who are liable
to suffer from it. In contrast to this, the failure of private organisations usually
affects direct owners and specific customers.
The characteristics and typical difficulties of the traditional public sector
organisations are frequently presented in comparison and in contrast to private
sector organisations. Various scholars (e.g., Johnson, Leenders, and McCue, 2003;
Lagrosen, and Lagrossen, 2003; Perry and Rainey, 1988; Rainey, Backoff, and
Levine, 1976; Ross, 1988; Stackman, Connor, and Becker, 2006) investigated and
compared the characteristics of both sectors. The authors argue that environmental
factors of public organisations, i.e., less exposure to free markets (Crawford and
Stein, 2004; Karl and Sutton, 1998), results in less incentive to cost reductions,
operation efficiency, and effective performance. On the other hand, no vacuum
exists; the absence of market forces invigorates more exposure to political forces.
Public organisations are thus subjected to more formal constraints, expectations,
scrutiny, and external control from politicians, interest groups, and public opinion.
In addition, internal factors in public organisations, i.e., structures and processes,
generate greater multiplicity, vagueness, complexity, conflicting goals, criteria, and
decisions (Chang and Turnbull, 2002; Johnson, Leenders, and McCue, 2003;
Rainey, Backoff, and Levine, 1976) that make failure more likely and recovery
34
more complex. The management of public organisations suffers from less
autonomy, fragmented authority over subordinates, greater difficulty in devising
incentives for effective and efficient performance, greater use of formal regulations,
and extra-political influence over senior managers (Harel and Tzafrir, 2001;
Lagrosen, and Lagrossen, 2003; Rainey, Backoff, and Levine, 1976).
Organisational performance tends to be weaker due to over-cautiousness, rigidity,
less innovativeness, and frequent turnover of the leadership. Finally, public
employees are more likely to be varied in personality traits and needs, have lower
valuation of pecuniary incentives, lower work satisfaction, and lower organisational
commitment (Kurland and Egan, 1999; Lyons, Duxbury, and Higgins, 2006;
Rainey, Backoff, and Levine, 1976; Stackman, Connor, and Becker, 2006). In sum,
the findings do not flatter the traditional public sector, which lags behind the private
sector in performance measures. The authors reveal that the public sector suffers
from chronic diseases, such as rigidity, waste of resources, red tape, and
anachronism. According to the authors, although both sectors operate in the same
reality, environmental and internal factors make stakeholders perceive the
traditional public sector as bureaucratic, less effective, less efficient, unresponsive,
less independent and consequently, widely criticised. Such characteristics might
appear to some extent in any public organisation, but in failing organisations they
tend to be the norm, and together with the tendency of public organisations to be
large and complex, they make it harder and longer to achieve recovery in the public
sector (Boyne, 2006; Pant, 1991).
Another characteristic of the public sector is that many decisions lie at the
core of the political process (Skelcher, 1992). In public organisations many
decisions are generally based on policy, which is often derived from political
considerations. For instance, preferences regarding which services will be funded
reflect political inclinations (Skelcher, 1992). Though political considerations are
part of democracy, there is a danger that extra-political considerations will bias the
decision-making process and hinder public interest. In other words, political
considerations might obstruct a public organisation from getting the optimal
decision for the public it serves. Though the political game also involves public
scrutiny, public intervention does not always result in a beneficial outcome. For
example, political considerations might also obstruct the implementation of
35
unpopular decision that would be beneficial in the long run since they might
influence public support in the short run. While referring particularly to LAs,
political process and public policy involve various external stakeholders and
primarily the central government. In this sense, decision making in LAs is even
more complex since it is directly influenced by central-local relations and national
policies. Moreover, in England these relations tend to be tensed and penetrating.
Thus, LAs might face additional difficulties when they come to implement recovery
strategies.
An additional major characteristic of public organisations has been
described as an unproductive organisational climate. Paton and Cornforth (1991)
claimed that the climate of public organisations is unique while Wimalasiri (1993)
and Solomon (1986) argued that public servants have low levels of satisfaction,
commitment, and motivation compared to private corporations employees. One
possible explanation for this phenomenon would be the lack of clear demands for
acceptable and favourable objectives, which cause employees to place their efforts
in achieving different or even conflicting aims (Rainey, Backoff, and Levine,
1976). An unproductive organisational climate makes it harder for management to
stimulate employees and to obtain their cooperation, and thus productivity is
harmed (Parry, 2003; Wimalasiri, 1993). In addition, public organisations were not
often interested in customer feedback. In contrast to private organisations, which
usually charge the consumer directly for services or goods supplied and therefore
depend upon their satisfaction, public organisations are indirectly financed.
Because of the use of taxes as a primary source of revenue, those who pay are not
precisely those who enjoy the services. As a result, public sector organisations are
less concerned with consumer satisfaction (Graaf, and Wal, 2008; Rainey, Backoff,
and Levine, 1976). This not only might affect the quality of services delivered but
also the ability of an organisation to recognise a failure. Since public organisations
tend to be less customer-oriented, dissatisfaction is less noticeable, and failure can
therefore be relatively ignored or denied.
In general, it seems that publicness, which is reflected in public ownership,
public funding, and public control, is the main characteristic of public service
organisations (Boyne, 2002). However, publicness involves and relates to more
than one policy or ideology, which may contrast each other and cause some typical
36
problems. While greater, better, and varied services are continuously demanded by
the public, the political decision tendency to decrease resources delivered to the
public sector, which has taken place from the mid-1970s (Butler, Travers, and
Adonis, 1997), has caused an enormous lack of resources and poor management,
and decreased the ability of public services to meet consumer demand (Bishnu and
John, 2005; Grout and Stevens, 2003; Martin, 2002; Osborne and McLaughlin,
2002; Smith, 1993; Wholey, 1993). Though these problems are common in a wide
range of situations, in radical cases the increasing demands, lack of resources, and
poor leadership, each and all together, might lead to organisational failure, delay or
prevent recovery. In contrast to private enterprises, which have as their general aim
the making of profits for shareholders, and for which any decrease in profitability is
likely to indicate that the organisation is failing (Witteloostuijn, 1998), public
enterprises might be held as failing when they suffer from deterioration of services
provided or when they ignore consumer demands, since they are established with
the rationale of supplying the needs of citizens (McKiernan, 2003). These problems
and difficulties faced by the traditional public sector, and particularly LAs, have
raised the interest of researchers, citizens, and politicians.
The rationale for the foundation or abolition of local services in the welfare
state context depends on the type of services provided. For example, the rationale
for the establishment and funding of certain local services is citizen need (e.g., local
transportation), for others, the main rationale for government intervention is based
on consumer demand (e.g., personal security), and for others, the rationale for
intervention is equity and equality (e.g., education). Since public goods, like law
enforcement, cannot possibly be charged directly to consumers, the government
finances the service on behalf of all consumers using tax revenue. Thus, services
are provided by using public funds to redistribute income and serve the whole
society at least up to a minimal standard (Grout and Stevens, 2003). Nonetheless,
some scholars take a more critical view of the rationales behind the provision of
services. In their view, the policy toward local government reflects the interests of
senior politicians rather than the community. Central government was largely
indifferent to LAs? aspirations to democratically represent local communities
(Chandler, 1988).
This may provide at least a partial explanation for the perception of public
37
services as deficient performers. Citizens and politicians considered public services
as not being responsive enough to environmental changes and to the needs of
clients. Public servants have often been committed to outdated practices; they were
influenced by staff interests, and provided costly and unaccountable services
(Cornforth and Paton, 2004). The traditional public sector and the welfare state
provided low standards of services to all the citizens (Dent, Chandler, and Barry,
2004). Therefore, within LAs for instance, low standards were the acceptable norm
and the visibility and prominence of public failures were low.
As a whole, the evolution of English local government and the emergence
of the welfare state during the 20
th
century created and shaped the expectations
from LAs to provide services and take care of the communities' quality of life.
These expectations will only increase over time (Leach, 2006). Yet, the resources
required to fulfil them would never be enough. This gap between expectations and
resources available will be one of the key reasons for failure in LAs and difficulties
in accomplishing recovery. Furthermore, the political climate and relations in which
both the English central and local governments would have to act, will be more
conflictual than cooperative. While both sides will keep trying to close the gaps
between expectations and resources, central government would try to increase
expectations and decrease resources and local government would continuously try
to increas resources. These primary conditions would shape the next generation of
public administration, the New Public Management (NPM).
2.1.5. New Public Management Reforms
2.1.5.1. The Political Ideological Perspective
Since the second half of the 20
th
century, theorists have continued to debate
about the nature, the role, and the functions of the modern state, and its relationship
with citizens. The debate was accompanied by wide political and social struggles.
Liberals favored the devolution of central power and the evolution of locality, civic
responsibility, and civic participation that contribute to a stable liberal democracy.
Yet, fears that urban government would be captured by socialists and used to
further ownership of production drove liberals to interfere in local politics
38
(Chandler, 2007). In contrast, Social Democrats feared that devolution of power
and locality would promote inequality and unacceptable values (Chandler, 2008).
For instance, the debate on taxation demonstrates the tensions between the different
views on the role of the state. Taxation is generally used as a tool for the
redistribution of wealth. Thus, ever since British were asked to tax property,
tensions between principles of capitalism, market organisation, and rights of private
property conflicted with socialist views such as collectivism and citizenship rights.
Traditionally, the two core political ideologies found expression in the two levels of
government: local and central. Central government favoured economic efficiency
and accumulation of private property while the local government became associated
with supplying the quality of life (Saunders, 1984).
According to Bevir (2001), the major ideologies in the 20
th
century:
Liberalism, Pluralism, Socialism, and Capitalism, were represented by three main
political movements: (old) Labour, the New Right (also named Thatcherism), and
the New Labour (also named The Third Way). While the Labour party, which
emphasised Socialism, mostly influenced England after the World Wars, the New
Right and the New Labour parties, which emphasised Neoliberalism (Economic
Liberalism), mostly influenced England from the 1980s to the 1990s, and from the
late 1990s to the present, respectively (Kingdom, 2003).
Old Labour generally sought to realise an ideal of socialism and fellowship
in a universal welfare and provider state characterised by a command form of
service delivery. The New Labour roots can be also found in the Socialist tradition.
Yet, although services are supplied by the state, the attitude towards citizens is less
paternalistic. New Labour conceives the state as an enabler who acts in partnership
with citizens and other organisations, delivering services through networks
characterised by relationships of trust. In other words, while Old Labour evoked the
state as a paternalistic provider of resources for individuals, which gives citizens
cash benefits, health care, education, and housing, New Labour has modified the
traditional ideas regarding welfare to promote a vision of the state as an enabler and
partner. According to Bevir (2001), New Labour?s philosophy is a development of
the socialist tradition in response to specific dilemmas, such as underclass and state
overload, conceived largely in terms associated and highlighted by both Old Labour
and the New Right. Therefore, New Labour is also termed The Third Way,
39
something in between the Old Labour and the New Right.
The New Right has challenged the vision of the welfare state on a number of
fronts. First, New Right theorists argue that high levels of public spending and state
interventions are detrimental to the economy and may drive Britain into
bankruptcy. Second, the New Right encourages Individualism and argues that the
welfare state also impedes social development because it encourages a culture of
dependency, both economically and psychologically, among welfare recipients.
According to this view, the modern welfare state offers individuals too many
benefits, and demands too little social obligations. Thus, the New Right seeks to
promote market forces and reduce government involvement in individual affairs.
The state should only supply a safety net by cutting costs and promoting self-
reliance. Thus, during the 1980s and 1990s Britain was a leading example of a
'night-watchman state' (McClelland, 1996). Whereas the New Right?s competitive
individualism promotes individual responsibility through competition, New Labour
advocates collective individualism and promotes individual responsibility through
opportunities and cooperation (Bevir, 2001; Clark, 2003).
In sum, it seems that since the 1980s, the most influential ideological
movement in the UK has been Neoliberalism (Clark, 2003). As will be portrayed
later in this study, the Neoliberalism ideology has been the engine of public policy
in the UK over the last three decades and thus has had a profound influence on the
public sector, public services, local government, central-local relations, and the
perception of failure in LAs. This ideology has focused public debate on terms such
as performance measurement and improvement, and imported techniques, values
and practices from private sector organisations into public bureaucracies. The
adoption of private sector standards drawn from principles of contestability and
competition and their implementation in public service delivery, which has been
termed New Public Management (NPM), will be broadly discussed later on in this
thesis.
2.1.5.2. The Political Perspective - Local Government under the New Right
As a whole, the role of national level politics and the extent to which it
40
influences decisions taken by local leaders is not clear-cut or steady. During the
1960s the pluralist/elitist debate tended to analyse LAs as isolated political units.
On the other hand, in the 1970s, community power studies in Britain backed the
elite theory, which argued that local government could not be considered in
isolation from the wider political system and that local government is party-based.
Consistent with this view, a narrow elite of bureaucratic officials and party
politicians at the core of local power tightly control local affairs, notwithstanding
their political inclinations. Accordingly, only a few well connected wealthy groups
were ever successful in influencing local policy (Green, 1981).
The party/group loyalty, as an approach to local democracy, favoured party
over community representation and open decision making. Councillors do not cross
party boundaries, while conducting representation in private groups meetings.
Consequently, the visibility of decision making is obscured and the electoral
legitimacy of local government impoverished. In such circumstances the
mainstream accepts the subordinate role of LAs in the British constitution and the
cut of services (Chandler, 2001). As it will be discussed next, the central tendency
to intervene in local government characterises the English politics.
From 1979 to 1997, the Conservative governments under Thatcher and
Major replaced the post-war welfare state with a coherent political doctrine based
on New Right principles. These principles, which were applied also to local
government and central-local relationship, consisted in encouraging capitalism,
entrepreneurialism, monetarism, individualism, liberalism, moralism, and
nationalism in the local field.
The New Right government held the belief that government intervention,
partly throughout local services, was a barrier to free market and social welfare.
The Thatcherism saw local government bureaucracy as inefficient and self-serving.
Welfare services provisions were regarded as unjustified, expensive, and as leading
to dependence and as self-defeating (Atkinson and Wilks-Heeg, 2000; Butler,
Travers, and Adonis, 1997). Thatcherist financial policy is based on an ideology
and political strategy directed towards rolling back the welfare state, freeing market
forces and individual private corporations, cutting taxation, and promoting
privatisation (Boddy, 1984). Consequently, the government persistently rolled back
41
social spending and slowed local growth and autonomy (Butler, Travers, and
Adonis, 1997).
The growth of the welfare state can be reflected also in economic measures.
In real financial terms, from 1900 to 1980 local government expenditure increased
from £101M to £18,669M and from 12% grants to 63% grants (Butler, Travers, and
Adonis, 1997). This increase provided one of the reasons for cutbacks. However,
cutbacks were not a new strategy. Central cutbacks in local expenditures have been
common since the mid-1970 (Boddy and Fudge, 1984; Butler, Travers, and Adonis,
1997; Saunders, 1984). Both parties, Labour and Conservatives, in order to restore
profitability of the private sector, subordinated social priorities to economic
priorities. Subordinating local government to central government was part of this
policy (Saunders, 1984). Nonetheless, for the New Right, cutting back and
controlling council spending has been a more central strategy. Since the Thatcher
government failed to deliver significant tax cuts or constrain its own expenditures,
the overall strategy seemed to be focused on privatisation in the local area (Boddy,
1984).
The shift in policy, introduced by the New Right (i.e., controlling and
restricting finances and authorities), created a considerable threat to local
government (Atkinson and Wilks-Heeg, 2000), on the working class, and on
principles of collective provision. In addition, these changes affected relations
between central and local government. Operating within a unitary state with strong
local traditions but an unwritten Constitution, changeable at will by a simple
parliamentary majority, central local relations in Britain have often been uneasy
since the New Right created a chronic tension between powerful traditions of local
government and parliamentary sovereignty. During Mrs. Thatcher term, the
relations between central and local governments were characterised by
confrontation, massive central control (Wilson et al., 2006), and decline in trust
(Chandler, 2007). Local government were expected to act as agents of the central
government and neglect their role as democratic representatives of local interests
(Chandler, 2007).
One of the major cases which reflect this trend is the poll tax case described
by Butler, Travers, and Adonis (1997). Modern British history offers no
42
comparable example of government putting a single piece of legislation so
prominently, forcefully implementing it, and then abandoning it. The Thatcher
government imposed the replacement of the domestic rating system by the poll tax.
This step was revolutionary to local government since it abolished a tax system
traced back to the Poor Law of 1601, which had been developed on a basis of
income derived from the rates and property taxes. When the poll tax was
introduced, local government objected to it, and councils, councillors, and officers
were not consulted before the reform was introduced. When professional bodies
became involved in the debate, the negative aspects of poll tax gained greater
importance. In 1990-1 the collection proved to be a nightmare and collection levels
fell well behind the comparable figures for domestic rates. Therefore, the poll tax
was finally abolished.
This case demonstrates, on one hand, the tension between central and local
government. The intervention of the central government points out the local
government weaknesses and its inability to successfully reject a reform that reduced
its fiscal and legal autonomy. On the other hand, the case indicates the strength of
local governments. By 1987, local government was the only national institution to
challenge the authority and ideology of Thatcher government. Almost alone, local
government stood out as part of a wider rebellious opposition.
Though the obstacles presented by the central government LAs did not
blindly followed central direction but make their own decisions regarding their
level and pattern of expenditures, LAs vary in their extent of acceptance of control,
resources, and political and professional factors (Rhodes, 1981). LAs initiated
efforts to increase productivity and found alternative service-delivery mechanisms
based on public-choice assumptions (Denhardt and Denhardt, 2000). In practical
terms, LAs implemented cuts, increased rates, or did both in order to maintain
services provision and employment (Boddy, 1984). In this context, it may be
suggested that due to the continuous cutbacks LAs found a way to become more
efficient.
Support for this view can be found in research that explored the relationship
between competition expenditures and efficiency in LAs (Boyne, 1998). In the
English context, empirical tests support public choice theory and provide
43
justification for the New Right agenda, if low expenditures and efficiency are
perceived as first priority targets. According to the findings, competition between
LAs and competition between service providers are negatively correlated with
levels of expenditures and positively related with efficiency. In other words,
competition and the free market model indeed encourage LAs to constrain their
expenditures and provide services in a more cost-effective manner.
One of the tools that later on were used to achieve cost effectiveness was the
idea of the enabling authority. The government of John Major promoted better
services and New Right values by shifting responsibility for service delivery to the
private sector and the extension of Compulsory Competitive Tendering (CCT) to
professional services (Chandler, 2007). However, the major managerial tools used
to close the gaps between the continuous cutbacks, on one hand, and increasing
expectation to services, on the other, were introduced by the NPM reforms. These
reforms will be broadly discussed next.
2.1.5.3. The Managerial Perspective
During the 1980s, citizens who appeared to be losing faith in the
bureaucratic-professional system expected and demanded greater choice of services
designed to meet individual needs (Dent, Chandler, and Barry, 2004). The reaction
to the failure, the demand to provide appropriate services (Osborne and
McLaughlin, 2002), and the reaction to fiscal crises (Martin, 2002) resulted in a
neo-liberal political agenda and a new phase of the public sector.
While radical changes do not occur very often in large and complex
systems, since the 1980s, local government and actually the entire public sector in
the U.K. experienced a dramatic process and a wide and multidimensional reform
named „New Public Management? (NPM). NPM refers to a collection of ideas and
practices that reflect the call to "run the government like a business". For instance,
NPM emphasises elements as accountability, market-like mechanisms, cost cutting,
budget transparency, high standards of performance, output control, competition,
and rational relationship with stakeholders (Atkinson and Wilks-Heeg, 2000;
Denhardt and Denhardt, 2000; Dent, Chandler, and Barry, 2004; Dunleavy and
44
Hood, 1994; Martin, 2002; Osborne and McLaughlin, 2002; Willis, 2005). This
reform has significantly changed the face of public administration (Boyne, 2002)
and has shaped local government until today.
As previously discussed, the origin of the reform arose from the belief held
in many western nations, which was based on Neoliberal ideology, that the public
sector was under performing and that a radical overhaul was essential and should
include many of the free market strategies, e.g., competition (Willis, 2005). This
change was promoted worldwide by the OECD (Organisation for Economic Co-
operation and Development). In Britain, as described in the former chapter, the
change was first led by the New Right thinking, the Conservative Party, and PM
Thatcher who was followed by PM Major. Later, the New Labour headed by PM
Blair further developed the trend.
These reforms were so extensive and continuous that today, it is hard to
detach NPM from the public sector; it is actually its modern appearance. Some
scholars refer to NPM as an agenda and believe it reflects an ideology on how the
public sector should be, since it emphasises modernisation and excellence of
political and administrative systems (e.g., Carvalho et al., 2006; Mueller et al.,
2004; Talbot and Johnson, 2007). According to the principles of Neoliberalism, the
aims of the changes were to upgrade the status of competition, reduce state
ownership, and commercialise public services (Christensen, Laegreid, and Stigen,
2004). By the mid-1980s, even the terminology was changed and signalised
managerial conceptual shifts: 'administrator' became 'manager' and citizens became
'customers' (Chandler, 2007). Similarly, the term „New Public Management?
represents the assumption that „New? equals good and 'Old' or traditional equals
bad (Cutler, 2004). Even political movements and parties sought to be perceived as
"New": the New Right, the New Labour, and New Liberalism.
Reforms are the focus of NPM. These reforms could be implemented in
different shapes. For instance, it could enhance the availability of LA services by
making them accessible online. Alternatively, it could improve the quality of
services by encouraging delivery by private suppliers. As a matter of fact, the range
and variety of themes, approaches, and terminology related to NPM is huge (Hood
and Peters, 2004). There is no single universal model or homogenous trend of
45
reform. NPM varies in types, routes, countries, and services (Flyn, 2002; Martin,
2002).
Nevertheless, though the NPM agenda has different faces, it is a universal
phenomenon (especially in the western world), which follows some core aspects
reflected in far-reaching internal changes and performance oriented schemes
(Scharitzer and Korunka, 2000). These aspects are common to different agencies
and states. For example, NPM reforms are most likely to emphasise modernisation,
efficiency, effectiveness, economy, accountability, and citizen-orientation; all of
these affect national political-administrative systems (Christensen and Laegreid,
1999; Lynn, 1998).
The question of the LA roles has become more complex. Though the
traditional roles of LAs have stayed much the same, further roles were added, and
the methods by which these roles are executed have been dramatically influenced
by NPM. While implementing NPM reforms, many LAs have gone through radical
changes. According to Keen (2004), NPM has redefined LAs' mission within a 4Cs
framework:
? Challenging the purpose of its service
? Comparing LA performance with other providers
? Consulting the community
? Looking for Competition
Accordingly, new ways of working across the boundaries of traditional services
were introduced. For instance, reorganisation took place in order to focus services
on user need; LAs were asked to publish plans, indicators, and annual performance
evaluations. As a whole, the NPM in LAs appeared to stimulate innovative,
dynamic, and customer/community responsive service. It stimulated the
empowerment of managers to identify and meet wishes of their local communities
(Keen, 2004). For instance, since the 1980s, as part of the NPM reform, English
LAs adopted various and different NPM models and reforms. All of them attempted
to achieve improved value for money. These types of policies are known as best
value policies and are characterised by the 3Es (Stewart, 2003):
? Economy
46
? Efficiency
? Effectiveness.
Consistent with these principles, LAs were expected to move away from
traditional roles towards a more customer-oriented position (Baker, 1995), which
became more and more demanding (Backoff, Wechsler, and Crew, 1993). They
were encouraged to develop innovative practices to improve their efficiency and
effectiveness. LAs were expected to meet NPM standards such as accountability
and performance under high levels of moral and managerial standards. Pressures
continued to increase as they were expected to respond effectively to the needs of
local communities and to make decisions locally, rather than control processes from
the top (Clifford, 2001). Consequently, LAs are currently committed to broader
accountability structures than ever before (Baker, 1995). These structures include
for instance consideration of a wider range of stakeholders and interest groups,
enabling more accessibility to elected politicians, and maintaining a higher degree
of openness and transparency. In addition to the usual demands for economy,
efficiency, and effectiveness, the public had increased expectations regarding
equity, fair treatment, and honesty in LAs? operation and service delivery. As
previously discussed, these enhanced demands and expectations in public services
were not necessarily followed by increased resources, tools, or revenues, and were
usually followed by cutbacks and reductions. Unfortunately, but logically, not all
LAs met the demands and expectations successfully. Some of them encountered
huge difficulties and ended up in organisational failure.
The most common difficulty faced by LAs, as a result of the introduction of
NPM, was the inability to cope with increased demand for services while revenues
were reduced (Martin, 2002). On one hand, the NPM culture challenges the
traditional predominant bureaucratic structure of the public sector and increases
expectations and demands. On the other hand, economies have witnessed growth in
both absolute and relative terms. However, as a result of a substantial growth in
some public expenditure, governments cut other expenses. Thus, central
government strategy often threatened LAs with budget reductions, affecting in this
way the ability of LAs to achieve their mission. In some cases, the ability of LAs to
supply services was damaged in a way that they could not supply modern services
as expected by the public. Moreover, they failed to deliver minimal standards of
47
services. The inability to supply services at the required level is one of the main
characteristics of a failing organisation.
An additional difficulty that NPM imposed on LAs is rooted in the
requirement of continuous adaptation to customer needs and fast-changing
circumstances. Generally, LAs are characterised by an organisational structure
based on the Weberian model of bureaucracy. They tend to be structured as
hierarchical, functionally differentiated, and rule-bound organisations. Such
structure has strong internal divisions between functional areas and intense
competition for resources (Skelcher, 1992). External considerations, like checks
and balances, may lead to the over monitoring of managerial processes, causing
more red tape, formalisation, and stagnation (e.g., an Audit commission review).
Scholars argue that these reflect obsessions with rules and processes rather than
results and outcomes (Rainey, Backoff, and Levine, 1976). These characteristics
place difficulties for the development of a customer-oriented culture that often
require fast, innovative, spontaneous, and inter-departmental intervention. For
example, in contrast to the business area where increased competition may lead to
decline (Slatter, 1984), LAs enjoy lack of competitive pressures from other
agencies, which is assumed to be an advantage. Public organisations usually enjoy a
dominant position in their environment as single service providers (Boyne, 2002).
Yet, there is a risk that a public monopoly would not react properly to a sudden
increase in demands or fast changing consumer needs (Krause and Douglas, 2006).
In this case, inability to supply services at the required level badly affects
consumers who have no alternative supplier.
Furthermore, since traditionally LAs were monopolies, they hardly ever had
to think about attracting and keeping customers, or being customer-oriented. The
access to services was physically limited; for example, access to buildings for
individuals with disabilities was often unavailable, and opening hours were short or
inconvenient. Similarly, access to decision-making and service design was also
partial with no clear procedure to enable citizen participation (Skelcher, 1992). A
customer orientation was assumed rather than demonstrated. The bureaucratic
paternalistic structure led to a situation where the authority followed practices and
procedures established over the years. These practices and procedures were
hierarchical, closed to the voices of customers, and they took the view that they
48
alone knew best. While LAs have well-developed systems for collecting and
analysing social, economic, and demographic data, few efforts have been made to
discover public opinion and customer needs. Consultation and participation
exercises are infrequent and do not always enable the full involvement of citizens.
Usually, only vocal customers or those represented by interest groups find the
opportunity to express their views.
Moreover, due to this inflexible structure, even if managers were willing to
create a customer-oriented environment, public managers have relatively less
autonomy and freedom to react to changing circumstances. For example, the
discretion of public managers in human resources management, such as hiring,
firing, and promoting, is limited (Boyne, 2002; Snavely and Desai, 2001; Zhiyong,
Riley, and Cayer, 2005). Constrained human resources management has several
implications, especially for failing LAs. In these cases, managers have less
available powers, tools, and authority to perform radical, rapid, and effective
changes that could lead to recovery.
Diversity of stakeholders that leads to multiple and vague goals (Aharoni,
1981; Drucker, 1976; Meier and Bohte, 2003) impose an additional difficulty on
LAs since those are hard to control (Brookfield, 2000), cohere, and measure
(Tirole, 1994). LA goals are a product of a political process and not of an intra-
organisational process alone (Boyne, 2002). As such, they are an outcome of
political compromises. Thus, they may reflect contradictory policies supposed to
serve different interest groups. Obviously, contradictory policies are hard to follow
and they push and pull management into different directions. In these cases, the role
of management is to interpret and balance these conflicting and vague objectives,
and to control plans, the execution of activities, and outcomes. Structural changes
designed to improve performance for one goal may hinder performance for others
(Theobald and Nicholson-Crotty, 2005). These difficulties are aggravated in cases
of organisational failure. While in private organisations failure will probably drive
the management to satisfy most stakeholders by increasing profit, LA management
would be expected to satisfy contradictory interests of unions, politicians, other
public agencies, the media, employees, and consumers. These groups might expect
the implementation of different ways of action. For instance, a public debate on
radiation caused by mobile phone antennas would motivate the media, parents, and
49
the minister of health to demand removing antennas near kindergartens. On the
other hand, taking down antennas might damage public-private partnerships and
cause massive dismissals. Another relevant example could arise when a recovery
process requires retrenchment. Transferring resources to areas that are more
productive might necessitate the dismissal of employees. Firing friends, colleagues,
and subordinates, in turn, could lead to an unproductive organisational climate.
Moreover, in order to balance contradictory goals in a political system, there is a
need not only for managerial skills but also for strong leadership (Harker and
Sharma, 2000), and those are often absent in cases of organisational failure.
To sum up, in spite of the broad trend of NPM that emphasised best value
for people, an extensive, pervasive, and deep crisis exists within the public sector
(Corrigan and Joyce, 1997). According to Christensen and Laegreid (1999), NPM is
actually a reflection of international crises in the public sector. Some of these crises
are rooted in economic factors. Despite the reforms, some public organisation
finances worsened, remained weak, and became vulnerable. Fundamental changes
in culture that challenged the traditional predominant bureaucratic structure of the
public sector required the introduction of new methods of accountability and a
greater choice of services. Those had to be achieved under, inter alia, reductions in
expenditure led by central government policies (Martin, 2002), an unproductive
organisational climate, and often under-motivated or unskilled management. Thus,
it is not surprising that some LAs have had severe difficulties in fulfilling their
missions and were considered under performers. According to Corrigan and Joyce,
(1997) this situation in the public sector created a driving force for innovation
within the UK. The next chapter will address local government evolution under
these ideologies, political movements, central policy, and managerial reforms, as a
base for the perception of public failure.
2.1.5.4. New Public Management and Local Government under the Third Way
In the general election manifesto, 1997, the Local Government Act, 1999
(see Appendix 1), and in the White Paper - Strong Local Leadership (see Appendix
2), the New Labour party headed by Tony Blair spoke grandly about bringing
power back to local people by renewing local democracy and revitalising civic
50
government. The rhetoric of the Labour government policy regarding LAs indeed
had a more positive tone. On the other hand, Blair declared that his government
would be quick to respond and intervene if LAs failed to carry out their mission
effectively. The Labour strategy consisted in a number of components such as
modernising local decision-making, encouraging innovation, and enhancing service
quality. The Labour regime expected local government to promote the social,
economic, and environmental well being of the communities it serves and they
promised to give new powers to meet local priorities. The three core themes of the
New Labour modernisation program were community leadership, democratic
renewal, and improving performance (Stewart, 2003).
As was suggested earlier, NPM reforms and Neoliberalism trends have
continued under the Blair regime. Since the 1997 General Election, local
government has experienced a remarkable renaissance in its fortunes. The Labour
government demonstrated its commitment to local government by stating that LAs
will be crucial in making a significant contribution to the delivery of the domestic
policy agenda. Ministers have promised that councils will be provided with new
powers and responsibilities by government. However, new responsibilities for
councils will be conditional on their acceptance of the modernising agenda (Brooks,
2000).
Improving performance (e.g., moving into e-government: delivery of public
services on-line), is the most relevant issue for our discussion. It was promoted in
the White Paper - Strong Local Leadership, which set out a comprehensive
performance framework for service improvement involving national priorities and
targets, along with performance assessments of individual authorities and related
incentives and penalties (Stewart, 2003). Although funding of local services
increased and their improvement became a major government priority, there was no
reduction in the central control (Chandler, 2007) which was called 'control freakery'
(Wilson et al., 2006). Control for improving service delivery was a key element,
which was achieved by securing „Best Value? for local people. It was monitored by
the Audit Commission, which introduced national performance reviews and
indicators for efficiency, cost, and quality (this point will be discussed in detail
later). This process involved consultation with local taxpayers, service users, and
the wider business community on how services could be improved (Atkinson and
51
Wilks-Heeg, 2000).
According to Stewart (2003), LAs were required to review all their
functions over five year periods while following the guidelines of the four Cs:
Challenge why, how and by whom a service is provided, make Comparison with
other performances, Consult stakeholders, and use fair and open Competition. LAs
were required to prepare a best value performance plan each year that must include
a summary of objectives, current performance, targets, comparisons with
performance in previous years, plans for action, response to audit and inspection
reports, and financial information. Since LAs were under the statutory duty to
pursue „Best Value? and in order to make sure these duties would be accomplished,
the government obtained the power to enforce those requirements by audit,
inspection, and direct intervention.
As part of the modernising environment that encouraged excellence
(Cornforth and Paton, 2004; Jas and Skelcher, 2005), public opinion about failures
of LAs became less acceptable and ignorable. Thus, public pressure motivated LAs
to seek creative ways to improve services. However, while some LAs improved
their performance dramatically, others stayed behind (Cabrero-Mendoza, 2000;
Miah and Mia, 1996), increasing the gap between poor and good performers. These
gaps increased the demands for equality. Thus, recognising failing LAs and making
greater efforts to recover their performance became essential. Consequently, these
changes paved the way for government pressures such as performance
measurement and cross-agency comparisons.
These pressures reflect the contradictions between the stated objectives of
the modernisation policy and other Labour?s policies (Brooks, 2000). Specifically,
Labour has emphasised its commitment to enhancing community representation
and the democratic practices of local governments, yet the government has
reiterated that it will continue to direct the management of LAs. In other words, it is
questionable whether the government?s push for modernising local government is
of lasting benefit to local governments or to a system that merely administers
nationally decided policies.
As Boyne (2006) suggested, despite the NPM reforms, or perhaps because
of them, a widespread concern remains about the failure of public sector
52
organisations. Additionally, the government was keen to find ways to achieve
organisational turnaround, remove service disparities across client groups, and
bring the laggards up to the service standards achieved by the leaders. Accordingly,
NPM prepared the ground for the use of TMS, which will be widely discussed later.
Thus, there is a linkage between the two phenomena: NPM and TMS. There is a
linkage between management style reforms (i.e., the atmosphere, norms, and
expectations they created), the desired organisational recoveries for failing LAs,
and particular strategies designed to achieve these recoveries. According to
preliminary scholars (Schendel, Patton, and Riggs 1976; Hofer, 1980), TMS were
known and in use in private failing organisations since the 1950s. Yet, they were
borrowed and expected to be implemented in LAs only in the last few decades.
Although it may be assumed that cases of failing LAs existed in the past, we have
no evidence TMS were in use at the same time. Thus, it can be claimed that the
NPM reforms principles and nature, which rose up in the 1980s, made the
difference that pushed failing LAs to implement TMS. In other words, TMS were
one of the optional sets of strategies directed to recover failures, as a reaction to the
demands presented by the NPM reforms.
Similarly, NPM has changed the face of LAs leadership as well. According
to Christensen and Laegreid (1999), NPM is designed to improve public services in
two ways, which significantly involve management skills. This is done firstly, by
importing managerial processes and behaviour from the private sector and by
implementing them according to financial standards, norms, and values, such as
economy, efficiency, and effectiveness. Secondly, it is done by introducing
professional management committed to these standards and managerial techniques
(Boyne, 2002) (e.g., Management by Objectives (MBO), Total Quality
Management (TQM), and Management by Objectives and Results (MBOR)). Over
the last three decades, NPM has led to a profound shift in the role of LAs and the
nature of their profession. Local managers and political leaders were expected to
demonstrate accountability and high performance. They have sought to restructure
bureaucratic systems, redefine organisational missions, rationalise processes, and
decentralise decision-making (Denhardt and Denhardt, 2000). As time passes and
accountability from managers is in greater demand, the role of local politicians and
officers is becoming broader, deeper, and more challenging (Hall and Holt, 2002;
53
Nutley, 2000; Sanjay and Bradley, 2006). For instance, the present local leadership
faces new missions such as promoting private-public relationship and commitment
to ongoing performance assessment. The complexity of the role is enhanced in both
failure and recovery situations. These situations test management skills to the
extreme, requiring more creativity, innovativeness and added responsibilities while
acting under the open eye of the public and government agencies.
The desire to strengthen the role of political leadership in LAs is one of the
key features of Labour?s renewal agenda. The model suggested followed the
separation of powers in local government in a similar manner to central
government. According to this model, a separate small group of councillors with a
powerful leader would have the authority to make executive decisions. These
powers and decisions would be overviewed and scrutinised before their
implementation by a scrutiny system (Leach, 2006). This model of local checks and
balances is aimed at controlling decision-making and performance, and thus
preventing failures.
Recently, creative ways of dealing with the central policy were
accomplished through the transition from local government to local governance.
The term 'local governance' seems to be more and more relevant, though its roots
go back to the 1980s (Kingdom, 2003) or even the 1950-60s. In a broad view, the
search for reformed local governance is a response to working in a post-industrial,
post-bureaucratic, and post-welfare state. It marks a break from traditional public
administration and NPM, while moving into the emergence of local networks
(Stoker, 2003). Local governance reflects the tendency to shift away from a system
in which LAs were the sole key actor into a system in which decision-making,
authorities, and the provision of services are shared amongst private and voluntary
organisations (Atkinson and Wilks-Heeg, 2000; Kingdom, 2003). Instead of the
direct provision of services to citizens, LAs identify requirements, set priorities,
determine standards of service, and find the best way to meet these standards. Local
governance is the latest evolutionary phase of local government. Though LAs have
never had complete governmental powers, they saw themselves as the leaders of
their community. Now their position is under challenge, as they share
responsibilities with a whole range of bodies and all sorts of players also exercising
governmental powers at the local level. The council is no longer the only or main
54
actor in the field, thus, partnership is a key term in the modern management of LAs
(Wilson et al., 2006).
Overall, the NPM reforms and modernisation agenda described above
required LAs to make adaptations and adjustments. In response to the wave of
Neoliberalism, LAs implemented cuts, increased rates, or both to maintain services
provision and employment, while blaming the central government. Some strong
politically based LAs developed radical initiatives as well as large rates increases to
defence services (Boddy, 1984). Yet, it is important to note that not all LAs had a
strong political base and have not succeed in making those adaptations. Thus,
though NPM is based on modernisation, productivity, and accountability, it has not
always been perceived as an ideal movement, and was therefore criticised by
stakeholders. Dunleavy and Hood (1994) classified this criticism into four groups.
First, the fatalist critique holds that previous problems that had begun back in the
traditional phase have not yet been cured and there is little evidence that the NPM
reforms led to the desired results (Cristensen and Laegreid, 1999). In other words,
this critique holds that Socialism, the welfare state, and the traditional public
administration have not resolved the social problems and that reforming the public
management style would probably not do better. Second, the individual critique
holds that the NPM has been grafted into a system where there are enforceable
contracts and individual legal rights. As a result, instead of performance, tenure is
the factor that determines salary level. Third, the hierarchic critique, which is
rooted in an orthodox view, holds that reforms must be carefully conducted and
should not let things get out of control while there is a risk of irreversible damage to
the wider public. From this point of view, a hierarchical structure is better than
independent managers who have no skills for strategic design since it allows the
individual manager less freedom to make mistakes and wrong decisions. Fourth, the
democratic critique reflects the fear from corrupted, elitist decision-makers that
would serve personal rather than the end users' interests. For example, excessive
decentralisation, privatisation, and budget cutting that might lead to inequality and
corruption.
These critiques raise an important question regarding the NPM role in LA
failures. It could be argued that NPM not only did not solve the problems of the
traditional public sector, as suggested by the fatalist and the individual critiques, but
55
also caused some failures, as hinted by the hierarchical and the democratic
critiques. A linked argument was suggested by Boyne (2002), who did not criticise
NPM outcomes but its concept. He argued that public and private organisations are
fundamentally different, and therefore practices and skills cannot be directly
transferred to public management tasks, and there is little point in seeking to draw
lessons from private management. Adoption of private structures would at best be
fruitless, and at worst counterproductive. However, Boyne?s argument is quite
radical and should be refined and moderated. Indeed, blindly adopting private
managerial techniques, concepts, and values by unskilled managers is dangerous.
However, cautious adoption of appropriately adapted private sector techniques and
skills can enrich the local leaders and officers? repertoire of managerial tools. In
other words, it seems that along with the improvements NPM offers, it also entails
risks, yet these risks could be diminished if changes are executed with caution.
As may be expected, NPM has not solved the entire problems of LAs. It has
not been found as the cure for all the chronic diseases or as the tool-kit for the
whole range of difficulties. During the last three decades, LAs and NPM have
continued to be a target for criticism (Dent, Chandler, and Barry, 2004). This
criticism was even enhanced in cases of failure. Since wide interest in NPM created
a more competitive environment driven by a culture of excellence in which there
are higher standards and higher expectations among stakeholders, these
stakeholders were less tolerant toward public failures (Boyne, 2002; Christensen
and Laegreid, 1999; Glynn and Murphy, 1996). This intolerance was detected,
among other organisations, in LAs and particularly in underperforming ones, which
are at the core of this study. LAs have been in the spotlight of governments and
during the 1990s and the 2000s, LAs' performance has continued to trouble policy
makers, politicians, and managers, especially in the UK (Cornforth and Paton,
2004).
2.1.5.5. Summary
The historical development of English LAs reveals few main points.
Democratic principal authorities derive from the 1835 Act and in rural areas from
1888. Although much abused, since Anglo-Saxon times there was a strong tradition
56
of participative democracy at parish level. Yet, democratic local government is still
struggling for its existence. Legally, LAs are corporations with statutory defined
powers, in which their scope of action is limited by the principle of intra vires, and
their range of duties is imposed on them. Since there is no written constitution in
the UK, central government can at any time change the powers, functions, and
character of local government. In addition, the absence of explicitly established
relationships led to confusion about responsibility, which allowed each to blame the
other, a situation which politically suits both sides (Henney, 1984).
Over recent decades, LAs within England have undergone enormous
changes (Keen, 2004; Whiteman and Turner, 2005). Although support for localism
exists, LAs continuously lose functions to the central government, nationalised
industries, and privatised institutions. Since control over LAs becomes tighter, LAs
become dependent upon central grants. Therefore, local government was seriously
affected by government?s attempts to reduce spending. Consequently, some LAs
have fallen into severe crises and some of them have even stopped expanding
services (Henney, 1984). However, while LAs have been forced to give up some
areas of autonomy, some LAs found a variety of ways to protect and expand their
independence in other areas (Atkinson and Wilks-Heeg, 2000).
The main managerial reform introduced to improve performance under
budgetary limitations was NPM, which imported private sector managerial
practices into public administration. However, as shown through this chapter, NPM
reforms did not cure all the problems of the public sector in general, and failing
LAs in particular. LAs still are at the center of governmental efforts aimed at
improving their performance.
2.2. Best Value Regime: Recent Efforts to Improve the Performance of Local
Authorities
This chapter outlines the special efforts made recently in England to deal
with LA performance. It details the methods used to promote the performance of
LAs, and their achievements, mostly throughout the Best Value regime, as they
have been published by the Audit Commission. In addition, this chapter outlines
some of the criticism written on this method and its disadvantages.
Over the last few decades, UK governments and especially New Labour
57
policy makers favoured modernisation, which resulted in a major concern for LAs
and their management (Cornforth and Paton, 2004). The English Local Government
Act, 1999 (see Appendix 1) and the White Paper: Strong Local Leadership –
Quality Public Service (2001) (see Appendix 2) encouraged Best Value policy,
which means greater focus on improved services for local people. The Best Value
policy develops principles of best practice that derive from a business model based
on excellence, which includes the efficient use of resources, effective policy
making, customer satisfaction, and 'SMART' targets (specific, measurable,
achievable, relevant, and timed) (Bevir, 2001).
Improving performance of public services is a great challenge to any
government. Nevertheless, the New Labour set it up as a major political objective
and as a self-test (Stoker, 2003). It moves towards a comprehensive system of
performance management; it challenges local councils to improve their
performance through locally managed systems of review and restructuring; it
inspects local government using national Performance Indicators (PIs) which
provide information for central government. In other words, it creates a system of
challenges, training, support, rewards, and sanctions.
Enormous efforts have been made to encourage best practices, to promote
stronger management, and to strengthen the leadership of LAs. The importance of
these efforts cannot be exaggerated since in the UK for instance, LAs spend about a
quarter of public spending and raise only about a quarter of that amount (i.e., 1/16
of public spending) from local taxes (McLean, Haubrich, and Gutiérrez-Romero,
2007). This development was part of the implementation of NPM reforms
previously discussed. While these efforts were applied in all LAs, special efforts
were dedicated to failing LAs. The English government introduced a robust
intervention plan designed to recognise failing LAs, supply them with the necessary
support, and supervise them (Walshe et al., 2004).
The government intervention plan was mostly implemented by the Audit
Commission, an independent body founded in 1983. The Audit Commission was
given a mandate to measure, inspect, and supervise council managements. The
main purpose of the mandate was to seek high quality local services and to ensure
that public money is spent economically, efficiently, and effectively. It provided
58
information on the quality of public services, and practical recommendations for
spreading best practice and good value for money (Audit Commission, 2005). As
McLean, Haubrich, and Gutiérrez-Romero (2007) summarised, "...recent UK
governments of both main parties have shown increasing interest in using
performance metrics as a tool to assess and improve the performance of LAs."
Thus, since 2002, the Audit Commission annually rates all 150 English LAs into
one of the following categories according to their performance: poor, weak, fair,
good, or excellent performers.
However, though the interest of both main parties in using performance
metrics as a tool to assess and improve the performance of LAs, the Best Value
regime and its formal appearance through CPA, Office for Standards in Education
(OFSTED), and Commission of Social Care Inspection (CSCI) have been highly
criticised by some scholars (Brooks, 2000). The critics focus on the scale, the
overlap, the inflexibility, and the overwhelming centralism. The Best Value regime
depends on audit and inspection of LA?s services performance. However, according
to these scholars, this inspection takes into account a narrow definition of
accountability based on responsibility and obligations to fix performance indicators
dictated by national agencies rather than taking into account more legitimate factors
such as local targets and priorities. This criticism was even acknowledged by the
government. In 2005 Budget, as a response to the loud criticism, the Chancellor of
the Exchequer, Gordon Brown, cut the number of inspectorates leading to fewer
inspections (Wilson et al., 2006).
At the organisational level, the Best Value regime is criticised for generating
new tiers of bureaucracy and unsustainable administrative costs. Units compete one
with another during the planning, funding, and delivery phases in a way that may
have hindered an appropriate coordination between them. Some organisations, the
argument goes, are unwilling to share principles of best practice for fear of losing
competitive advantage, which is a sign for negative competition (Bevir, 2001). In
addition, continuous performance improvement, particularly from previously
poorly performing LAs, has been a key Governmental objective at the heart of both
Best Value and CPA policy (Game, 2006). Yet, critics sustain that the CPA is an
annually test, run only once a year. Thus, it may create organisational pressure,
excitement, preparation, and bustle for a short period but organisational limpness
59
and relaxation the day after.
An additional critic holds that the centralised and corporatised policy, which
adopts tight social control and protects businesses interests, created trends of
professionalism and specialisation. As this public policy aims at best outcomes
achieved with given resources, it encourages transferring authorities and powers
from agencies driven by political considerations to experts guided by professional
considerations. In other words, agencies dealing with specific and narrow scope of
services are privatised. Even in cases in which the powers to provide services
remains in LA's hands, the review and audit procedures demand for more
professionalised decision making. That way or another, these trends allow the state
to rationally manage local government, fragment it into Quasi-Governmental
agencies (QGAs), and leave it out of LAs' hands (Dunleavy, 1984). The policy
focussed on efficiency in the delivery of services has led to a secure and stable
liberal democratic state, yet, it has neglected liberty for communities (Henney,
1984). In addition, professionalism and specialisation have enhanced the role of
administrators while reducing the discretion of politicians. It has been repeatedly
argued that civil servants rule, since in contrast to their experience ministers have
brief tenure and thus, have to rely upon their advice (Chandler, 1988).
Similarly, the Best Value and CPA result in limited discretion in
determining the policies LAs may implement. The wide intervention, centralisation,
and inspection provide not only the route for LA performance, but also provide the
route that strictly defines the measures for success and failure. Within this
framework, LAs cannot, or can less than before, define the boarders of success and
failure since national PIs already done it without taking into account communal or
regional factors. As a consequence, recovery process would be focused on
replicating and simulating national PIs rather than representing local needs and
wishes.
Notwithstanding the criticism, the CPA provides an overall score for each
LA in England which assesses performance from various perspectives and provides
a more complete picture and a better understanding of activities. The CPA distils a
complex set of judgments into easy, understandable, and transparent terms (Audit
Commission, 2005). It should be borne in mind that this performance measurement
60
supplies tools to ensure an equal level of services for population nationwide, since
LAs are evaluated according to common national PIs. Complete independence of
LAs when establishing aims and providing services, in addition to their self-
inspection, might lead to gaps between the levels of services provided to citizens in
different LAs. Second, since LAs are publicly funded, public transparent inspection
of their expenditures is necessary. The CPA's measurement supplies such
transparent inspection which cannot be executed by single citizens. Finally, CPA
does not totally ignore localism. For example, CPA measures include the level of
accordance between aims, use of resources, and local needs. In addition, according
to Stoker (2003), although there are strong elements of classic oversight, checking,
inspection, and sanctions, equally there are elements of control through group
processes and mutuality using share learning peer review. On the other hand, the
CPA system raises tensions between the set PIs along with inspection processes and
NPM themes of accountability, which emphasise more responsibility of managers.
The Audit Commission?s methodology, as described by Andrews, Boyne,
and Walker (2006) (see Appendix 3), scores (from poor to excellent) the resources
management in addition to all the main areas of LA activities (education, social
care, planning, waste management, housing, benefits, library, and leisure). These
scores derive from a mixture of existing measurement systems (i.e., benefits,
education, and social services), self-assessments, inspection judgments, and
evidence from performance indicators. Whiteman and Turner (2005) mentioned
that within the existing measurement systems we could find other regulators such as
The Office of Standards in Education (OFSTED), which inspects education
authorities as well as schools and the CSCI, which examines both council
departments and private providers. Overall, the performance indicators covered key
dimensions of performance (Boyne, 2002):
? Quantity of outputs (e.g., number of exclusions from primary school, and
number of home helps for the elderly)
? Quality of outputs (e.g., number of cyclists killed, and serious injuries on
highways)
? Formal effectiveness (e.g., average school passes at 16, and percentage of rent
collected from council housing tenants)
61
? Efficiency (e.g., cost per benefit claimed)
? Consumer satisfaction (e.g., satisfaction with waste collection, and users
satisfaction with theatres and concert halls)
Due to differences between LAs and in order to make the rating comparable, the
scores were adjusted according to services and organisational characteristics. For
instance, there are adjusted scores for counties, metropolitan boroughs, unitary
authorities, and London boroughs, which reflect the different responsibilities of
each organisational type.
Since 2002, English LAs are assessed according to the measurements
described above. This process results in a Comprehensive Performance Assessment
(CPA). The CPA framework, which reflects the above-mentioned methodology, is
described in Figure 1. The results of the CPA test are published as a league table
overseen by the office of the Deputy Prime Minister.
In 2002, the first CPA report was published, and it identified 13 failing LAs
(9% of 150 inspected) and 21 weak LAs (14% of 150 inspected) (see Table 1). The
CPA rated all English LAs as poor, weak, fair, good, or excellent performers (or
alternatively, from 0 to 4 stars when 4 reflects the excellent performer) according to
ideal standards, to their past performance, and to other LAs.
Figure 1: The Comprehensive Performance Assessment (CPA)
Framework
(Source: The Audit Commission, 2005)
62
Table 1: Local Authorities’ Comprehensive Performance Assessment
Over 2002 and 2005- N (%)
2002 2005
Poor Weak Fair Good Excellent
Poor 13 (9%) 1 4 6 2 0
Weak 21 (14%) 0 3 9 9 0
Fair 40 (27%) 0 1 18 17 2
Good 54 (36%) 0 1 0 29 24
Excellent 22 (14%) 0 0 0 8 13
Source: Audit Commission (2002-5)
Given this methodology, some LAs had to be rated as failing, at least at the first
measurement. Although the Audit Commission?s inspection, supervision, auditing,
and measurement are part of the NPM reform, or, in other words, are part of
continuous efforts to improve performance of LAs in England since the early
1980?s, these 34 LAs (23% of 150 inspected) provide quite strong evidence that,
despite the efforts, some LAs were still failing in 2005.
However, one should note that the Audit Commission activities,
measurement, and methodology are not free from criticism. Extensive written
criticism concerning methodology and measurements could be found in the
literature (e.g., Bache, 2003; Cornforth and Paton, 2004; Jones, 2004; McLean,
Haubrich, and Gutiérrez-Romero, 2007; Stewart, 2003; Wilson et al., 2006). Jones
(2004) claimed that performance measurability is limited and some of the outcomes
of public services cannot be precisely measured. The difficulty arises when some
services provided by LAs are not reducible to inputs and outputs (Brooks, 2000).
Stewart (2003) and Cornforth and Paton (2004) criticised performance
measurement since it focuses the attention of management on a limited number of
standards, scales, and figures, which are measurable, but not necessarily the most
important. As a result, managers may invest efforts in adapting strategies designed
to improve their ranking rather than improve performance. Moreover, McLean,
63
Haubrich, and Gutiérrez-Romero (2007) showed that the CPA is vulnerable to
categorisation errors since decisions that lead to rating categories might be
arbitrary. In addition, it is vulnerable to gaming in the sense of hitting the target
(i.e., improved rating) but missing the point (i.e. improved performance); it is not
always consistent with other government policies; and, it is partly influenced by
factors that LAs cannot control (e.g., mortality rates, ethnic mix). According to
Bache (2003):
"The approach to identifying failing organizations in England is based more
on judgment than formulae. Organizational performance in functions such
as education and social services is evaluated by national inspectorates who
visit local agencies. Although these inspectorates take results on
performance indicators into account, they have substantial discretion in
arriving at a final judgment."
Moreover, according to Wilson (2006), judgments of the inspection teams are
subjective. They are crammed with sweeping observations, personal impressions,
and biased conclusions. In some cases, elected members are disengaged from the
Best Value exercise and preparation of performance plans. These plans may be
prepared by officials for the benefit of external authorities rather than the product of
political debate about values, priorities, and resource allocation.
In spite of the criticism, according to Wilson (2006) there is no perfect
measurement tool, scale or indicators, which are free from bias. Any measurement
is based on compromises, every scale has its limitations, and there are no unbiased
scales. Moreover, the Audit Commission is well aware of such limitations, and thus
encourages scale re-evaluation. The CPA's methodology is re-evaluated annually
while taking into account public debate, in which local leaders have the opportunity
to express their views and influence the scale, creating in this way a dynamic
measurement tool. Hence, for the purpose of this study, the Audit Commission
methodology and measurement tool will be perceived as reliable, though not as
perfect.
As in this study, criticism has not prevented English governments from
using Best Value products. Furthermore, the collection of CPA scores was the
beginning of a process not the end (Stoker, 2003). English efforts to improve LAs'
performance and the English case as a whole provide an example of massive
government intervention. This intervention reflects the aspiration to follow values
64
and standards that symbolise the pure model and spirit of NPM. As far as we know,
the Audit Commission is the most comprehensive governmental attempt to measure
performance that includes inputs, outputs, and outcomes. The performance
measurement was used, inter alia, to map the quality of performance of all LAs,
and it revealed that about one quarter of LAs are failing.
While the Audit Commission intervention was aimed at dealing with the
general improvement of all LAs, this study is focused only on the recovery
processes of failing LAs. Although in the extensive audit made by the Audit
Commission it was shown that 34 LAs were officially recognised and labelled as
failing, it is still unclear what is the nature and what are the characteristics of a
failing public organisation and failing LAs. Additionally, although after three years
some of these 34 LAs were ranked as fair/good performers, organisational cycles of
failure and recovery have not yet been clarified. Thus, the next section further
narrows down the scope of the research and discusses these areas. First, it discusses
the nature of organisational failure, in particular public organisational failure and
failing LAs. Second, it reviews a stage model of organisational cycles of failure and
recovery.
2.3. Organisational Cycles of Failure and Recovery in Local Authorities
2.3.1. Failure in Local Authorities
2.3.1.1. Definitions and Perceptions of Failure
While the discussion above deals with the general efforts made by the
English government to improve the performance of all LAs, the core of this study is
concerned with a narrower scope. As previously mentioned, this study is concerned
with failing LAs within public organisations. Chapter 2.4. seeks to discover the
nature and characteristics of organisational failure in general, and failure within
LAs in particular. Yet, organisational failure is only one phase in a wider view of
the organisation?s life cycle. To understand the broad picture, the second part of
this section follows and assesses a model of organisational failure and recovery.
Identifying at this stage the nature of failing LAs is crucial since it will be
the basis for exploring the strategies designed to bring about a recovery in those
65
organisations. The literature discussing organisational failure is rich (Paton, 1996;
Paton and Cornforth, 1991) and not necessarily dedicated to one of the sectors.
Hence, although there are some unique characteristics of public organisations, it
would be wise to use this source as a starting point for discovering the nature of
failing LAs. As noted earlier, adoption of a strategy should be made while carefully
adapting and adjusting ideas, concepts, and tools.
As a rule, when exploring organisational failure we should assume that each
failure has causes and symptoms that preceded the crisis and could be recognised
by at least some stakeholders. However, for several reasons, analysing
organisational failure is a complex task. First, it is difficult to spot the existence of a
failure, or in other words, when it started and when it ended. Schendel, Patton, and
Riggs (1976) claimed that there is a problem in separating a natural, but temporary
decline, which is common in any organisation, from one more permanent and
demanding in its impact. In the latter case, the period of decline should be long
enough to demonstrate that there is indeed some basic problem and not a simple
minor mistake with short-run impact. Hence, failure lasts for long periods and can
be seen as gradual declines in performance (Hofer, 1980; Hofer and Schendel,
1978; Schendel and Patton, 1976; Schendel, Patton, and Riggs, 1976). The authors
found an average length of decline in private businesses of five years, with a range
of minimum four years, up to ten years. Yet, spotting the exact point at which a
public organisation begins failing is rare due to performance measurement
problems.
Second, there are difficulties in recognising the causes of a failure. Scholars
agree that organisational failure is a consequence of multiple and interrelated
factors (Balgobin and Pandit, 2001; Schendel, Patton, and Riggs, 1976). Therefore,
pointing out a single cause would not be a reliable reflection of the reality. Third,
various ways of describing the relationships between income and outcome create
difficulties in spotting the factors that assist an organisation to stop failing. Thus,
ambiguity exists regarding the evaluation of a failure, its severity, and its
consequences, especially when asking more than one stakeholder. This ambiguity
often leads to conflicts around the recognition of problems, agreement about their
seriousness, declaration of their existence, and the need to tackle them (Mordaunt
and Cornforth, 2004).
66
These difficulties may be especially severe in the public context. A large
public organisation may deteriorate gradually over several years as the consequence
of combined causes. Since performance measurement is complex, it may be
difficult to point out the specific timing, reasons, and outcomes of failure.
Numerous stakeholders, who may not share the same interests, may probably
disagree on the ideal solutions for recovery. Additionally, according to Walshe et
al. (2004) due to the stakeholders? subjectivity, public organisations failure may be
a political act as much as a managerial one. Put things differently, the perception of
public organisational failure may be different and may be influenced by political
philosophies (e.g., Liberalism versus Socialism), political values (e.g.,
Individualism versus Communitarism), and political practices (e.g., CCT versus
Best Value). Hence, some norms of management and performance may be
acceptable for one political party and unacceptable for another. The same activities
will be evaluated differently by individuals holding different political view. While
the socialist view would prefer a more interventionist policy, neoliberals would
favour a more constrained one. This different view may influence the way success
and failure are perceived. For example, failure of LAs for CCT supporters would be
the inability to efficiently provide services either within the national established
budget or by private providers. However, failure for New Labour supporters would
be the inability to provide efficient services without wide participation of citizens.
As we can see, the decision to label an organisation as failing and to
enforce specific solutions may be driven by non-objective considerations. From a
purely managerial point of view, the above requires a rational analysis of the
organisation?s performance, needs, and keys for recovery.
Due to these difficulties, there is neither a single accepted term nor a
definition for organisational failure. Different terms for organisational failure such
as crisis, decline, fiasco, mortality, or death are used. According to Hofer (1980),
organisational failure is a major decline in performance or organisational
profitability. Pandit (2000) has defined organisational failure as ‘an existence
threatening decline in performance’. Witteloostuijn (1998) defined organisational
decline as ‘the process of decreasing performance over a prolonged period and
performance is measured in terms of profitability’. Meyer and Zucker (1990)
argued that a condition characterised by sustained low performance could be called
67
failure. Finally, Sloma (1985) defined organisational crisis as ‘a business firm that
faces financial disaster’. Despite the differences between the definitions, scholars
agree that failure involves deterioration of performance. However, since these
definitions originated in the business world, deterioration of performance is
reflected mainly in loss of profitability that eventually threatens the survival of the
organisation. While public organisations might be threatened by the reduction of
authorities and powers, failure is usually not considered as a survival threat since
they are not under a threat of closure (Meier and Bohte, 2003). Additionally, a
significant portion of LA senior management is generally not under threat of
dismissal since their nomination involves democratic procedures and their
legitimate power comes directly from the citizens. Likewise, although in public
organisations various financial aspects such as balanced annual budgets are at the
core of their daily activity, profit making is not an aim. Profitability, as measured
according to simple financial ratios (see for example, Furman and McGahan, 2002)
like return on investments, could not be applied as a satisfactory standard for the
failure of public agencies. A single financial criterion assumes there is a universal
and objective criteria of organisational performance. Yet, definitions of decline and
improvement, whether in the public or the private sector, should mirror the
interpretation of external stakeholders (Arogyaswamy, Barker, and Yasai-Ardekani,
1995). Thus, measuring the quality of performance is more appropriate, yet,
difficult (McKiernan, 2003). Given this, deterioration of performance might be the
least bad indicator for failure in the public sector. In these cases, it would reflect
other additional factors besides profitability, such as decreased productivity or
dissatisfaction of consumers. However, since failure is a much more complex
situation deterioration of performance alone does not reflect its entire concept.
Thus, a further adaptation of the definition is required.
According to Mordaunt and Cornforth (2004) ‘failure [is] defined and
arising when at least some of the stakeholders in the organisation believe that the
problems or crises it faces seriously threaten its legitimacy, resource base or even
its survival.’ McKiernan (2003) defined corporate decline as ‘an unintentional
contraction of the strategic discretion of the firm’s executive.’ Pearson and Clair
(1998) defined organisational crisis as ‘a low-probability, high-impact situation
that is perceived by critical stakeholders to threaten the viability of the
68
organisation.’ From this definition, it can be learned that organisational failure does
not only involve performance deterioration but also resources deterioration. These
include, inter alia, lack of personnel enthusiasm and skills, lower value of assets,
smaller management size, or decreased revenues. Furthermore, according to these
definitions, loss of profitability is not the only indicator of failure, and stakeholders?
views are also taken into account. Considering stakeholders? views is more
appropriate for complex and diverse public and political environments. This is
especially important since public organisation stakeholders are not always allied in
their interest; what seems to one group as reasonable performance might seems to
other group as a complete breakdown.
To sum up, despite the lack of a sole precise definition of failure, it can be
concluded that failing organisations generally suffer from performance
deterioration, resources deterioration, or both. These characteristics can coexist.
They may result from similar or different causes and may lead to similar or
different symptoms. In contrast to private organisations, failure in public
organisation does not necessarily involve financial deterioration, though financial
problems are often part of it. In these cases, deterioration in services delivery would
be one of the main characteristics of organisational failure.
2.3.1.2. Causes of Failure in Local Authorities
Not every type of deterioration should be regarded as organisational failure.
According to the pioneering work done by Schendel, Patton, and Riggs, (1976),
Schendel and Patton (1976), Hofer and Schendel (1978), and Hofer (1980) one of
the main characteristics of failure is that it last for long periods and can be seen as
gradual declines in performance. According to the authors, there are two core
causes for a declining process. These causes could be either operational (not
efficient or not effective) or strategic (weak strategic position relative to
competitors). While inefficiency and ineffectiveness in execution of policy may
perhaps be a cause for failure in public organisations, strategic position is less
relevant. Since public organisations are often the only players in the field,
competition is usually not a threat. Moreover, public organisation may suffer from
the opposite problem when, as single providers, the increasing demands for public
69
goods make them fail in satisfying consumer needs (Krause and Douglas, 2006).
Later works that further explain the causes for organisational failure were written
by various scholars (e.g., Gopal, 1991; Thain and Goldthorpe, 1989; Grinyer,
Mayers, and McKieran, 1990; Shamsud, 2002; Slatter, 1984). These works
distinguish between two theoretical perspectives that explain the causes of
organisational failure, though there is no clear-cut distinction between them:
? Out-source extinction- emphasises external factors, frequently involves
financial aspects, and particularly resource dependence, e.g., changes in
customers' expectations, increased demand of consumers, high cost of goods,
decline in resources, unexpected events or catastrophes in the organisational
environment.
? In-source extinction- emphasises internal factors and reduction of resources
within the organisation e.g., poor leadership, deficient organisational learning
process, poor decision-making, mismanagement, dismissal of an expert, lack of
leadership, and internal conflicts, all of which might lead to an organisational
crisis. Additionally, financial aspects, which are in the hands of the
management, could be perceived as internal causes as well. For instance,
declining performance might be caused by inadequate financial control or
financial policy, for example, overlaid conservative financial policy (Grinyer,
Mayers, and McKieran, 1988; Slatter, 1984).
Failure in public organisations follows a similar distinction and has external and
internal reasons for decline. However, external causes are likely to be as much
political as economic (e.g., changes of ideologies, goals, priorities, or policies,
which the organisation was slow to respond to). Internal causes may tend to be
bureaucratic (Boyne, 2006) (e.g., red tape, and unskilled decision makers).
In a recent study Mellahi and Wilkinson (2004) comprehensively
summarised theories concerning the causes of organisational failure. The authors
reviewed the business literature and found two major schools of thoughts: first, the
classical industrial organisation and organisation ecology school and second, the
organisational studies and organisational psychology school.
The classical industrial organisation and organisation ecology school
70
assumes a deterministic role of the environment, which has a greater influence and
more explanatory power than organisational level factors such as managers.
Accordingly, it argues that managers are limited by exogenous environmental
constraints leaving them with little real strategic choice. Since failure is caused by
external factors over which management has little or no control, the role of
managers could be ignored. Over the last 20 years, the expectations from local
leaders have been increased and widened. Yet, leaders in LAs face a limited set of
choices. No leader, even an elected mayor operating in favourable circumstances,
can hope to transform an ongoing council agenda at a stroke. The capability lies in
the political and organisational culture where the leadership priorities can be
introduced without persistent resistance. Some would say it is the capability of
identifying the art of the possible (Leach, 2006).
Although public managers are indeed constrained by governmental and
other external stakeholders, the main weakness of industrial organisation and
organisation ecology theory is that, by putting all the emphasis on external factors,
they underestimate the influence of management on organisational performance.
Too little attention is being paid to the question as to why similar organisations
facing the same constraints fail while others succeed (Mellahi and Wilkinson,
2004). In this context, it can be argued that managers do enjoy, at least to some
extent, a degree of strategic choice and control over their organisation. Thus,
management functioning during a crisis does influence the chances of an
organisation to overcome it.
According to the classical industrial organisation and organisation ecology
school, organisational failure is associated with four inter-correlated middle range
theories concerning the Organisational Population (i.e., a group of organisations
sharing a common form or strategy like LAs). This school of thought argues that
failure could be caused by either of the following environmental causes (Mellahi
and Wilkinson, 2004).
? Waves of external pressures and constraints that affect the entire Organisational
Population (Hannan and Freeman, 1977).
? A natural and objective organisational life cycle inherent within the efficient
operation of the entire population (Meyer and Zucker, 1990).
71
? Increased competition among dense population (Dobrev, Kim, and Hannan,
2001).
? Being a newer (Carroll, 1983) and smaller (Freeman, Carroll, and Hannan,
1983) organisation in comparison to its population, decreases the chances of
failure.
While some of these causes may enlighten public organisational failure,
others may be found to be inappropriate to public sector characteristics. The first
two possible explanations: "life cycle inherent in a population?s efficiency" and
"waves of pressures activated within the entire sector" may supply a possible
explanation for failure in LAs. The NPM reforms, which led to massive cuts in
governmental resources (Martin, 2002) and affected all LAs, might be seen as
exogenous environmental constraints that could have resulted in LAs failure.
Moreover, according to Christensen and Laegreid (1999), NPM is a reflection of
international economic crises in the public sector. Thus, it could be perceived as a
reflection of objective decline in the life cycle of the population. In addition, the
extensive, pervasive, and deep crisis suffered by the entire public sector (Corrigan
and Joyce, 1997) could be seen as a possible reaction to the waves of pressures and
inconsistent demands activated as part of NPM agenda (Skelcher, 1992). However,
these causes may make clearer the performance tendency of an entire population
(e.g., LAs), but not a single organisational failure within this group.
Regarding the third explanation, competition within a dense population,
although it exists in the public sector, it finds a different expression than that found
in the private sector. The activities of a public organisation are usually funded by
limited budgets, therefore, since resources are limited, whenever it comes to
budgeting, public areas compete with each other for funding. Yet, this competition
is indirect and it would be unlikely that competition between two LAs caused the
failure of one of them. The last suggested explanation for organisational failure,
being an older and larger organisation, seems to be irrelevant since most LAs are
large organisations that were established around the same period, back in the 1850s.
Since these characteristics do no not differentiate LAs from each other, they cannot
explain organisational failure in a single agency.
In contrast to these explanations, the second major school of thought, that of
72
organisational studies and psychology, takes a more voluntaristic perspective and
argues that managers are the principal decision makers in the organisation.
Consequently, their actions and perceptions are the fundamental cause of
organisational failure (Mellahi and Wilkinson, 2004). According to this view, the
individual making a decision is more relevant than the external context in which the
decision is made. According to this perspective, even though management actions
are influenced by the environment and their perceptions about the environment
have a strong effect on the way they manage or mismanage the organisation, it
rejects the assumption that managers are powerless. Moreover, managers even have
the ability to influence and shape the environment. Thus, the characteristics shared
by managers of failing organisation are personally-based characteristics (e.g.,
exaggerated pride, over self-confidence, arrogance, narcissism) and misperceptions
of managers (e.g., taking impulsive decisions, interpretation of criticisms as threat,
not responding to change, poorly informed routine, taking unnecessary risks). In
other words, internal inadequacies in dealing with external difficulties lead to
organisational failure (Mellahi and Wilkinson, 2004).
Therefore, most scholars agree that the major causes for continuous decline
in performance that usually lead to organisational crisis are poor management and
poor leadership (Gopal, 1991; Grinyer, Mayers, and McKieran, 1990; Schendel,
Patton, and Riggs, 1976; Slatter, 1984). In these circumstances, management often
does not take the right actions or alternatively, even in situations when appropriate
actions are taken, lack of leadership boycotts their implementation. Since it is the
responsibility of management to remain aware of the possibility of decline
(Balgobin and Pandit, 2001), the initial crisis actually exposes weaknesses in
internal governance and management systems (Mordaunt and Cornforth, 2004).
According to Maguire and Redman (2007), failure is often associated with lack of
attention to "softer" management practices such as culture change and organisation
development. Given that organisational decline or failure can be attributed to
malfunctions of management (Schendel, Patton, and Riggs, 1976), the probabilities
for recovery might not be very high. In other words, if failure is caused by poor
management, when management is called upon to restore the efficiency of the
organisation (i.e., to spot external changes, formulate a recovery plan, and execute
it effectively), it might not be able to do so effectively.
73
In LAs, since some members of the management are elected democratically
and directly, it is particularly accountable for committing errors that put at risk the
organisational effectiveness (e.g., approving unbalanced annual budget) and errors
of omission that prevent recovery. However, although management plays a key role
in organisational failure, one should be careful not to overestimate their role as an
elected leadership tempered by collective responsibility and political party. Though
recent changes pay more attention to strong individual leaders, such as elected
mayor and cabinets, local leadership in this context is influenced by a mixture of
traits of individual leaders and group relationship. Political parties still play a key
role in the local process, though less dominant than they did during the 1960s and
1970s (Leach, 2006). Thus, failure is probably a mixture of individuals and parities
responsibility. Moreover, since public agencies are large and complex, and
management in them may be constrained by national policies and regulations
(Skelcher, 1992) and thus be less autonomous (Rainey, Backoff, and Levine, 1976),
their potential to be regarded as a single cause of organisational failure is limited.
According to the organisational studies and psychology school of thought,
organisational failure is associated with five inter-correlated middle range theories
(Mellahi and Wilkinson, 2004).
? The Groupthink theory (Janis, 1972) maintains that within a team, group
mentality and pressures for unanimity lead to sub-optimal decisions based on
collective rationalisation, illusion of invulnerability, poor search for alternatives,
ignorance of information, and overestimation of the group's chances of success.
This state of mind might end up in organisational failure.
? The Upper Echelon theory (Hambrick and Mason, 1984) argues that
homogenous and long-tenured management is less effective, especially in
uncertain and confusing situations like failure.
? The Threat Rigidity Effect Theory (Staw, Sandelands, and Dutton, 1981) argues
that individuals, groups, and organisations tend to behave rigidly in threatening
situations and seek to maintain the existing status quo. Paradoxically, this
rigidity distracts managers' attention from solving the crisis.
? Psychological factors (Brown and Starkey, 2000) often exist beneath the level
74
of conscious awareness. Organisational failure may hide recognitions,
motivations, feelings and dynamics. These can find expression in ego defences
and regressive defensive avoidance strategies such as denial, rationalisation,
idealisation, fantasy, and symbolism.
? The Curse of Success theory (Starbuck, Greve, and Hedberg, 1978) claims that
most successful organisations in the past becomes the one most vulnerable to
failure in the future due to the assumption that success raises over confidence,
arrogance, and preservation of traditions, which retains the „how and why? of
doing things.
A further complexity related to the reasons of failure is the fact that not
every causes of failure can be classifies into the internal-external dichotomy.
Failure in LAs could probably be inherent in both internal and external reasons.
Since English local government acts in centralised system LAs do not act as
autonomous units. According to this view, failure of LAs is an outcome of both
local and central factors and actions. For instance, according to Henney (1984) the
reasons for bad performance of LAs in the case of housing under the Thatcher
regime are rooted externally in the lack of consumer influence and preference, and
internally in the lack of professionalism and weak management.
Similarly, another typical example for internal and external mixed causes of
failure is related to local government workers unions and their changing power. As
part of social and economical shifts over the years, the power of the unions
increased and was transformed from conservative into aggressive and political.
During the second half of the 20
th
century, these unions were involved more than
ever in strikes and influenced councillors (Henney, 1984).
The combination of several inter-correlated theories significantly
contributes to the understanding of public organisational failure. The Groupthink
theory and the Upper Echelon theory might explain some political aspects, which
are relevant to public organisation leadership. In LAs for instance, a situation in
which political leadership involves a one party coalition of long-tenured senior
councillors sharing similar values and agenda may create old-fashioned and
homogenous leadership. This over-similarity may restrict the ability of management
to be innovative in dealing with a crisis. Political agendas may also cause restricted
75
and rigid leadership since it may tie LAs management to unsuitable policies, tools
and perceptions. In addition, political coalitions may force LAs to maintain the
existing status quo barring the possibility of radical changes. Similarly, since an
essential part of LA management is democratically elected and cannot be
dismissed, organisational failure has to be solved by a management that acts in a
defensive way or under denial. This situation involves further difficulties in
recognising the symptoms of failure, ceasing to deny it, and dealing with it
effectively.
The above difficulties lead public organisations, in some cases, to
permanent failure. Meyer and Zucker (1990) explain permanent organisational
failure in public organisations. The theory describes why, although public sector
performance declines over the years, the organisations still survive (Brown, 2001).
According to Meyer and Zucker (1990), this characteristic is the core of permanent
failure, which is described as a combination of low performance and high
persistence. In these cases, rational stakeholders who are dependent on an
organisation, but are not its direct owners (e.g., consumers, employees or
management), will lobby vigorously for its persistence even if it is inefficient.
While tendencies to maintain low performance organisations may exist in all
sectors, these tendencies increase when dependent actors and non-direct owners
have more influence over the organisation, when organisations cannot be
liquidated, and when politics takes over economics. To put it in a different way,
where performance and persistence are decoupled, a group of dependent actors who
derive benefit from the continued persistence of the organisation must exist.
This theory reveals a point worthy of attention. Interestingly, in contrast to
theories presented previously, this theory does not provide an explanation for why a
public organisation fails in the first place. Alternatively, it explains why public
failures turnout to be permanent failures. According to the theory, in the public
field, interest groups prefer and encourage organisations to keep performing even
though they are failing. Therefore, failing public organisations are less promptly
pushed either towards recovery or be closed down than are private failing
organisations. This tendency raises the question whether public failures are more
common and frequent. Evidences from the literature provide mixed results about
private failure rates. Weil (2007) found 90% failure, Kortge and Okonkwo (1989)
76
found 20%-35%, 24%-98% was found by Crawford (1987), 1%-67% by Dickinson
(1981), and 35%-95% by Crawford in 1979. Since parallel evidence in the public
sector is missing, this question remains unsolved.
In sum, the implications of the above discussion on failure in LAs engage
several aspects. Failure of a LA is an unwanted situation in which negative
consequences extremely affect public welfare in general and in particular the
citizens in its geographical area. Though these implications may have a wide range
of effects on the everyday life of citizens, the most recognisable and direct impact
is deterioration in the quality of services. Consistent with the lesson drawn from the
private sector, the causes for LA failure are most likely to be multiple, inter-
correlated, and rooted in both external and internal factors. Externally, as part of
NPM environment, stakeholders pressure LAs to improve their level of
performance and supply better services, while their budget is continuously
retrenched. Internally, poor and politically constrained leadership, together with
outdated, rigid, and often long-tenured and homogenous management fail to spot
the failure and deal with it. However, in contrast to the private sector, public
organisations are generally not under threat of survival, and thus may permanently
fail without being liquidated. This characteristic enhances the importance of a
successful recovery process. In other words, since LAs cannot be totally abolished,
their recovery is essential.
Public organisational failure is a key issue in this study and several themes
lead and shape its perception. The discussion dedicated to central-local relations in
England (see Chapters 2.1 and 2.2.) emphasised that these relations not only
influence the self perception, role definition, and activities of LAs but also they
dictate what would be regarded as success by the central government and what the
central government believes should be the self perception, role, and activities of
LAs. As a consequence, central-local relations lead the conceptualisation of what
will be regarded as LAs' failure. Local failure is often regarded as non-carrying out
the local missions desired by central government, according to its ideological and
political view. However, the central government it is not the sole stakeholder
involved in shaping this concept. There might be a competition between different
perception of LAs' failure (Beeri, 2009b; Ben-Elia, 2006). Within the competing
perceptions, the government's perceptions would probably be the leading one, since
77
central government is the most influential key stakeholder in LAs environment,
compared to private agencies, third sector agencies, citizens, and local media.
Since there are competitive concepts for public organisational failure,
failure is neither uni-dimensional nor once occurrence but has multiple potential
contributing factors interacting in unique ways in a given case. Accepting this
assumption positions turnaround as a process not an event and sets up the argument
for failure and recovery cycle as a stage approach presented in the following section
(additionally, given the complexity of failure, it also sets up the case study
qualitative exploratory approach presented in Chapter 4).
2.3.2. A Six Stage Theory for Cycles of Failure and Recovery
While the previous discussion paid attention to organisational failure, this
chapter will describe the organisational cycle which is expected to culminate in the
recovery and renewal of a failing organisation. Since this study is concerned with
both failure and recovery in LAs, it is essential to draw a theoretical framework for
these phases. In a broad sense, organisational turnaround expresses the path that
failing organisations follow up to the point they recover. Hence, turnaround is
neither a single event nor a direct and quick transition from failure to the recovery.
It is a dynamic process composed of a sequence of actions and occurrences over a
particular period. Accordingly, Shamsud (2002) argues that a study that deals with
a recovery process should be based on a stage theory perspective because such an
approach could explain how and why repeated occurrences play out in stages and
eventually lead to an organisation's survival or failure. In accordance with this
view, this thesis will be based on a stage theory, which could explain the
performance ranking published by the Audit Commission over three years from
2002 to 2005 (see Table 1).
By definition, a stage theory explains the series of events that lead to an
outcome, the narration of a story about how a sequence of incidents unfolds to
cause a dependent variable to respond to independent variables. A stage theory
contains hierarchical critical structures such as incidents, events, and core concepts.
At each stage, numerous incidents are packed together into theoretically meaningful
78
events, which, in turn, are packed into core concepts whose sequential linkage
facilitates the explanation of an outcome (Van de Ven and Poole, 1995). In this
theoretical context, a stage theory simply explains the phases a LA experiences
from failure to recovery.
The literature suggests various models for cycles of decline and recovery.
Most of these models derive from the business area and are suitable for
corporations (e.g., Arogyaswamy, Barker, and Yasai-Ardekani, 1995; Balgobin and
Pandit, 2001; Chowdhurry, 2002; Grinyer, Mayers, and McKieran, 1990; Harker
and Sharma, 2000; Krueger and Willard, 1991; Pearce, and Robbins, 1993;
Richardson, Nwankwo, and Richardson, 1994; Shamsud, 2002; Smith and Graves,
2005; and Tvorik; Boissoneau and Pearson, 1998). For instance, these models make
use of professional terms like bankruptcy, merger & acquisition (M&A), financial
ratios (e.g., employees/sales, cost/sale, inventory/sales ratio), and levels of
profitability. These terms are strongly related to the private business context and
have no parallel meaning in the public context.
Whereas most of the literature on turnaround concerns the economic
recovery of private corporations after financial losses or bankruptcy (Meier and
Bohte, 2003; Paton, 1996; Paton and Cornforth, 1991), McKiernan's model
illustrates a principal frame for failure and recovery stages of an organisational unit
focusing on behavioural aspects and patterns (see Figure 2). Explicitly, McKiernan
(2003) suggests a model based on a stage theory of turnaround that is appropriate
for public organisations. As the author claims (p. 267): "...many of the more generic
issues [of this model] can be applied to public sector organisational woes". Thus,
extensive adaptation is not required. In addition, McKiernan's model is useful for
this study context as it suggests a stage based model that allows us to study the
dynamics of recovery processes over time, which usually lasts for several years
(Boyne, 2004; Hofer, 1980; Hofer and Schendel, 1978; Schendel and Patton, 1976;
Schendel, Patton, and Riggs, 1976). As outlined in this thesis, public organizational
failure is a complex and multifaceted process. Unlike other models mentioned
earlier, this model addresses and distils causes, symptoms, triggers, and diagnosis
of failure. Thus, it has some potential as a tool to understand and represent failure
in a public sector context.
79
Additionally, since McKiernan's model is focused on managerial
behavioural aspects leading to organisational patterns it has a potential of capturing
elected members and officials' activities and decisions that are important to our
context, and not only macro level information (e.g., balanced budget,
investments/assets ratio). Lastly, the McKiernan's concepts, as illustrated in figure
2, are generic rather than specific to private sector. Nonetheless, alongside these
advantages, the model is isolated from the particular political environment of
English LA in the 21
st
century.
Thus, in order to base this study on McKiernan's model and better reflect
LAs turnaround, some additions, adjustments, and adaptations were applied where
appropriate. The model was adapted and related to the political climate, meaning,
ideologies, political movements, managerial reforms, and political values based on
the literature review and the examination of two experienced researchers from the
public sector.
Figure 2: Stages of Organisational Turnaround – Organisational Perspective
Source: McKiernan, 2003
Failure
Causes of Failure (+ Symptoms)
Triggers for Change
Diagnosis & Recovery Strategy Formulation
Retrenchment & Stabilisation
Recovery
Renewal
80
The framework for the model McKiernan suggested includes six stages that
represent the process:
1. Causes and symptoms
2. Triggers for change
3. Diagnosis and recovery strategy plan formulation
4. Retrenchment and stabilisation
5. Recovery
6. Renewal
As Figure 2 portrays, progression along a linear path implies that one stage leads to
another. Yet, only stage 1 is guaranteed. While the bold arrows illustrate an ideal
throughway, the striped arrows reflect the ongoing threat since each one of the
stages could go wrong and lead to an even deeper failure (Jas and Skelcher, 2005).
Stages 1 and 2 include the causes and symptoms of the failure, and the
triggers for change. The distinction between the three terms is vague, given that the
same phenomenon could be classified as each one of them, depending on the
context. For instance, a dramatic bad decision like discontinuing cooperation with
local neighbourhood representatives might lead to failure, but could be considered
as a symptom of a lack of leadership, or be the trigger for organisational change.
Stage 3 reflects organisational preparation toward the main recovery process.
Stages 4 and 5 then reflect the core turnaround process, which could bring the
organisation back to the position prior to the failure. Stage 6 reflects continuous
efforts including organisational learning that drive the organisation to an even
better position than before the failure. The model suggests a linear process, though
in practice, drama, emotions, difficulties, and simultaneous activities will be present
(McKiernan, 2003). For instance, actions directed to stabilise the LA may take
place before diagnosis was completed. The following discussion details and deals
with each one of the stages and their implication for LAs.
The first stage, causes of organisational failure, was discussed in detail in
the previous chapter. This chapter illustrated both wide theoretical explanations of
causes of failure and specific causes related to LAs and LAs in the English context.
81
In a nutshell, failure of a LA is an unwanted situation in which negative
consequences extremely affect public welfare.
The implications on the everyday life of citizens mostly include
deterioration in the quality of services. The multiple, inter-correlated causes for LA
failure are rooted in external factors like continuously retrenched resources,
changed perception of failure of governmental agencies, and internal factors like
poor leadership, conflicted ideologies, and absence of local participation. Within
the English case, the recent reforms under the Best Value regime have widely
shaped the expectations and thus, the definition and perceptions of failure. The
national PIs and their measurement have precisely pointed, named, and shamed
LAs that have failed to present minimum standards of performance. Yet, scholars
have raised question regarding the suitability of these measures to accurately point
out failing LAs.
Since this model distinguishes between the causes and their symptoms, a
few comments will be added. Generally, the symptoms of a failure are different
from the causes that led to it; because they appear later on, they reflect the outcome
of the problems but not the problems themselves; nor do they directly point out the
necessary reactions (Slatter, 1984). The key factor in the analysis of failure
symptoms is recognition, which means the ability of both identifying and admitting
the existence of the failure. Recognising the symptoms is important since
ineffective recovery occurs when managers fail to successfully diagnose the
problem or respond inappropriately to it.
Yet, in reality, it is not simple to immediately recognise the symptoms of
failure, partly because low standards of services become the norm (Meyer and
Zucker, 1989), and partly because the public tends to tolerate failure (Walshe et al.,
2004). According to Schendel and Patton (1976), the symptoms of organisational
failure are the events or circumstances of decline, which are recognised by
stakeholders. This statement raises a couple of questions regarding their suitability
for LAs context. First, which stakeholders are accounted for this mission? This
question is important, since stakeholders are not usually unified in their interests
and priorities.
Therefore, only multiple severe symptoms of deterioration involve wide
82
recognition, which stimulates turnaround (Walshe et al., 2004). Second, should this
recognition be formal? If so, how should the LA measure decline and success? In
other words, complexities in the measurement of performance in the public sector
would probably make it difficult to point out successes and failures, and therefore,
their symptoms. Indeed, LAs are expected to have an internal control system that
enables them to recognise possible failure symptoms (Audit Commission Website)
and guide the management during later phases of the recovery process (Walshe et
al., 2004). Nevertheless, within the English case, the government does not rely only
on an internal control system and imposes a centralised system, which intervenes
and pressures LAs to admit that failure exists. For instance, the Comprehensive
Performance Assessment (CPA) tool introduced by the Audit commission was
aimed at achieving an accurate performance measure. Yet it was criticised by
scholars and public servants due to its inability to supply widely accepted
comparative picture of LA performance and for biasing managers' daily missions
(Bache, 2003; Cornforth and Paton, 2004; Stewart, 2003).
At the second stage of turnaround, the organisation may experience triggers
for change, which were described as stimulating activities necessary for the
implementation of turnaround (McKiernan, 2003). Nevertheless, not all failing
organisations experience such activities. While all failures have causes and
symptoms, triggers for change are events that may not necessarily be recognised as
such or might be ignored. Since this model simplifies the turnaround process into a
linear trend, if one stage does not occur, then the next stages will not take place as
well. If the LA?s political leadership ignores the symptoms of failure and maintains
business as usual, it might not interpret events as triggers for change. In this
situation, recovery would probably not take place, leading the LA to permanent
failure. Therefore, interpreting events as triggers for change is crucial in order to
launch a turnaround process. These triggers should be significant enough to activate
a diagnosis process, to formulate a recovery plan, and to call for action.
Pointing out the time in which triggers are severe enough to lead to change
is difficult. Within LAs, the severity of triggers that are required to initially „shake
up? the organisation?s routine depends on management skills, awareness, and
motivation. Generally, a change will be triggered in two stages. First, a gap
between desired and actual performance grows either because of a fall in
83
performance, a rise in aspiration, or both. This growing gap gradually creates a
climate for change. Second, events that are perceived as triggers for change take
place at the widest gap point between aspirations and actual performance
(McKiernan, 2003). For instance, during a period of budget retrenchment that
requires cooperation and sacrifice from the public, a report that reveals
management corruption is published. This publication, at this specific time, may
trigger stakeholders to demand a radical change. While in this example the trigger
is internal, they can be external as well, e.g., regulations, the launch of a national
plan, or the Audit Commission?s massive intervention that requires specific
changes.
Walshe et al. (2004) distinguish between three main types of triggers: First,
events that appear in a period of neglect and performance decline and cannot be
ignored. This kind of trigger might be very common in an LA environment since
public organisations can survive for a long period even though they continuously
fail. In this case, an external key player such as the media, an interest group, or the
central government might break the routine and alert the management that failure
cannot be tolerated any longer. The second kind of trigger was identified as a sharp
change in the organisation's leadership that leads to formal diagnosis and
declaration. In the LAs context, this does not occur very often yet it is a reasonable
scenario after a local election or personnel turnover. Finally, the last type of trigger
is a single egregious event that points to a significant catastrophe. Such events are
rare as well, although natural disasters, corruption, and scandals do occur. While
such a single event can shake the management and trigger a recovery process, it can
also shock the management, cause paralysis, delay the recovery process, and entail
the occurrence of additional triggers. Obviously, a LA could experience more than
one kind of trigger.
One of the interesting questions about triggers is whether they should arise
from an internal voluntary organisational source or forced external intervention.
The balance between these two attitudes may affect the management status and
motivation to lead the recovery process. In the English case, it seems that the
centralist attitude externally triggers recovery processes and organisational changes
as part of the Best Value regime and CPA. Turner et al. (2004) recommended,
according to ten case studies, that central governments should be engaged in the
84
recovery process without intervention, with minimum interruption, and with no
formal power. That means governmental bodies should work with a council,
motivate, encourage, and support turnaround while leaving one hundred percent of
the responsibility for the recovery process to the local management. The authors
explained that interfering and leaving out self-managed process would prevent
recovery, cause deeper decline in performance, weaken the leadership, and create
lack of motivation. In reality, an organisation may experience a set of triggers
rooted both in internal and external sources; yet, all triggers would lead to the same
outcome, formulation of a recovery plan, which is the third stage of the model.
Diagnosis and recovery strategy plan formulation is the first active stage of
turnaround. This stage requires recognition and reaction. Taking this step
distinguishes between an organisation that denies failure, which is at risk of not
recovering (Lorsch, 1990), and an organisation that handles its failure. As the first
proactive measure taken, this stage involves some dilemmas and key questions that
will affect the recovery process and the LA as a whole. This stage can be regarded
as the first time in which the organisation openly admits and even declares the
existence of a failure. Such a declaration has extensive political, public, and
managerial implications (e.g., risk of stakeholders? call to resign, damage to the
LA's image, and employees' resistances). Thus, although predicting a failure may
be possible, recognising it is commonly delayed, ignored, mitigated, and even
covered up (Walshe et al., 2004). On the other hand, honest recognition could be
perceived as an act of good will that leads to relief and courageous diagnosis. In LA
environment, these could give a second chance to the leadership and the party.
While recognising a failure is a political and declarative act, diagnosing and
formulating a recovery plan requires more analytical tools. According to
McKiernan (2003), diagnosis tracks and expresses the links between symptoms and
causes of failure. The diagnosed problems point up suggested strategies to tackle
failure, which are translated into operative actions and gathered into a coherent
recovery plan. Planning has been found to be essential since there is a significant
positive correlation between planning and performance (Pearce, Robbins, and
Robinson, 1987). However, it is hard to define what a good recovery plan is since it
has to be synchronised with the specific needs of consumers and the circumstances
of failure. Nevertheless, according to Sloma (1985) a good plan, is cohesive,
85
relevant, restorative, understandable, measurable, monitored, communicable,
convincing, communicated, and approved. Quintero (1989) emphasised that
successful recovery requires a detailed plan that reflects the collective judgments
and knowledge of managers and professional advisers regarding optimal strategies
and realistic budgeting (Mayer and Quintero, 1992). Usually, the latter will include
an emphasis on retrenchment until stability is achieved, followed by a shift of
emphasis towards growth (Pandit, 1998). In the case of LAs, where managerial
processes involve democracy, the participation and support of political leaders,
parties (and opposition parties), interest groups, and citizens is crucial for the
formal approval and implementation of a recovery plan. In a practical manner, the
third stage must produce a clear picture of the LA status. It should supply clear
answers to the questions as to why and how the LA has got to this point, where the
LA should be in the future, and how it is going to get there
At the fourth stage, the organisation retrenches its activities in order to
achieve stabilisation, improve efficiency, and ensure future reinvestment in core
missions. From the Best Value perspective, retrenchment is a crucial stage since it
encourages provision of services in the most efficient, effective, and economy way
(Bevir, 2001). From a managerial perspective, stabilisation is vital to ensure
survival (i.e., keep providing reasonable services and respecting the rights of
employees) (Robbins and Pearce, 1992) and to generate balanced resources and
expenses. It means temporarily taking one step back so that two steps forwards can
be taken in the future. In other words, if stability is achieved, the focus could move
forward to a longer-term prospect (Balgobin and Pandit, 2001). This organisational
stage is vital, and evidence shows that an organisation cannot skip this stage and
straightforwardly move towards growth. Robbins and Pearce (1992) found that it is
rarely possible to achieve recovery without an initial period of planned
retrenchment, and that the degree of retrenchment is positively related to the
success of a recovery. For instance, a proper recovery process would include
planned decreased salaries expenses of particular personnel designed to balance the
annual budget.
Though retrenchment directed towards stabilisation is vital, it has its price
and its victims such as employees and external stakeholders. The responses of
victims to the crisis might be radical since retrenchment may be perceived as a „step
86
back? and as an additional decline. These reactions may take unexpected directions;
they may lead to the outcome of failure or the success of recovery (Pearson and
Clair, 1998). Thus, managers prefer to skip this stage and avoid dealing with the
tension between the aspirations to stabilise the organisation and stakeholders'
reactions. Public retrenchment has to be carefully conducted due to equality
considerations. These considerations restrict public managers who cannot just
withdraw or close down inefficient chapters. For instance, after years of
deterioration and inability to provide reasonable services, a LA recovery plan may
include the dismissal of staff. A possible reaction could involve an employee strike,
which may demand a political price in the form of demands for collective
resignation and earlier local elections. These reactions may seriously delay the
implementation of a recovery plan and reaching the fifth stage: recovery and return
to growth. Yet, retrenchment by itself, even if completed successfully, does not
achieve recovery. Thus, the following chapter will describe the fifth stage in the
cycle.
Recovery and return to growth is the desired result of the efforts made by an
organisation up to this stage. While retrenchment involved restricted and minimised
resources, at the fifth stage resources are redistributed to key services in order to
ensure continuous efficacy and effectiveness. As a new vision and policy come into
effect, strategies for development are aimed to secure long-standing success in
providing high quality services (McKiernan, 2003). This stage is at the heart of the
turnaround process, which leads a LA from being (and rated as) a poor performer to
being a reasonable to good performer. Recovery and return to growth of a LA could
be recognised by stakeholders as a significant improvement of performance that
they experience. For example, the provision of better services, renewal of existing
services, serving new consumers, or fulfilling obligations to employees. Since a LA
is a wide-ranging and complex organisation, the achievement of a comprehensive
recovery and a return to growth may be a long and ongoing process that requires
patience. Schendel, Patton, and Riggs (1976) maintain that the period of upturn
should be long enough to give confidence that it is real. The authors found an
average length of private businesses recovery phase of 7.7 years, with a range of 4
to 16 years while Boyne (2004) mentioned public recovery may last for several
years. Since public organisations are large, it can be estimated that public
87
organisation recovery will be gradual and last for several years.
Though recovery and return to growth is the desired outcome of a
turnaround process, it is not guaranteed. It might occur after years, or not at all.
According to Witteloostuijn (1998), a failure has four possible outcomes:
successful recovery, persistent failure, immediate exit from the market and exit
after a period of losses. The last two are irrelevant to LAs, due to the tendency of
public organisations to survive even after a failure (Meyer and Zucker, 1990). As
mentioned earlier, each stage involves an opportunity and a risk. Not completing a
stage successfully means more than stagnation; it could damage the organisation
and further deteriorate it. In this case, stakeholders might conclude that the
organisation suffers a triple failure: failure to supply reasonable services, failure to
recover, and inability to recover in the future. The risk in these situations is that
triggering a second recovery process, which requires inspiring the leadership and
stimulating other partners for the second time, could be more difficult, since fear of
an additional failure is more real.
According to McKiernan (2003), a sixth stage, renewal, might take place
after recovery. Technically, while accomplishing recovery, the organisation is
expected to return to the level of performance it had enjoyed before the decline.
Returning to the previous level of performance is necessary but risky; it does not
promise a permanent recovery. In contrast to recovery, renewal demonstrates that
the recovery is permanent. Renewal involves better performance than had been
enjoyed before the decline, and greater prosperity. According to Jas and Skelcher
(2005), an organisation should take into account the possibility of experiencing a
temporary, fragile, short-term recovery in only partial domains of performance.
Avoiding this cyclical movement between success and failure depends on further
actions. According to McKiernan (2003), it is these key actions inherent throughout
continuous organisational learning that makes renewal possible. A recovery process
is a good time for developing learning skills. In this context, organisational learning
processes are very important since they ensure that lessons from the failure will be
drawn. If there is no organisational learning, there is a risk of returning to the
primary causes of failure that may lead to decline again.
Assuming that recovery was accomplished, achieving renewal in a LA is not
88
less difficult or complicated. This stage requires a different leadership state of
mind. Whereas analysing, planning, stabilising, and recovering the LA could be
motivated by the will to avoid on-going failure, this incentive might be irrelevant
when it comes to renewal. Achieved recovery could lead to relief and relaxation
that result in reduced activity. Thus, since failure might be perceived as an unlikely
situation, the stimulus for further efforts decreases. However, in order to achieve
renewal, organisations must be driven by a wish for excellence. This change of
stimulus might be problematic due to lack of motivation. Only after long and
continuous efforts the employees might expect to enjoy the fruits of their labour
and slow down the demands for activity.
While every failure is unique and requires an adjusted recovery process, the
theory and basic concept of organisational failure, failing LAs, and organisational
cycles of turnaround were identified and discussed. In practice, the English
government made vigorous attempts to recover failing LAs. However, politicians,
decision makers, and managers who took part in these attempts did not always
succeed in remedying LA troubles, as discussed in the following chapter.
1
Hence,
the next chapter moves forward and narrows down the discussion as it scrutinises
the way failing LAs were treated, the mixed results of these interventions, and their
consequences.
2.3.3. Cycles of Failure and Recovery in the English Context
In the previous chapters, we have explored failing LAs, their nature, and
characteristics. However, in order to evaluate the efforts made by English policy
makers we should first decide what level of improvement should be regarded as
organisational recovery. Recognising a successful recovery process or indicating
the point from which an organisation has recovered is not an easy task. Similarly
pointing out failing organisations involves various outcomes, complexities of
performance measurement, and contrast assessment of interest groups. Though
1
Please note that while Chapter 2.3. traced the general efforts recently made by the English
government to improve performance within all LAs, the next chapter is focused on attempts made to
recover failing LAs in particular.
89
comprehensively defining recovery is beyond of the scope of this work, a basic
understanding of which organisations would be regarded as recovered is essential.
In accordance with definitions of organisational failure in the private sector, Barker
and Duhaime (1997) defined successful recovery using similar terminology: 'a firm
undergoes a survival threatening performance decline over a period of years but is
able to reverse the performance decline, end the threat to firm survival, and
achieve sustained profitability'. Alternatively, Joyce (2004) defined a more
appropriate definition for a public organisation that experiences a recovery process:
’an organisation moving from being a poor performer to being a good performer’.
This definition is tuned to the LA environment since it emphasises quality of
performance rather than survival threats.
However, for the purpose of this thesis, in order to effectively identify
failing organisations, and in order to adjust this model to English LA environment
and circumstances, we are required to use a more operational definition.
Accordingly, we have transformed the above definitions into practical terms using
the rating of the Audit Commission. For example, moving up only one category
(e.g., from being a weak performer to being a fair performer) is not likely to be
considered as a significant recovery by most of the stakeholders, thus only
improvement of two categories or more were regarded as recovery.
2
According to Stewart (2003), British authorities have widely accepted the
duty to pursue governmental plans and NPM principles, and these processes have
led to significant improvements in performance. According to the Audit
Commission National Report (2005, p. 2), there was a broad significant
improvement in LA performance from 2002 to 2005:
"Over the last three years, council services have improved significantly, and
CPA is acknowledged to be one of the catalysts for this. CPA has also been
a lever for reducing inspection and regulation in better performing councils
and focusing support for others…most councils continue to perform well
and to improve…"
However, these reports seem to be too optimistic and they raise some doubts
regarding their reliability, since the definition and practical terminology of
performance rating previously developed indicate lower levels of performance.
2
Further details on this classification can be found in the methodology chapter.
90
Although improvements have been made, they were usually achieved within
moderate and good performers. As will be demonstrated next, the success among
poor performers was merely moderate. In 2002, after the first Audit Commission
report was released, it was clear that some LAs do fail to deliver reasonable
services (see Chapter 2.3.). The league table published by the Audit Commission
(see Table 1) revealed no homogenous achievements within failing LAs. Till 2005,
some LA ranks have been improved. Yet, some failing LAs were trapped in
continuous failure and did not progress toward a better position.
According to the Audit Commission publications and the CPA reports,
within the LAs rated as poor performers in 2002, 38 percent did not recover and
were still rated as poor/weak performers in 2005 (see Table 1, p. 38). None of the
failing LAs in 2002 are yet to be rated as excellent performers (updated to 2006
reports). Within the LAs rated in 2002 as weak performers, 14 percent have
stagnated and were still rated as weak performers in 2005. None of these LAs is yet
to be rated as excellent performers in 2006. Within all the poor and weak
performers in 2002, after three years of efforts, 12 percent have not made any
progress, and 38 percent have made minor progress, moving up only one category.
In addition, two LAs have deteriorated in their performance from being fair/good
performers to being weak performers. Overall, in 2005, 68 percent of the LAs were
still performing poorly/weakly/fairly. Alongside these cases of stagnation, the data
reveals that some LAs did improve their performance and accordingly, their rating.
For instance, within the 13 poor performers, 6 (46%) LAs improved two categories
to being fair performers and 2 (15%) LAs moved up three categories to being good
performers, showing the most dramatic change in those years. Within the 21 weak
performers, 9 (43%) LAs improved two categories and were rated as good
performers. Overall, in 2002 34 LAs were labelled as poor/weak performers and 8
LAs remained in that position (plus 2 LAs which joined them) (Audit Commission,
2005). From here, we can conclude that the data suggests a partial success in
recovering failing LAs.
However, it is critical not to draw a conclusive analysis since the results are
mixed and contradictory. On one hand, some LAs have achieved a significantly
better rating, which probably indicates, at least to some extent, improved
performance. This improvement may be considered as recovery. On the other hand,
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some LAs have stagnated and could be perceived as persistently failing. These LAs
point to the gap between the efforts made by the English government and the actual
success. Three years after the first publication of the CPA, the results are far from
being satisfactory and thus, it would be fair to say that decisions makers,
governmental officers, councillors, executives, and consumers are still seeking for
better solutions for failing LAs. The mixed results question the suitability of the
efforts made to solve the problem under the current circumstances.
As previously noted, public sector performance is currently a significant
issue for management practice and policy, especially for organisations delivering
less than acceptable results (Jas and Skelcher, 2005). From the English case, it is
clear that there is an increasing and ongoing interest in measuring and improving
performance. Accordingly, these growing interests directed the government to
introduce robust intervention (Cornforth and Paton, 2004). As part of this
intervention, efforts were made to recognise failing LAs and to supply them with
the necessary support (Walshe et al., 2004). Most of this intervention was carried
out by the Audit Commission, which served as supervisor, inspector, and auditor
for LAs.
Although failing LAs have received special and adapted treatment, these
interventions were introduced only recently and they were vague, since previous
experience, grounded knowledge, and tools for the recovery of failing LAs were
missing. Attempts to achieve public service turnaround were undertaken in the
absence of comprehensive theories or rigorous evidence (Boyne, 2006). As
Cornforth and Paton (2004) pointed out "little is known about whether, how often
and why „normal? cycles of decline and recovery may be arrested". Accordingly,
Boyne (2004) claimed that many national bodies and providers of local services are
searching eagerly for recovery strategies that can ease the problems they face.
Managers in the public sector suffer from a lack of appropriate tools to predict
failure in their organisation, prevent it, and generally deal with a crisis after it has
occurred (Mellahi, Jackson, and Sparks, 2002; Melahi and Wilkinson, 2004; Paton,
2003). In addition, although special treatment was given to failing LAs, one should
bear in mind the circumstances in which this aid was provided. According to
Stewart (2003) this aid was a political intervention, which was part of the New
Labour agenda. As such, it was not based on purely managerial considerations but
92
was contaminated by resourcing decisions. At the end of the day, governments and
especially NPM reforms try to achieve the most but spend the least. Thus, a
scenario in which this intervention was more of a political show with no adequate
financial support is not unlikely. Overall, whether the intervention suffered from
lack of knowledge, experience, managerial tools, political considerations, or lack of
resources, the mixed results point to a severe lacuna in this area, which should be
further investigated.
The lacuna in knowledge regarding the recovery process of failing public
organisations is not incidental. Jas and Skelcher (2005) and Cornforth and Paton
(2004) explained that this lack is rooted in government policy and the predominant
ethos that is focused on excellence. For instance, organisational learning and peer
review was based on declared Beacon Councils. The focus on excellence has
centred the research on good performers creating serious gaps for failing
organisations (Meier and Bohte, 2003). As a result, most research dismisses poorly
performing cases and strategies engaged in consistent failures. Hence, institutions
and scholars avoided measuring the relationship between strategies and
performance. This tendency can be recognised in the Audit Commission
measurement policy, which deals with outcomes and performance, rather than
process and strategies (Beeri, 2006). English failing LAs are recognised, labelled,
required to achieve recovery, supervised, inspected, and measured by their
performance. However, the Audit Commission?s measurement policy does not deal
with the managerial process itself. Given that, the ability of the Audit Commission
to give valuable guidance and advice on the way the recovery should be achieved is
limited.
In conclusion, there are several reasons for the limited success of recent
attempts made to recover failing LAs. It seems that these reasons are related to each
other. Due to a national predominant ethos of excellence the focus was given to
excellent performance and excellent performers. The search for knowledge related
to poor performance and poor performers was absent. The research focus on
excellence had created a lacuna of knowledge, experience, and managerial tools.
This lacuna affected the ability of governmental bodies to assist failing
organisations and consequently the ability of managers to deal with LA failure.
Moreover, the political circumstances in which these efforts were made invited
93
constraints, which made it more difficult to achieve success. In the context of this
study, the limited successes in recovering failing LAs and the huge lacuna pointed
by several scholars (e.g., Boyne, 2004; Cornforth and Paton, 2004; Mellahi,
Jackson, and Sparks, 2002; Melahi and Wilkinson, 2004; Paton, 2003) draw
attention to the great need for research in this area. While little is known about LAs
failure, especially about recovering them, the fact that LA failures have wide
negative implications makes researching this area urgent and vital.
Nevertheless, in conjunction with criticising the partial success, which left
behind about half of the failing LAs, one should keep in mind that three years after
the first Audit Commission report was published, the other half of failing LAs were
rated as better performers (e.g., from being a poor to being a good performer). It is
important to follow this group of LAs due to two rationales. First, the presumed
recoveries these LAs achieved should be followed in order to examine how real,
comprehensive, and convincing they are. Second, assuming that a comprehensive
recovery was achieved, it is crucial to figure out what change strategies were used
and how they were implemented. The next chapter develops this analysis as it
examines Turnaround Management Strategies as a lens to address such question.
2.4. Turnaround Management Strategies in Local Authorities
2.4.1. Turnaround Management Strategies
The previous chapter exposed the recent attempts made by the English
government to recover failing LAs, which ended in mixed results. While the lacuna
in this area explains the stagnation and fruitless attempts, the cases of success are
yet to be uncovered. Therefore, the data concerning the quality of LA performance
published by the Audit Commission should be further explored and explained.
While the data points to some LAs that had a low ranking in quality of performance
at the starting point and a high ranking at the endpoint, it does not disclose what
happened between these two points. In practical terms, the managerial tools and
techniques used to improve the ranking were exposed by neither managers, nor
scholars, nor by the Audit Commission itself. Exploring the strategies implemented
in those LAs might lead to possible schemes and policies for dealing with failure.
94
Additionally, it might enrich the knowledge in this area. Hence, the purpose of the
following chapter is to examine the „Black Box?, the strategies and the actions
implemented behind the scenes and the rankings in cases that had been significantly
improved. Three key questions lead this discussion: What are the appropriate
strategies for dealing with organisational failure? What is their applicability for the
public sector and LAs? What are the characteristics of these strategies that make
them a possible option for dealing with public organisational failure?
The term „strategy? was described by various scholars. In 1980, Porter has
described a category scheme consisting of three general types of strategies that are
commonly used: cost leadership, differentiation, and market focus, emphasising
efficiency, uniqueness, and effectiveness respectively. Hofer and Schendel (1978)
emphasised the match between the organisation?s resources, skills, environmental
opportunities, constraints, and the purposes it wishes to accomplish. Landrum and
Gardner (2005) emphasised the broadness of strategic management and described it
as a wide setting of goals, examinations, and behaviours, where the organisation
promotes managerial cognitive processes, managerial abilities to coordinate
intraorganisational and interorganisational resources, and managerial abilities to
support organisational learning (Sanchez and Heene, 1997). In addition, Khanfar
(2007) suggests a traditional ontology of management and summarises several of its
aspects:
"The traditional ontology of management science relies very heavily on
strategic planning and strategic thinking. Management sees its role within
this paradigm as reducing conflict, creating order, controlling chaos and
simplifying all the complexities created by the environment. Goals and
objectives are set, possible outcomes are predicted and alternatives for
action are planned, and these are communicated throughout the
organization. The traditional approach to strategic management describes it
as a process of analysis where the strengths, weaknesses, opportunities, and
threats of the organization are used to develop the mission, goals and
objectives of an organization. The management of tactics to plans and
programs are short-term and adaptive whereas strategy would be more
continuous and changes are geared toward broader goals and the vision of
the organization."
The formation of a strategy is thus one of the major management tools for
coping with both external and internal challenges. Given the characteristics of
failing LAs, the major purpose of those organisations is to accomplish the recovery
95
of the quality of services. This managerial process requires the art of matching and
balancing between resources, skills, opportunities, and constraints (Hofer and
Schendel, 1978) (in the LAs context these could be e.g., balancing available
finances, local volunteers? participation, local private-public partnerships, and
national plans, respectively). Balancing means matching spending to available
resources, for instance, if there is a reduction in available finances, services should
be respectively retrenched or assets should be sold. In addition, the authors
emphasise that it is worthwhile and important that the organisational strategies be
formally formulated. Hence, management should make a better forecast of possible
developments and adapt policy to them, rather than improvise. Most importantly,
according to the authors, a proper strategy can indeed result in superior
performance and it has the potential to achieve the following purposes:
? Development of organisational goals and objectives
? Identification of major organisational problems
? Allocation of resources
? Coordination and integration of complex organisations
? Development and training of managers
? Helping to forecast future performance
? Evaluation of management
? Stretching the thinking of top management
Looking at this list reveals that in general, formulating a strategy is important in
failing organisations. For instance, developing organisational goals in a failing LAs
could lead to formulating a recovery plan; identifying major problems could lead to
mapping the causes of failure; allocating resources could guide the management to
redistribute resources to new and more important areas; and evaluating the
management may lead to required replacement of senior managers.
While these aims demonstrate the general need for the formulation of a
strategy, this study seeks for a particular set of strategies, which are applicable in
failing situations. As far as we know, the literature suggests one main set of
strategies to deal with organisational failure, which are Turnaround Management
96
Strategies (TMS) (Boyne, 2006; Schendel, Patton, and Riggs, 1976). The roots of
TMS can be found in the private sector as most of the research in this area has been
conducted using samples of private companies in the USA (Ketchen, 1998). The
pioneer scholars (i.e., Hofer, 1980; Hofer and Schendel, 1978; Schendel, Patton,
and Riggs, 1976; Schendel and Patton, 1976) claimed that adopted strategies and
management actions during the recovery process could successfully influence
performance outcomes. A comparison between firms that recovered and did not
recover revealed that successful TMS included strategies such as management
changes, organisational changes, marketing, new investment expenditures,
diversification of products, efficiency increases (e.g., firing and cost control),
divestiture, and vertical integration (Schendel, Patton, and Riggs, 1976). Hofer
(1980) categorised these strategies into revenue increasing, cost-cutting, and asset
reduction. A later work done by Meyer and Zucker (1990) suggested two main
characteristics for TMS. The first one is „cutting expenditures to the bone?, which
usually includes reorganisation elements such as deep staffing reductions and the
second is complementary characteristic „investment in new areas?. These strategies
were named by the authors as „the combination of slash-and-burn together with
aggressive new growth?.
The key question at this point is whether TMS are feasible and applicable to
public organisational failure in general and failing LAs in particular. As noted
earlier, adopting ideas, concepts, and tools from the private sector should be made
carefully, while adapting and adjusting them to the public sector environment. The
adoption of ideas from the private sector became common since NPM reforms took
place. Therefore, NPM trend encouraged the use of imported practices from the
private sector, which consequently, became more feasible and applicable than
before. In this sense, TMS, which were adopted from the private sector, may
express the English government desire to recover failing public organisations
(Boyne, 2006).
According to Boyne (2004), private firms are more likely to recover from
failure if they follow TMS. This key argument points out a linear relationship
between managerial strategies directed towards recovery and significant
improvement of performance. Given that, he suggests the suitability of these
strategies to the public sector as well. Although some difficulties might arise from
97
their implementation in the public sector, they may be feasible and relevant to it.
However, at this stage, cautious is necessary since TMS may not automatically lead
to recovery. Accordingly, TMS will be perceived as a possible, useful, and potential
(and not necessarily the single) managerial method to deal with failure in LAs. In
other words, TMS may be appropriate in drawing the first step for a theoretical
framework concerning cycles of failure and recovery in the public sector context.
Therefore, the main purpose of this thesis is to discuss and assess the relevance, and
the applicability, of TMS in recovering failing LAs.
Boyne was not the only scholar to claim that TMS may be relevant to failing
public organisations. Turnaround management rhetoric has gained popularity in the
public sector context among other scholars as well (see for example, Cornforth and
Paton, 2004; Jas and Skelcher, 2005; Joyce, 2004; Paton and Mordaunt, 2004;
Turner et al., 2004; Walshe et al., 2004). Many of the ideas, concepts, and models
that have been developed in the for-profit sector have at least some application in
public service. As Walshe et al., (2004) stated:
"It contains a number of ideas, theories, and findings which are almost
certainly relevant to the study of failure and Turnaround [recovery] in
public organisations. While the empirical experience of recovery in public
service may be quite different from that in the for-profit organisations, there
are sufficient similarities for ideas about… the causes… the measurement,
prediction, diagnosis… stages… nature and the effect of interventions… of
failure and Turnaround".
Though private and public organisations are surrounded by different
environments, general organisational cycles could be similar. Cornforth and Paton
(2004) noted that as a result of imperfect and erratic market-driven processes,
"cycles of relative decline and recovery are commonly observed among companies
and this has been a major focus of research…similar cycles of decline and recovery
occur in the public and non-profit setting - indeed, the rhetoric of „turnaround? has
become commonplace". Therefore, TMS will be further explored in the following
chapter.
2.4.2. Classification of Turnaround Management Strategies
TMS were classified by Boyne (2004) into the 3Rs: Retrenchment,
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Repositioning, and Reorganisation strategies. Walshe et al. (2004) suggested a
slightly different version of them: retrenchment, renewal, and replacement. For the
purpose of this study, the difference between the two is minimal. Since Boyne?s
suggestion is usually cited in other publications, the „retrenchment, repositioning,
and reorganisation? will be used in this study. When classifying and describing the
3Rs one should note that the strategies discussed are not conclusive, and more
strategies may be added. In this context, the 3Rs only simplify the classification of
TMS into sets of actions.
2.4.2.1. Retrenchment
Retrenchment deals with efficiency. It includes a reduction in the scope or
size of the organisation, for instance, by selling assets, contracting out to an
external service provider, and cutting costs of services. One of the main objectives
of these steps is to release resources from unproductive sections that can be
reinvested in ones that are more productive. As a result of this reinvestment, higher
quality of performance and better outcomes would be delivered to the public
(Boyne, 2006). The implementation of retrenchment in a public organisation might
be more complex than in the private sector. Since generally private organisations
are profit oriented, non-profitable activities could be halted whilst implementing
retrenchment strategies. In the case of LAs, such cessations might be more
complicated and comprise a limited set of substrategies than in the private sector,
even though technically and politically they are feasible and possible (Balgobin and
Pandit, 2001; Boyne, 2004). One should remember that English LAs at present time
and over the last decades have already been under continuous national
retrenchments, cutbacks, and search for efficiency. These governmental moves are
well known by local government and rejected whenever possible. Furthermore,
omitting and reducing services are not determined by the profitability test alone, but
other considerations are evaluated as well.
Despite these complications, there is growing evidence that suggests that
retrenchment is one of the basic and common sets of actions used in successful
recoveries. Thus, researchers have described retrenchment as a positive and
essential activity. Nonetheless, according to Robbins and Pearce (1992)
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retrenchment cannot be held as a stand-alone strategy because it mostly includes
reactive actions, thus they must be supported by proactive actions such as
repositioning.
2.4.2.2. Repositioning
Repositioning is an entrepreneurial strategy that deals with effectiveness
emphasising growth and innovation (Schendel and Paton, 1976). This response to
failure involves redefinition of the mission and core activities of the organisation
and encourages the active improvement of existing services, or the supply of brand
new services to current consumers or to a new variety of consumers (Boyne, 2004).
It includes identifying successful services and products in one area or locating and
duplicating them in other areas. Compared to retrenchment, repositioning is a more
proactive strategy. It might be considered as the complementary strategy to
retrenchment, which emphasises cuts and reduction. As described above, resources
released by the implementation of retrenchment strategies can be reused. The
release of funds triggers the use of repositioning strategies aimed at redesigning
more cost effective services to be supplied to the public. The introduction of cost-
effective services immediately improves the performance of the organisation,
creating in this way a win-win situation.
However, one of the problems with the implementation of these strategies in
failing LAs is that it requires creativity, and managers in failing organisations are
usually mired in traditional ways of working rather than innovative ones. In
addition, English local government performs in a centralist and restricted
environment (McClelland, 1996). Therefore, expectations concerning proactive,
innovative managerial actions based on large free resources should be moderated.
2.4.2.3. Reorganisation
Finally, the third R is reorganisation. This strategy can be regarded as any
internal organisational change, including changes within leadership, personnel, and
management arrangements such as changes in planning systems, the extent of
decentralisation, styles of human resource management, or organisational culture.
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The purpose of reorganisation is to support either retrenchment and repositioning or
simply the recovery of organisational performance. Yet, the history of local
government is characterised by continuous and repeated national forced
reorganisation moves (Clarke, 1955; Henney, 1984). In addition, the ongoing
changes of authorities and roles of LAs directed from the Government have also
required reorganisation (Chandler, 1988). Thus, it may be presumed that LAs
would rather prefer to avoid using these strategies if possible.
In private sector literature, the most cited re-organisational act is the
replacement of senior managers (Mueller and Barker, 1997; Thain and Goldthorpe,
1989b; Walshe et al., 2004). Schendel, Patton, and Riggs (1978) found that
management change leads to successful recovery in over 80 percent of the cases.
However, due to political restrictions and democratic processes in LAs,
replacement of the leadership in these cases might be more complicated than in the
private sector.
Replacing the CEO and other top managers is considered as a precondition
for successful recovery (Hofer, 1980). It is supposed to facilitate strategic change
because new top managers often have different backgrounds and experience; they
bring new understanding of the firm's environment, and enable productive change
to take place (Boyne, 2006). Additionally, new top managers, especially outsiders,
have no personal commitments to previous policies and practices, and so are freer
to commit radical changes (Schendel et al, 1978). Bibeault (1982) explained the
importance of replacement by arguing that a recovery situation is an abnormal
period in any organisation's history. It requires unique management approaches,
which are distinctly different from those of stable or growth managements. In a
recovery situation, many of the old management tenets lose their validity. In
contrast, nomination of new top managers can be an important signal for
seriousness about recovery (Boyne, 2006). However, Borins (2002) argues that
bottom-up innovation is frequent and common and thus, political leaders and
agency heads can create a supportive climate for bottom-up innovation when they
have popular appeal.
In the broad sense, these strategies reflect the main actions made by the
management after a crisis (Boyne, 2004). Since TMS originally deal with the
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survival of companies, they are viewed as a matter of performance in strategic
management. Strategic management refers to a set of managerial decisions and
actions that determine long-run organisational performance. TMS may be regarded
as a particular potential set of managerial actions directed towards achieving a
radical improvement of organisational performance.
At this stage, it is important to notice that the 3Rs described above cannot
be perceived as a tool-kit or as full package for recovery. A blind implementation
of these strategies with no sensitive adjustment to particular circumstances is
useless. Therefore, appropriate implementation of these strategies, e.g., matching
problems to solutions is essential. Additionally, one should pay attention to the
importance of implementation phases in determining the value of particular
strategies. Any step taken by the management depends on steps previously taken
and their outcomes. According to Fayols' principles, order is important and was
found as useful in strategies implementation (Shafritz and Russell, 2005;
Yoo, Lemak, and Choi, 2006). As Price and Chahal (2006) noted, revolutionary
change involves incremental process.
The implementation of TMS is aimed at putting an end to the supply of poor
services in order to achieve sustainable performance recovery. In other words, not
implementing TMS in the private sector eventually means organisational death.
Yet, the outcome in the public sector is survival alongside continuous poor
performance. Given this, TMS can be defined as ‘the actions taken to bring about a
recovery in performance in a failing organisation’ (Pandit, 2000). Pandit's
definition reflects the public sector environment and the NPM principles; it
emphasises performance and refers to the managerial aspect of recovery rather than
the typical aspects used in private sector literature (e.g., income, used by Schendel,
Patton, and Riggs (1978)).
Nonetheless, it could be argued that there is no need to distinguish TMS
from other type of strategies that could be use to improve failing LA performance.
Consequently, as the argument goes, management that seeks to recover an
organisation could implement general change/improvement strategies. This
argument is important since whenever change is necessary, organisations seek and
push for reconfiguration in the most value-producing way (Bloodgood and Morrow,
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2000). At this stage, it is not obvious that TMS are unique, nor should it be seen as
distinctive from general change strategies. Moreover, there is no base to prefer
TMS over other change strategies, and thus caution is required. Hence, this thesis
asserts that TMS might be useful in recovery processes as an additional option in a
management?s arsenal, since they have a possible and potential role as a set of
strategies for confronting public organisational failure. Therefore, the next chapter
assesses TMS characteristics and suitability for recovery situations.
2.4.3. Turnaround Management Strategies: Characteristics and Suitability for
Recovery Situations
According to the literature and official governmental reports, the
characteristics of TMS could be classified into six major aspects (Audit
Commission, 2005; Balgobin and Pandit, 2001; Beeri, 2006; Boyne, 2004; Boyne,
2006; Boyne and Dahya, 2002; Hofer, 1980; Joyce, 2004; McKiernan, 2003;
Mellahi, Jackson, and Sparks, 2002; Mordaunt and Cornforth, 2004; Paton and
Mordaunt, 2004; Turner et al., 2004; Walshe et al., 2004).
1. Aim, scope, and proportionality – TMS are radical, comprehensive managerial
strategies directed to bring about a recovery in failing organisation.
2. Timing and Time restriction – TMS effectiveness depends on timing and length
of implementation. TMS are more effective when implemented right after
failure and during a short period.
3. Urgency – Due to the necessity of preventing a crises or recovering an
organisation after the crisis occurred, TMS are urgent managerial action.
4. Inspection and examination – TMS are extensively inspected and examined by
internal and external organisational stakeholders.
5. Management – TMS are implemented by either managers who were part of the
organisational decline or a new management team.
6. Organisational climate – TMS are implemented throughout negative and
unproductive organisational climate.
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The feasibility of TMS is more likely to fit organisations that were labelled
as weak or poor, which means, organisations assessed as declined performers. The
stimulus for TMS is broad performance decline experienced by an organisation. In
accordance to this stimulus, TMS are undertaken and executed decisively and
purposively (Boyne, 2004). They are well planned and directed to achieve
comprehensive recovery and would not be an impulsive or capricious promotion of
middle managers. Accordingly, minor, local, temporary, or departmental decline
will probably involve more moderate change strategies. In this view, Grinyer,
Mayers, and McKieran (1990) argued that turnaround situations require a different
managerial approach from common performance improvement (e.g., action-
oriented, motivated, committed management) since they are implemented after a
recognised crisis or a continuous failure.
Following McKiernan (2003) model, actions directed to recovery will take
place after the second stage, after causes and symptoms were perceived and
recognised. In other words, as failing LAs reach the lowest point in their
organisational life, radical actions such as TMS are required (Walshe et al., 2004).
Accordingly, TMS constitutes a series of internal and external activities (Boyne,
2004) aimed at achieving a radical, positive organisational change. In contrast, not
every organisational change justifies radical response and in practice and not every
organisational change will be followed by a radical response.
The aim of TMS, by definition, is to create a radical organisational change,
to overcome severe organisational problems, and to achieve comprehensive
recovery starting from the lowest possible point. As TMS are substantial (Paton and
Mordaunt, 2004), they affect all parts in an organisation and all stakeholders. Thus,
they are not suitable for local minor upgrades (Boyne, 2004). In other words, the
tools used by the management should be proportional to the aim that the tools are
meant to achieve. Therefore, to bring about a significant and comprehensive
recovery in failing LAs, radical steps should be taken and vice versa. For instance,
based on the principle of proportionality, there is no need to replace the whole
management team just to improve the services for single parents. Equally, an
expert?s lecture about "How to deal with aggressive consumers" would probably
not completely upgrade the level of services supplied. Managers that review
strategies, deals with weaknesses, or improve ineffective areas, might assist the
104
organisation but they do not implement Turnaround Management.
The timing of TMS implementation is critical. In order to be effective TMS
should take place as soon as the crisis hits (Paton and Mordaunt, 2004), as a quick
response to the failure (Boyne, 2006). While the timing refers to the ideal starting
point, time restriction refers to the length of implementation. TMS should be
implemented in a condensed and defined frame of time, which as suggested by
Boyne (2004) spans over a period of years. In the private sector, it was estimated
that such process will take four to ten years (Schendel, Patton, and Riggs, 1976).
An additional characteristic of TMS is that they are implemented urgently. Because
TMS are applied as a reaction to a crisis or as an attempt to prevent a forthcoming
crisis, delay involves further deterioration. Any further deterioration might find
expression in greater resources needed for the reversal of a situation or in
irreversible problems. A second chance at the same conditions will rarely be
available (Boyne, 2006). When it is clear that the present circumstances will lead to
unwanted results, management must move decisively to introduce necessary
alternations and reduce the need for later painful and highly risky adjustment.
TMS are usually required, imposed, supervised, inspected, and examined,
by external stakeholders (Turner et al., 2004). Due to publicness, LAs tend to be
highly exposed and politically salient. Accordingly, they are likely to be under
pressure to act rapidly so as to prevent further deterioration (Boyne, 2006) and
recover organisational performance (Joyce, 2004). In contrast to conventional
organisational change, which has a greater element of choice, when it comes to
TMS implementation, the leadership has less degree of freedom to choose whether,
when, and which strategies to implement.
Poor management is one of the significant causes and characteristics of
organisational failure (Audit Commission, 2005; Walshe et al., 2004). Accordingly,
leadership is important for recovery (Harker and Sharma, 2000). Since managers
who implement TMS deal with a complex process, according to some scholars,
replacement of the leadership was found to be one of the most common and
necessary TMS (Boyne and Dahya, 2002; Hofer, 1980; Turner et al., 2004; Walshe
et al., 2004). However, some scholars maintain that internal leaders should lead the
recovery process since, in their opinion, they may be found to be more experienced
105
and innovative leaders (see for example: Borins (2000)).
According to McKiernan (2003), the recovery process is a complex one
since managers must be simultaneously tough and soft: tough, because change and
decisions are usually unpopular; and soft, because staff need to be motivated and
encouraged to take part in the recovery efforts. These complexities have to be dealt
either by a new management, who is unfamiliar with the organisation, or by an
experienced but poor, centralised, and stagnated management. Obviously, if
management was talented and professional enough in the first place, it could have
foreseen the crisis emerging from out-source extinction. Even in cases where the
causes of the crisis are external (like in situations created by NPM reforms that
resulted in increased demands on services while cutting back resources) crisis is not
an inevitable outcome. Management can still adapt to environmental changes.
Indeed, not all organisations failed to make adaptation during NPM reforms and
some of them performed well. Thus, management can make a difference while
dealing with external-source extinction and environmental changes.
Finally, TMS are generally implemented in a negative climate and in a
negative external environment, at least at the beginning of the process. For instance,
the leadership would probably face lack of motivation, antagonism, conflicts, and
resistance to change by employees, consumers, and other external stakeholders
(Balgobin and Pandit, 2001; Mellahi, Jackson, and Sparks, 2002).
In sum, turnaround situations are complex and involve varied and
simultaneous actions. As described by Dr. Wendy Thomson in Joyce's article
(2004) when in 1996 she became the CEO of London borough of Newham and led
a recovery process:
"I don?t think there are many organisations where I?d do that again in that
way…we were doing best value and we had to do it better than
anybody…there were quite a lot of initiatives…there was not just one thing
that was done. Everything was done at once...actions on employment,
actions on education…"
Turnaround situations are characterised by radical, urgent, and time
restricted operations generally taken by an unskilled or new management in a
negative climate, and under supervision and examination of external stakeholders
(Beeri, 2006). However, in order to better understand TMS, these managerial
106
actions should be seen in a wider context, as part of an organisational process.
Thus, the next chapter draws a theoretical framework for TMS.
2.4.4. Stages of Organisational Turnaround - A Managerial Perspective
This theoretical framework was suggested by Boyne (2006) as a generic
model that had been distilled from various stage models of decline and recovery in
private organisations (see Figure 3).
The author searched and identified studies that contained systematic
empirical evidence about the effectiveness of TMS including comparison of
successful and unsuccessful recovery attempts. This search was limited to a journal
article as a rough quality control and search of keywords in which 21 comparative
studies yield the suggested model. Additionally, five qualitative studies describing
success stories of recovery processes derived from the public sector are analysed in
order to evaluate whether the model can be applied to public organisations. The
author concludes that the model of TMS is derived from the private sector literature
but offer a useful platform for the public organisation context.
While the previously presented model: „Stages of Organisational Turnaround?
(McKiernan, 2003) emphasised the stages that a failing organisation goes through,
Boyne?s model emphasises the crossroads in managerial strategies during a
recovery process. Nonetheless, stages and aspects that were covered earlier will be
briefly presented to avoid repetition. This model constitutes a managerial process
that reflects and simplifies seven stages that may be complex, disordered, occur at
the same time, compressed or extended.
1. The Onset of Decline
3
- The first stage refers to the causes of the failure.
2. Corrective Action and Recovery to Avert a Turnaround Situation- A corrective
is an action taken in quick response to decline. This action prevents a deep
decline from developing and avoids the need to implement TMS.
3
This subject was thoroughly discussed in Chapter 2.4. and in the first stage of McKiernan?s model
(Causes of failure) . Therefore, no repetition is required here.
107
Figure 3: Stages of Organisational Turnaround-
A Managerial Perspective
Source: Boyne, 2006
1. Onset of decline
3. Turnaround
situation
4. Search for
strategies
2. Corrective action
and turnaround
Performance
Time
7a. Turnaround
7c. Terminal decline
7b. Continued failure
5b. No „escape?
strategy found
5a. Selection of
new strategy
6. Implementation
of new strategy
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As previously mentioned, one of the problems in researching organisational
failure is making the separation between a natural, temporary decline and a
permanent one (Schendel, Patton, and Riggs, 1976). A corrective action
distinguishes between the two. In other words, in cases where successful
corrective actions were employed, performance returned to be normal, and TMS
were not used. In such cases, the situations could be considered as temporary
declines but not as turnaround situations. By contrast, cases in which
unsuccessful or no corrective actions were employed, and performance
continued to deteriorate, can be considered as permanent declines. Additionally,
corrective action not only helps the organisation to escape from failure, it
encourages organisational learning that may prevent future identical
breakdowns since it trains the organisation to quickly spot a decline and
appropriately react to it. Repeated cases of decline later on would find a
management that has already dealt with such situations. In LAs for instance, the
prompt establishment of a psychologist team for children in reaction to a terror
attack could be considered as a corrective action. A quick response to a crisis
could support the education system in this case, and prevent further
psychological and emotional damage and deterioration. In addition, drawing a
lesson afterwards could be an organisational learning act that would help in
similar future crises.
3. Turnaround Situation
4
- This stage refers to the core organisational failure.
4. Search for New Strategies
5
- At a later point in time, the leaders of a failing
organisation might recognise that a new course of action is required. This
recognition could trigger the search for new strategies to prevent terminal
decline. The search for new strategies includes preliminary steps such as
diagnosing the causes of failure and determining present organisational needs.
4
For a comprehensive discussion of this stage, please see Chapter 2.4.
5
This stage is parallel to the third stage described by McKiernan (2003) in his model of a diagnosis
and recovery strategy formulation. Yet, the third stage of McKiernan?s model is split here into two
managerial efforts, which are compatible with the political process in LAs: Search for New
Strategies and Selection of New Strategies.
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However, in accordance to the democratic process, the selection of these
strategies has to be approved by other bodies, such as the council.
5. a. Selection of New Strategies
6
- The selection of new strategies is a formal
managerial act that ends in agreed strategies as part of the recovery plan. In
LAs, approval of a recovery plan may involve democratic procedures such as
consultation with local volunteers, coalition deals, private-public participation
and partnership, and official voting of council members. These procedures
might delay the implementation of the recovery plan especially if it involves a
retrenchment of services which might, in turn lead to stakeholder resistance.
However, not every search for strategies ends up in selection of strategies, as
described in stage 5.b.
5. b. No Escape Strategy Found- Selection of new strategy is not guaranteed.
Political considerations like those mentioned above or lack of managerial skills
may find the management with no clear and approved strategy. This problem is
severe since it occurs after the failure has struck and although the management
admitted its existence it failed to start a recovery process. When no recovery
strategy was found and approved, perhaps because political or managerial skills
were missing, the LA will fall into a combination of low performance and high
persistence, which is permanent failure (Meyer and Zucker, 1989).
6. Implementation of New Strategies
7
- This is the core managerial act during the
recovery process. The management implements TMS: retrenchment,
repositioning, and reorganisation. The implementation of TMS could lead to
one of the three options presented in stage 7.
7. a. Turnaround
8
- The ideal outcome of the implementation of TMS is turnaround
in organisational performance. However, there are no clear-cut timescales and
criteria to define whether a process has been successful or not. Generally, the
relevant benchmark is the return to the level of performance that was
6
This stage, which engages the approval of recovery plan is part of the second part of the third stage
in McKiernan?s model (diagnosis and recovery strategy formulation)
7
It is interesting that a parallel stage in McKiernan?s model is missing, since it is focused on the
organisation as a unit but not on the management.
8
This stage is similar to the fifth stage, recovery, in McKiernan?s model.
110
maintained before the beginning of the downturn. In LAs, just as decline and
minimally acceptable performance are subject to political interpretation, so is
turnaround and recovery. Thus, depending on the constellation of political
forces, some organisations may need only a small improvement in performance
to be perceived as successful, whereas others may face much higher hurdles.
7. b. Continued Failure- The second optional outcome of the turnaround process is
persistently poor performance. This may occur because the new strategy has
failed, which is a similar condition to the one described in stage 5.b., in which
no escape strategy found. However, it may be perceived as a more severe
situation: if TMS implementation failed in a LA, its organisational resources
will probably be weaker than before the recovery attempt. The failure to recover
is a further painful situation that could be humiliating for the management.
Since it involves enormous and special efforts by the management, and since the
management is being tested by stakeholders, a failure in this case can be
perceived as a proof for management inabilities. Consequently, creating a brand
new stimulus and driving the management team, employees, governmental
bodies, and other cooperators for the second time is harder. Moreover, it could
lead to terminal decline, as described in stage 7.c.
7. c. Terminal Decline- The worst possible outcome of TMS implementation is
terminal decline. Due to poor TMS implementation or no selection of new
TMS, failure could end up with terminal decline and the disappearance of the
organisation in its current format. Though LAs do not cease to exist, the
Ministry of Interior usually has the power to merge LAs, to transfer, or privatise
some of its powers. Given this, it may be argued that in consumers? eyes
terminal decline might not be a bad option at all. Assuming customers are
rational players, they aspire for the best services available, and when terminal
decline results in mergers or privatisations, it may be for the benefit of
consumers.
Overall, this model provides one possible explanation for the data published
by the Audit Commission. The LAs that improved their ranking and supposedly
recovered have probably gone through stages 5a and 7a. By contrast, cases which
stagnated and did not improve their ranking, could have gone through stages 5b/7b
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(we have no evidence for terminal decline). In the same way, this model offers a
possible explanation for the partial success. According to the model, successful
recoveries were achieved after implementing TMS, while persistently failing
organisations have either not adopted TMS, or have not implemented TMS, or
alternatively, implemented TMS inappropriately and unsuccessfully. However, one
should bear in mind that this model is a possible explanation, a suggestion, which
has not been empirically tested. As this option is derived and based on private
sector literature, the model and the typology need to be refined and developed for
application to public organisations (Boyne, 2006).
Empirically testing this model in public organisations could provide
answers for various questions. For instance, what are the common causes and
symptoms of public failure? What are the common triggers for change? How does
the search for TMS implemented, and which procedures lead to their selection? In
what way is the organisational performance affected in cases where no escape
strategy is found? What are the commonly used TMS and what is their
effectiveness? How should they be implemented in order to be effective? What are
the circumstances and what is inappropriate managerial implementation of TMS
that leads to persistent failure/terminal failure? How long does this process take?
Are there any other alternatives for TMS, which lead to recovery? In order to better
deal with these questions, the next chapter will review TMS? current state of
research.
2.4.5. Turnaround Management Strategies’ Current State of Research
While this model comprises a wide and complex process, it raises many
questions. However, the scope of this study is limited to the relationship between
TMS and recovery (stages 6 and 7). This relationship is at the center of the recovery
process. According to this model, the implementation of TMS is a managerial act
that dramatically influences the chances to recover a failing LA. Nonetheless,
research on this relationship is far from being complete. Most of the research
consists of normative prescriptions, success stories of companies, and the net effect
of TMS, while research on the effectiveness of different TMS is rare (i.e.,
comparisons between recovered and non-recovered organisations). Moreover, this
112
lack is even more noticeable in the public sector context since it has remained
largely isolated from studies of turnaround in the private sector.
The search method for TMS' current state of research in the public sector
was based on Boyne's (2006) search method for turnaround in the private sector
9
.
The literature concerning turnaround in the public sector context could be divided
into three groups of studies. Each one of the three employs a different outlook and
raises different theoretical and methodological difficulties.
1. The first group of studies consists of eight case studies of successful public
service turnaround in single organisations (Contino and Lorusso, 1982; Decker
and Paulson, 1988; Holzer, 1988; Moore, 1995; Poister, 1988; Rainey and
Rainey, 1986; Stephens, 1988), which were reviewed by Boyne (2006) (see
Table 2). None of these studies used the 3Rs as a conceptual framework for
their analysis, which was developed and adjusted to the public sector context a
few years later by Boyne (2004). The review reveals that retrenchment was
used in five of the eight successful recoveries. It included cuts in the level of
inputs (e.g., staffing and equipment) and reductions in the supply of services
(e.g., the number of houses provided by the Housing Authority). None of the
case studies indicated the use of market exit as a retrenchment strategy.
However, there is evidence for the use of strategies such as downsizing the
organisations and limiting the scope of services, even if they met political
resistance from staff and consumers. Repositioning was pursued in four out of
eight cases.
9
The search process employed was used to discover studies that contain some evidence on TMS,
failure, and recovery in the public sector. The search for evidence was limited to academic scholarly
journal articles, due to the assumption that peer-reviewed work is more likely to have passed
minimum criteria of academic severity. A search of keywords in the title or abstract was undertaken
on the ISI Web of Knowledge that contains the contents from 1945 onward of the world's leading
social science journals. This includes publications in economics, management, political science,
public administration, and sociology. The keywords used were turnaround, recovery, and failure.
Further journal articles were then identified by snowballing from the sources located through the
web search. Articles identified through this process were then selected for analysis if they included
empirical evidence on either TMS or failure and recovery in the public sector. The search process
yielded a set of 17 studies of TMS or failure and recovery in the public sector.
113
Table 2: Studies Used in Public Service Turnaround Success Stories
Reviewed by Boyne (2006)
Source: Boyne (2006)
Reorganisation Repositioning Retrenchment Organisation Study
New director; new senior
management team; more
performance management;
more
staff participation.
In-sourcing of
manufacture of
replacement
parts.
Cut in
expenditure on
overtime;
reduction in
overstocking of
materials.
Bureau of Motor
Equipment,
New York City
(NYC),
Department of
Sanitation
Contino
and
Lorusso
(1982)
New director; change in
formal
organizational structure;
more
staff participation.
Social Security
Administration-
Bureau of Retirement
and
Survivals insurance
Rainey and
Rainey
(1986)
More performance
management;
more staff participation.
Reduction in
staffing.
Solid waste
collection, NYC
Department of
Sanitation
Holzer
(1988)
New chief executive; more
performance management.
Efficiency
savings (source
unspecified).
Jacksonville Electric
Authority
Decker and
Paulson
(1988)
New director; more
performance
management.
Alabama Division of
Rehabilitation and
Crippled
Children Service
Stephens
(1988)
New secretary of
transportation;
new senior management
team; change in formal
organization structure;
more strategic planning.
Change in
balance of
activities; better
stakeholder
management.
Reduction in
staffing.
Pennsylvania
Department of
Transportation
Poister
(1988)
New chief executive; new
senior
management team;
decentralization.
Change in
mission; better
stakeholder
management.
Reduction in
housing stock.
(a) Boston Housing
Authority
Moore
(1995)
New chief of police;
decentralization of
budgeting;
more strategic planning.
Change in
mission; better
stakeholder
Management.
(b) Houston Police
Department
114
Three of the four cases changed the organisation?s priorities within an existing
market (e.g., the Police Department became more responsive to minority
groups). One case extended the scope of its operations by self-supplied goods
that were previously purchased. None of the cases adopted the radical action of
moving into a completely new area. The absence of this strategy again reflects
the constraints and legal restrictions to enter the territory of other agencies.
Thus, the cases demonstrate that repositioning is feasible but tends to consist of
a narrower set of strategies than in the private sector, and correspondingly they
may have a smaller impact on turnaround.
The most widespread strategy described in the studies was reorganisation,
implemented in all eight cases of the success stories. The strategy was
implemented in at least two of the following forms: the appointment of a new
top manager, replacement of the entire senior management team, new
performance management systems, and decentralisation of power. The extended
use of reorganisation may reflect the limitation to apply other strategies that
involve quitting areas or entering new ones, which makes reorganisation the
default strategy. Boyne (2006) concluded that overall, it can be concluded that
all 3Rs are feasible as a conceptual term for use in the public sector and may
lead to a successful turnaround. However, it should be borne in mind that the
evidence is derived from only eight cases. This small number of cases queries
the ability to infer the effectiveness of TMS in other cases. Additionally, since
the stories of success occurred at different points in time, environmental
circumstances (e.g., national plan and intervention) were not controlled and
might influence the relationship between the implemented TMS and recovery.
According to Boyne (2006), although the authors found the 3Rs to be
successful, it is impossible to judge whether this interpretation is valid since no
comparisons were drawn with unsuccessful turnaround attempts. Therefore,
cases in which these strategies were implemented and recovery has not been
achieved are possible.
2. The second group of studies presented in Table 3 consists of eight papers
published recently (Borins, 2002; Boyne, 2004; Jas and Skalcher, 2005; Joyce,
2004; Mordaunt and Cornforth, 2004; Paton and Mordounnt, 2004; Turner et
115
Table 3: Studies that Use the Language of Turnaround
Study Aim Method
E
m
p
i
r
i
c
a
l
q
u
a
l
i
t
a
t
i
v
e
d
e
s
c
r
i
p
t
i
o
n
s
o
f
c
a
s
e
s
o
f
r
e
c
o
v
e
r
y
a
t
t
e
m
p
t
s
Turner et al.
(2004)
Evaluation of recovery plans
delivery, assessment of service
outcomes, and generation of
evidence regarding the
recovery process
10 case studies of LAs
Interviews with key stakeholders and
analysis of documents
Jas and Skalcher
(2005)
Development of a more
differentiated analysis of
public service performance
determinants (what leads to
poor performance?) and
improvement strategies (what
strategies are most effective?)
5 case studies were tracked.
Interviews and structured data on 20
managers, staff, politicians, and external
advisors
Paton and
Mordounnt (2004)
Highlighting differences
between public and private
Turnarounds
4 case studies from very different public
areas.
Retrospective accounts of key figures
Joyce (2004) Examination of the leadership
behaviour during successful
recovery
One case study
One interview with LA chief executive and
analysing documents
Mordaunt and
Cornforth (2004)
Examination of the board?s
role in public organisation
during TA process and
organisational failure
4 case studies from different areas
Interviews with board members and senior
managers
T
h
e
o
r
e
t
i
c
a
l
p
a
p
e
r
s
t
h
a
t
d
e
v
e
l
o
p
t
h
e
o
r
i
e
s
t
o
e
x
p
l
a
i
n
e
m
p
i
r
i
c
a
l
f
i
n
d
i
n
g
s
Walshe et al.
(2004)
Reviewing the existing
literature on failure and TA in
the for-profit sector and their
relevance to the public sector
Literature review
Boyne (2004) Reviewing the existing
literature on failure and TA
strategies in the for-profit
sector and drawing a lesson
for the public sector
Literature review
Borins (2002) Theorising the nature and role
of leadership in three ideal
types of public management
innovations, one of them is
turnaround
A survey among public servants concerning
the source of innovative actions
al., 2004; Walshe et al., 2004). In contrast to the papers reviewed previously,
these articles indeed used the turnaround terminology.
Three of them theoretically examine aspects of turnaround and develop
explanations for empirical findings. The other five are empirical qualitative
descriptions of one to ten cases of recovery attempts. While these studies
116
contribute to the understanding of recovery, their contribution to the
understanding of TMS or other activities that led to recovery is very limited.
These studies do not point out the actual strategies and actions used in the
turnaround process.
In addition, they lack the ability to identify significant or specific
relationships between TMS and recovery/persistent failure, and thus they not
suggest causal explanations for recovery or other outcomes. Consequently, the
conclusions do not provide guidance for public managers, decision makers, and
politicians. So questions like „what should I do in order to recover a public
failing organisation?? and „what strategies are most effective?? remain
unanswered.
3. The third group of studies is mostly meagre. Empirical quantitative studies that
analyse TMS and tests their impact on recovery are rare. Boyne (2003) had
critically reviewed 65 empirical quantitative studies dealing with public service
performance. None of them was directed toward failing organisations and
recovery. These studies observed, measured, and followed fair performers
trying to achieve good performance. Parallel evidence for poor performers
trying to achieve good performance is not provided. It seems that only recently,
the first research, which follows the above criteria, was conducted. Boyne and
Meier (2007) developed a new model that is derived from theories of the effects
of environmental and human resources on organisational performance. The
model was applied to failing public schools in Texas and tested among other
predictors, whether retrenchment, repositioning, and reorganisation were
positively related to recovery (i.e., significant improvements in performance in
1995-2002 as TAAS score (Texas Assessment of Academic Skills)). A survey
was distributed among school district superintendents and archival data was
collected.
The results indicated mixed effects. The extent of turnaround was
significantly influenced by all 3Rs, but not always in the predicted direction.
Two of the three retrenchment variables („focus on core business? and „time
spent on internal management?) had no significant effect on performance
change. The impact of the third measure of retrenchment („emphasis on
117
lowering costs and increasing efficiency?), directly contradicted the authors?
assumption: districts that adopt this strategy were significantly less likely to
produce better results. In contrast to the private sector, this form of
retrenchment contributed to further failure rather than rapid recovery. The
authors explained that retrenchment is regarded a successful strategy if an
organisation suffers from high costs and low efficiency. Two of the three
repositioning variables ('superintendents who seek change? and „initiate
interactions with a wide range of stakeholders?) were positively related to the
extent of turnaround and were more likely to lead their districts towards
performance improvement. The third element of repositioning („emphasis on
acquiring private funding?) had no significant impact on recovery from failure.
Taken together, the results for retrenchment and repositioning suggest that
„financial? turnaround strategies (cutting costs and seeking revenues) are not
effective in school districts. Reorganisation had a significant positive effect on
performance. School districts that replaced their superintendent with an insider
were more likely to achieve turnaround, but the appointment of an outsider was
an insignificant factor. Districts that did „raise the proportion of their staff who
are teachers? and „recruit more experienced teachers? had significantly better
prospects of recovering from failure. The results for reorganisation were
consistent with the assumption that turnaround is associated not only with top
management changes but also with human resource strategy that pays particular
attention to core staff.
In conclusion, it can be seen from the above description that some
strategies had significantly contributed to recovery, some strategies had not, and
one strategy even prevented it. However, the conclusions of this research should
be handled with care since there are some weaknesses and biases regarding the
sample of respondents and the manner in which the measures were
operationalised. These biases raise several questions regarding the reliability
and validity of the measurement tool. First, the authors chose school district
superintendents as the respondents for the survey. Though this position enjoys
the authority and discretion to act in an effort to improve a failing organisation,
superintendents are in charge of several organisations at the same time, they act
as outside inspectors, and thus are probably not fully involved in organisational
118
decisions and changes. In that sense, their ability to assess the „black box?, the
managerial processes, and informal changes is limited. Second, it seems that the
measurements do not directly assess TMS implementation but are a general
reflection of their probable outcomes. For instance, in order to assess the extent
to which retrenchment strategies were implemented, superintendents were
asked to evaluate the relative priority that they attach to „lowering
costs/increasing efficiency?. While priorities were evaluated, the actual
implemented actions directed to achieve this goal were not assessed. Higher
priority may be reflected as giving much thought to an issue while not
necessarily acting to promote it. Third, some measurements assessed attitudes
toward ideal standards. However, these evaluations actually ignore the
strategies implemented in practice, as intentions may be different from actions.
For instance, in order to measure repositioning strategies, the superintendents
were asked to evaluate to what extent „a superintendent should advocate major
changes in school policies?. Fourth, the authors chose to concentrate on specific
strategies, which give the impression that they are a random sample of a greater
number of possible activities under each of the 3Rs. For example,
measurements such as „increase percentage of teachers? and „experience in
years? collected from archival data do not cover all the dimensions of
reorganisation and leaves behind such aspects as organisational climate and
organisational training.
Thus, from the above description we can conclude that further research that
employs better measurement tools for TMS is needed. The way TMS have been
measured in previous studies is inaccurate and inappropriate for the LA
environment. The published work on TMS largely consists of case studies of single
organisations with no systematic comparison of persistently failing and recovered
cases. These studies generally concentrate on the exploration of strategies
implemented in successful recoveries while no test group is used (i.e. there is no
description of strategies used in unsuccessful cases). Moreover, it can be argued
that the existing measurement of TMS is biased. Therefore, there is a need to
further explore the „black box? content and test its relationship with recovery
(Walshe et al, 2004).
Earlier in time, Barker and Duhaime (1997) handled such problems and
119
developed a scale, which evaluates the extent of specific strategies used to compare
successful and unsuccessful organisational recoveries. Yet, this scale was designed
for private organisations and emphasises private sector terms and spirit. A similar
study based on such a methodology has not yet been conducted in the public sector
and this indicates the importance of the present research. By using an adapted scale
based on Barker and Duhaime?s (1997) this study aims to portray a more accurate
picture of the „Black Box?. By comparing recovered and persistently failing LAs
while using a comprehensive, reliable and valid measurement tool for TMS, we
expect to uncover the actual managerial acts able to bring about a successful
recovery in a LA. A full description of the TMS measurement tool used in this
study and its development process will be presented later on in the methodology
chapter.
From the above chapter it can be concluded that TMS in the public sector
context requires further investigation. From a theoretical point of view, there is
quite a strong argument to perceive TMS as a promising, valuable, potential set of
managerial reactions to deal with public organisational failure. The concept of the
3Rs seems to gather a set of strategies, which may be adequate to lead an
organisation to recovery. On the other hand, the knowledge, experience, and
empirical study in this area suffer from a huge lacuna. While the Turnaround
literature in the private context covers three areas (i.e., empirical quantitative
studies analysing the effectiveness of TMS, empirical qualitative studies that
describe individual cases of recovery (e.g., Brown and Starkey, 2000), and
theoretical papers that develop explanations for empirical findings), parallel
comprehensive data and tools in the public sector context are still missing (Walshe
et al., 2004). The determinants of turnaround in the public sector have not been
theorised or tested, creating a significant gap in the literature (Boyne, 2006).
In order to achieve the most effective recoveries, governments and LAs
should base their policy on grounded evidence. The necessity to fill the specific
theoretical gap concerning TMS has been recognised by numerous scholars (e.g.,
Jas and Skelcher, 2005: Cornforth and Paton, 2004; Boyne, 2004; Walshe et al.,
2004). As Boyne (2004) argued: TMS in LAs "have received scant attention by
public management researchers", although this is a topic of immense practical
significance as well as of academic value. Walshe et al. (2004) added that more
120
research is needed regarding the context and the process of effective recovery
interventions. The existing theory of Turnaround Management is currently either
inadequate (Barker and Duhaime, 1997) or not existent (Pearce and Robbins, 1993).
Overcoming the lacuna is of enormous practical significance since holes exist in the
policy governments choose to promote (e.g., the English Government). On one
hand, failing LAs are recognised, labelled, and required to achieve recovery. On the
other hand, the ability of government authorities to provide grounded knowledge
and tools to assist LAs is limited.
Therefore, this study seeks to sharpen the concept of TMS, based on
investigation of the impact of TMS on public organisational recovery. A sharpened
concept of TMS would point out the value of TMS in recovering failing LAs and
path the way to uncover the most appropriate manner TMS should be implemented
and measured. To state the matter differently, this study strives to expose the 'Black
Box', the exchange process led by the senior managers and designed to bring about
a recovery. However, since few studies statistically evaluated whether different
TMS are associated with success/failure, and others draw conclusions based on
qualitative interpretation, it is difficult to employ a meta-analysis technique to the
studies of turnaround (Boyne, 2006). Indeed, a comprehensive theory has not yet
been developed; quantitative scales of implemented TMS are absent; empirical
evidence concerning the impact and effectiveness of TMS are rare; no studies that
compared successful and unsuccessful TMS in the public sector were found; and
overall, it is yet to be made clear how failure and recovery dynamic in public
organisations works. Closing the practical and theoretical gap requires that research
employ such comparisons, particularly in the public sector context. Nevertheless,
the present literature and evidence are sufficient for the rigorous and
comprehensive investigation of these issues. To do so it is necessary to move
beyond single cases to large-N studies, which compare successful and unsuccessful
recovery attempts. This would provide evidence and reveal whether and how
management leads recovery processes (Boyne, 2006). An empirical examination of
TMS and their effectiveness within successful and unsuccessful cases of public
organisational failure consists of wide methodological considerations and
procedures. The next chapter discusses and details these methodological issues.
121
CHAPTER 3: METHODOLOGY
Evaluating and testing comprehensively and empirically the relationship
between TMS and recovery within persistently failing and recovered LAs require
multiple methods. According to Fritz and Durhane (1988), there is a particular need
for multiple methods when studying a complex phenomenon such as organisations,
because they have a variety of behaviours and indicators. In this study, using
multiple methods means employing induction and deduction, linear and non-linear
orientations, and various techniques. The combination of several approaches has the
potential to complement each other and enrich each other (Neuman, 2003). This
would be especially vital when the analysed phenomena are not well known to
researchers and similar studies are rare as there are no quantitative empirical studies
that measure TMS and compare their relationship with successful and unsuccessful
organisations in the public sector. Exploring the 'black box' requires, inter alia, dual
complementary methods of both qualitative and quantitative techniques.
In this research, the qualitative methods involve two case studies of LAs,
which were exploratory research to probe the 'Black Box' in recovery cases. These
cases revealed qualitative data that provided a descriptive account of the process of
change and created the base for the development of the TMS scale. This process
required careful examination based on face-to-face meeting and exposure to
experience gathered in the field. The quantitative methods involved a survey that
validated the new TMS measurement tool and empirically tested the relationship
between TMS and recovery. The quantitative data depends and rely on the
qualitative data and both supply the materials for answering the research questions.
The methodology chapter aims at describing the qualitative and quantitative
methodological considerations and procedures used to accomplish those missions.
Therefore, it answers practical questions such as what is the study population, how
the cases and participants were chosen and sampled, how the variables were
constructed, in what way data was collected, what statistical and analytical tools
were employed, and what are the justifications for the decisions made. While the
following chapter answers these questions, it demonstrates that this study is based
on reliable data, representative samples, and valid measurement tools.
Consequently, this study intends to generalise the findings within a wider
122
population of cases than those sampled.
As part of the attempt to address the theoretical lacuna and the lack of
practical experience that public managers and policy makers face in relation to
understanding and achieving comprehensive recovery, this study seeks to answer
several research questions. Theoretical aspects like defining organisational failure
and conceptualising TMS will be examined both by employing reviewing tools and
qualitative methods. The conceptualisation and construction of a new measurement
tool for TMS will employ qualitative methods, while the reliability and validity
process will rely on quantitative methods. Observations directed to evaluate the
'Black Box': the extent TMS were implemented within failing LAs and the
effectiveness of TMS in achieving recovery will be tested by employing
quantitative methods.
In sum, based on the recommended techniques of research methods (Strauss
and Corbin, 1990), the qualitative tools, i.e., analysed documents published by the
government, analysed reports published by the Audit commission or the LAs, face-
to-face interviews, and the case studies report (i) provide a better conceptualisation
of public organisational failure, (ii) acquire a better understanding of cycles of
failure and recovery in failing LA, (iii) clarify the causes of these failures, the
triggers led to organisational change, and the implications of such failure, (iv)
highlight the phenomenon of persistent failure of some LAs and the partial success
to recover them, (v) conceptualise TMS and characterise them, and (vi) construct a
new measurement tool of the extent of implementation of TMS in LAs. The
quantitative tool, i.e., the survey, the questionnaire distributed to senior managers
(vii) validate the new TMS measurement tool, (viii) explore the extent of TMS
implementation in LAs, (ix) spot the difference between persistently failing and
recovered LAs regarding TMS implementation, and (x) investigate the relationship
between implementation of TMS and recovery.
In conclusion, the outcomes of both methods for this study generate a
theory, an explanation, that enlightens successful recovery in failing LAs and
recommends practical directions for failing LAs and future studies.
123
3.1. The Study Population and Sample of LAs
Although the population and sample study are of similar groups, they are
not completely identical because the sample aspires to represent the population. The
population is defined as the unit to be researched. Defining the research unit is
important in order to enable later on the sampling of a smaller number of units that
represent the population (Neuman, 2003). In addition, a careful sampling process
would enable to infer from the results of the survey on population.
The population of this study is defined as LAs and senior managers in
England that have suffered from organisational failure. This population supplies a
platform for empirical examination of the relationship between TMS and recovery
since English LAs can be tracked according to the CPA measures. Thus, the
defined population might include a huge number of organisations and senior
managers. Even the focus on failing LAs only might still provide a large number of
cases. Obviously, since our resources are limited, it is impossible to access all
cases. Accordingly, the collection of data should be made within a narrower group
of LAs, which is the sample. The sample must represent the entire population, so
that the primary goal of sampling is to gather a representative group, a collection of
units and cases, which would enable the researcher to deduct, generalise, and
conclude on the entire population of cases (Neuman, 2003).
In order to explore the relationship between TMS and recovery while
comparing successful and unsuccessful recoveries, a sample from three different
groups (according to the CPA rates from 2002 to 2005) of LAs was chosen:
1. Persistently failing LAs - An experimental group of LAs that experienced
failure and are persistently failing.
2. Recovered LAs - An experimental group of LAs that experienced failure and
achieved significant recovery.
3. Well performing LAs - A control group of LAs that have not experienced
failure.
The comparison between group 1 and 2 with group 3 may point out the use of TMS
during recovery process. From this comparison we will be able to learn whether
TMS were less used in well performing LAs. The comparison between group 1 and
124
group 2 may supply an explanation regarding TMS effectiveness.
To do so, it was necessary to determine which LAs had failed, and within
those who failed which LAs have recovered. Two problems are present while
making this distinction. First, due to measurement complexities of performance in
the public sector, the measurement of failure and recovery and the distinction
between failing and other LAs are not straightforward (Walshe et al., 2004). In fact,
few public organisations are systematically supervised and labelled according to
accepted scales, and some failing public organisations keep failing without being
noticed for long periods. Second, the use of financial ratios as the main criteria to
determine failure is not adequate for the public sector environment. The application
of a single financial criterion to different organisations assumes the existence of
universal and objective criteria of organisational performance. While private
organisations can be classified as failing according to financial ratios, LAs are not
for-profit organisations and thus financial ratios cannot be regarded as the main or
as the single indicators for performance (Cutler, 2004; Dawson and Dargie, 2002).
Accordingly, public performance should be subject to interpretation by external key
stakeholders and higher bodies (e.g., customers, rivals, and regulators)
(Arogaswamy et al., 1995; Boyne, 2007; Gimeno et al; 1997; Short et al., 1998),
which engage various indicators (e.g., ambition, prioritisation, quality of services,
and performance management). These terms of performance measurement were
indeed followed by the English Audit Commission, which publishes data that
distinguishes between persistently failing, recovered, and well-performing LAs.
Therefore, the sampling process of this study will be based on the data produced by
English Audit Commission and it will be dealt with as secondary data.
According to the data published in 2002 by the Audit Commission
10
, out of
150 inspected LAs, 13 (9%) were rated as poor performers and 21 (14%) were rated
as weak performers (see Table 4). These 34 (23%) LAs would reflect the
population of failing LAs.
11
10
The CPA and the Audit Commission methodology that led to these ratings were described in
detail in Chapter 2.3 and Appendix 5.
11
The sample revealed no significant difference in the extent of implementation of TMS between
poor and weak performers. Thus, combining these LAs into one category of failing LAs was
125
Table 4: Three Groups of Local Authorities According to the Secondary Data
2002 2005
Poor Weak Fair Good Excellent
Poor 13 (9%) 1 4 6 2 0
Weak 21 (14%) 0 3 9 9 0
Fair 40 (27%) 0 1 18 17 2
Good 54 (36%) 0 1 0 29 24
Excellent 22 (14%) 0 0 0 8 13
PF = Persistently Failing LAs R = Failed and Recovered LAs WP = Well Performing LAs
According to the data published in 2005, within the 34 failing LAs, 17 LAs (11%
out of 150 inspected) improved their status in two to three categories and were rated
as fair/good performers. These 17 LAs would reflect the population of significantly
recovered LAs. Further 17 LAs, (11% out of 150 inspected), stagnated or moved up
only one category and were rated as poor/weak/fair performers. These 17 LAs
would reflect the population of persistently failing LAs. In 2002, 22 (14%) LAs
were rated as excellent performers.
Within these 22 LAs, 13 (9%) LAs kept performing well in 2005. These 13
LAs would reflect the population of well performing LAs. All together, 47 English
LAs were sampled and were the source for collecting both qualitative and
quantitative data.
possible.
PF
WP
R
126
3.2. Collecting Qualitative Data
The conceptual frame for TMS and the model of the 3Rs was used as a
guide for questions about specific actions undertaken to facilitate recovery in the
LAs. This stage was an exploratory phase, its most important purpose was to make
the first step toward uncovering the 'black box', the actual managerial process, and
the strategies employed in successfully recovered LAs. Alongside this major
purpose, two secondary purposes justify and were achieved through the qualitative
data: First, further exposure of the nature of failing LAs. Second, to assist with the
construction of a quantitative measurement tool of TMS that was used to collect
quantitative data.
In order to meet these aims, based on secondary data, which provided
information about council's structure (i.e., Metropolitan District Councils/unitary
authority/London Borough Councils), extent of improvement, and geographical
area, two LAs were randomly sampled from the recovered LAs group (group
number 2, see Chapter 3.1.). This group was regarded as the most adequate group
for the exploratory research since they represent the extreme cases in which
successful change strategies were presumably implemented. The sampling process
retained as much as possible the principle of representativeness. In practical terms,
applications for cooperation added to the aims of the study were either mailed or
emailed to all Head Council and CEOs offices. Yet, due to limited resources and
constraints of cooperation we were able to explore only two cases. These two cases
were chosen according to the willingness to cooperate and availability. Since
structures of LAs may differ in size, service provision quality, efficiency,
effectiveness, and socio-economic development (Atkinson and Wilks-Heeg, 2000),
the author made sure the sampled LAs were of different structures, different
geographical areas, and were ranked in 2005 in different categories. While these
two cases LAs do not perfectly represent the variety of English LAs, they did
provide a reasonable base for an exploratory research of the 'black box' and a
descriptive account of a process of recovery:
1. Walsall is a metropolitan district council, located in the West Midlands and one
of the two LAs that made the most impressive recovery (moving from being a
poor performer to being a good performer).
127
2. Swindon is a unitary authority, located in the South West, and one of the six
LAs that made an impressive recovery (moving from being a poor performer to
being a fair performer).
In addition, the case studies are based on qualitative data that refers to a
timeframe of four years, from 2002, when the first CPA report was published, to
2006, when data was collected. Since previous studies found that this time-frame
could allow recovery (Schendel, Patton, and Riggs, 1976) and according to the
secondary data some LAs had indeed improved their rating during this period, we
would assume these four years can reflect the recovery phase or at least a
significant part of it. Furthermore, the two selected case studies improved their
rating during this period and were categorised as fair/good performers.
Generally, two sources of data were used: relevant documents and semi-
structured face-to-face interviews. The documents were supplied by the LAs e.g.,
Comprehensive self assessment, organisational working plan, Cabinet meeting
reports, and by the Audit Commission, e.g., Comprehensive performance
assessment reports and scorecards, Annual Audit, and Inspection Letter. In
addition, a search was conducted in national and local news websites, which
produced contemporary newspaper accounts. This search was carried out while
using keyword such as Walsall/Swindon, council, local, government, and authority
in the BBC Archive and Google News Archive search engines. The documents
supplied an insight and a rich overview regarding the LA demographic information,
the LA level of performance before and during the recovery process, the recovery
progress, descriptions about the management official plans, and the political climate
these LAs went through from 2002 to 2005. Yet, the strategies used (the „black
box?) were not detailed in these official sources but were discovered through the
interviews.
The major aim of the semi structured face-to-face interviews was to reach
and gather high quality information from original sources regarding the recovery
process and the „black box?. They were specifically designed to expose concepts,
terminology, stages, and managerial actions taken during the recovery process. This
was done by enabling fluent responses, statements, opinions, and evaluations to be
expressed by the interviewees. In order to accomplish these aims it was important
128
to select the appropriate interviewees. While performance evaluations of failure and
recovery were mainly based on external key stakeholders and superior bodies (i.e.,
the Audit Commission data and documented reports), managerial insights should be
supplied by internal key figures (the interviewees). Therefore, exploring the 'black
box' should be based on an appropriate, credible internal key players that originate,
plan, control, implement, and therefore, can evaluate and report on the change
strategies used. In the case of recovered LAs, the body that has these abilities is the
senior management, which leads organisational changes and has a proactive
position in complex organisational processes. Therefore, senior managers were
chosen to participate in the interviews.
The author decided to interview the top senior managers, meaning the head
of the council who is the senior politician and the CEO who is the senior officer.
The assumption is that the most reliable, extensive, and accurate information will
be in the hands of these figures as they were involved in the most influential
decision making during the recovery process. Moreover, the structure of power of
the LA senior management consists of a mixture of both elected and non-elected
staff members since the constellation of English local government management and
policy making includes professionals alongside politicians (Dunleavy, 1980).
Accordingly, both professionals alongside politicians were represented. In each LA,
one of the interviewees was an elected member: the Leader of the Council; and one
of the interviewees was a non-elected member: the Chief Executive/Finance
Executive Director (subject to willingness to cooperate and availability). The
rationale behind this choice was to reflect a typical LA management team as
accurately as possible.
In practical terms, after a Council agreed to participate in the research,
applications were sent to the Head Council and CEOs offices asking for permission
to interview these specific figures. As accepted, the applications were handled by
the secretariat. The interviews were conducted with four leaders who were deeply
involved in the recovery process in their LA over the last few years. Two of the
interviewees joined the Council of Walsall in the late 1980s and two of them joined
Swindon Council in the early 2000s.
The interviews were conducted in July 2006; they took place in the
129
interviewees' offices, they lasted an average of 1½ hour, and they were recorded
with the permission of the interviewees. During the interview, open-ended
questions were presented to the interviewee by the interviewer and answers were
followed by asking for clarifications and examples where it was required.
The tool used to collect the desired data was developed in three stages:
1. The author created the first draft of the proposed interview. The first draft
contained questions aimed at exposing as much information as possible
regarding the failure, its characteristics, the recovery process, and the strategies
that were employed for achieving recovery.
2. The draft was presented to two experienced scholars who were familiar with the
LA research area. These researchers acted as independent judges, who made
some improvements concerning the content and the phrases used. This process
increased the validity of the tool.
3. The first draft was updated, redesigned, and developed according to the judges'
comments. The judges and the author then approved the final version.
The final interview included three sections (see Appendix 4). The first
section contained the introduction presented to the interviewees: the research topic
and the aim of the study. At this stage, the interviewer asked the manager for
his/her cooperation and discussed confidentiality issues. The second section
contained demographic questions meant to follow personal and employment
background (e.g., age, tenure in the current position). The third section contained
the core questions aimed at exposing the interviewees? opinions, evaluations, and
examples concerning the LA failure phase, the organisational cycle that led to
recovery, and most importantly, the change strategies taken in order to bring about
a recovery. For instance, „What were the causes that led to the deterioration of the
local authority??; „What actions were taken in order to recover the local authority??
etc.
The approach of interpreting and analysing the qualitative data was based
on the integration of two strategies: analytic induction and narrative analysis.
Analytic induction begins with the definition of a research question, preceded by a
rough hypothetical explanation of the problem, and then continues with the
130
collection of data, i.e., examination of cases. The gathered data reshapes and
reformulates the initial hypothetical explanation in order to explicate phenomena
(Bryman, 2004). In other words, this study examines the question of TMS
effectiveness in achieving a recovery and assumes that change strategies have a
possible, useful, and potential role in dealing successfully with a LA?s failure.
Narrative analysis is sensitive to words, gestures, and the sense of temporal
sequences that the interviewees, as tellers of stories, expose (Bryman, 2004).
Alongside exploring „what actually happened?? during the recovery process, this
strategy uncovered „how did the managers make sense of what happened?? and
what are their interpretations of organisational events. In order to get rich
information, this strategy employed broad, open-ended questions, such as „how did
you bring about a recovery?? Both interpretation strategies, analytic induction and
narrative analysis, reshaped the initial assumption about TMS effectiveness, and
made the first step in drawing the nature of relationship between TMS and
recovery, explaining the data published by the Audit Commission, and illustrating
the cyclical sequences of failure and recovery. The information gathered was
further used to explain the nature of failing LAs and to construct a quantitative
measurement tool.
In sum, the careful sampling and the interviewing techniques used ensures
that the data reflects a descriptive account of failing LAs. Since, as far as the author
concerns, the LAs chosen are not unique or significantly different from other
English failing LAs the findings are valid for generalisation. Yet, each LA, failure,
and recovery process has its own distinctiveness circumstances, figures, and
narrative. Thus, while general organisational moves and phases, managerial
strategies, and central-local relations characteristics would probably be common to
other cases, personal occurrences and relationships would probably differ.
3.3. Collecting Quantitative Data
3.3.1. Sampling of Participants
While the participants who provided qualitative data were from recovered
LAs, the participants who provided quantitative data were from all three samples of
131
LAs: persistently failing, recovered, and well-performing LAs. Similarly, identical
considerations were taken into account in choosing the interviewees and in
choosing the surveyed population. Here again, information was gathered from
senior managers (both councillors and executives) (see Chapter 3.1.).
In practical terms, the sampling process included the collection and listing
of the contact details (i.e., names, positions, phone-numbers, and e-mail addresses)
of all senior leaders (i.e., council leaders, cabinet leaders, cabinet members,
committees? chairman, and executive directors). The details were collected from all
LAs that were rated and labelled by the Audit Commission as poor/weak
performers in 2002 and those that were rated and labelled as excellent performers in
2002 and 2005. The number accounts to 43 LAs (four LAs, in which the personal
details of the senior management were not accessible, were excluded from the
sample).
These 43 LAs enabled a classification of LAs into three distinct groups
according to their performance and as will be discussed in Chapter 3.3.2. This
information was accessible, and was mostly gathered from official websites. In
some cases, the contact details were sent to the author by email, after contacting the
council?s online contact centre. Overall, a pool of participants was gathered from
these 43 sample LAs totalling 553 potential participants. At this point of the
sampling process, the population and the sample were almost identical. They both
included senior managers of failing and well performing LAs. However, since not
all listed senior managers eventually replied, the final sample was smaller, yet still
representative. The representativeness of the sample was not influenced by the
actual number of participants because there was no pattern of participation. The
sample consists of a random group of senior managers.
3.3.2. Descriptive Statistics of the Local Authorities
Within the 43 English LAs (N = 43) sampled in 2002, 25.6% were rated as
poor performers, 44.2% were rated as weak performers, and 30.2% were rated as
excellent performers (see Table 5 and Figure 4). In 2005, 2.3% of these LAs were
rated as poor performers, 14% were rated as weak performers, 37.2% were rated as
132
Table 5: Descriptive Statistics of the Local Authorities’ Sample (N = 43)
Variable Values N %
CPA Rates in 2002 for LAs Poor 11 25.6
Weak 19 44.2
Excellent 13 30.2
CPA Rates in 2005 for LAs Poor 1 2.3
Weak 6 14.0
Fair 16 37.2
Good 7 16.3
Excellent 13 30.2
Recovery (Dichotomy) of LAs Consistently failing LAs 17 39.5
Recovered LAs 13 30.2
Performing Well LAs 13 30.2
Extent of Recovery within Failing LAs
12
Stagnated 4 13.3
Moved up 1 category 13 43.3
Moved up 2 categories 12 40.0
Moved up 3 categories 1 3.3
fair performers, 16.3% were rated as good performers, and 30.2% were rated as
excellent performers (see Figure 5). Division of the sample into the three major
groups according to performance shows that in 2002 and 2005, 39.5% of the LAs
were consistently failing, 30.2% were failing LAs that recovered, and 30.2% were
good performers (see Figure 6). Within the failing LAs, 13.3% stagnated, 43.3%
improved their performance in one category, 40% in two categories, and 3.3% LAs
in three categories (see Figure 7). The following table and graphs describe the
sample of LAs.
12
Extent of recovery refers only to poor and weak LAs (N=30) while excellent performers are
excluded. This point will be discussed in details in Chapter 3.3.4.
133
25.58
44.19
30.23
Poor
Weak
Excellent
Performance in 2002
2.3
14
37.2
16.3
30.2
Poor
Weak
Fair
Good
Excellent
Performance in 2005
Figure 4: CPA Rates in 2002 for Local Authorities (%) (N = 43)
Figure 5: CPA Rates in 2005 for Local Authorities (%) (N = 43)
Figure 4 and 5 show a reasonable distribution of rating of performance of LAs.
134
Stagnation Moved up one
category
Moved up two
categories
Moved up
three
categories
Extent of Recovery
0
10
20
30
40
50
P
e
r
c
e
n
t
13.3
43.3
40
3.3
Extent of Recovery
39.53%
30.23%
30.23%
Failed & Failing
Failed & Recovered
Well Performing
Recovery (Dichotomy)
Figure 6: Recovery (Dichotomy) of Local Authorities (%) (N = 43)
Figure 7: Extent of Recovery within Failing Local Authorities (%) (N = 30)
Figure 6 and 7 show a reasonable distribution of level of recovery of LAs.
135
3.3.3. Distributing the TMSLA Questionnaire
In order to collect a large quantity of data, a questionnaire was distributed
among the sample participants. The questionnaire included three sections (see
Appendix 5):
1. A short personalised cover letter which specified the aim of the study and
assured confidentiality
2. The TMSLA scale, which measured the extent of implementation of TMS
according to the participants' evaluations
3. The demographic questions
The questionnaire was distributed and administrated by using professional
online survey software, a technique that has recently been more extensively used
(Bryman, 2004). The list of participants and their personal details (i.e., name, role,
address, e-mail address, and name of LA) were coded into the software. In addition,
an electronic version of the questionnaire, which is identical to the hard copy
version was coded into the software as well (please see an example in Appendix 6).
Then, the questionnaire was sent to all 553 participants? personal e-mails and a
reminder, a short e-mail, was sent after two weeks to those who did not respond.
The software enabled the participants to fill in their responses into an on-line web-
survey and send the results by one click. The software also tracked individual
participation (i.e., the name, role, and name of LA of the participant), blocked
multiple replies, and automatically downloaded the responses into an electronic
database. Since participation in this survey did not necessitate computer expertise,
printing or mailing facilities and since the participants published their email
addresses we believe the website survey was not a barrier for taking part in this
study.
3.3.4. Descriptive Statistics of Participants Sample
126 senior managers, councillors and executive directors (N = 126),
136
participated in the research, a response rate of 23%.
13,14
77.8% of the respondents
were males, 16.7% were females, and 5.6% did not answer the question. The
average age of the respondent was 54.3 years old (S.D. = 9.99), the mode age was
56, and the median age was 55. The average years of education was 16.4 years
(S.D. = 3.45), the mode and the median years of education were 17. The average
tenure in position was 6.73 years (S.D. = 7.85), the mode tenure was 3 years, and
the median tenure was 4 years. 78.6 % of the respondents held a councillor
position, 16.7% were non-elected members, and 4.8% did not answer the question.
5.6% of the participants were cabinet leaders, 42.9% were cabinet members, 27%
were committees chairman, 15.1% were CEOs/executive directors, and 9.5% did
not answer the question. The detailed descriptive statistics containing central and
dispersion measures is presented in Table 6. The graphical descriptions of the
demographic variables are presented next (see Figures 8 to 13).
34.2% of the participants were from LAs that were rated in 2002 as poor,
34.1% of the participants were from LAs that were rated as weak, and 31.7% of the
participants were from LAs that were rated as excellent. 4.8% of the participants
were from LAs that were rated in 2005 as poor, 11.1% of the participants were
from LAs that were rated as weak, 40.5% of the participants were from LAs that
were rated as fair, 12.7% of the participants were from LAs that were rated as good,
and 31% of the participants were from LAs that were rated as excellent.
13
Typically, response rate to on-line surveys are lower than those for comparable postal
questionnaire survey (Bryman, 2004).
14
Following up on nonrespondents revealed that they were distributed in a similar way to the
respondents: 32% were from persistently failing LAs, 32% were from recovered LAs, and 36% were
from well-performers, compared to 39%, 29%, and 32% (respectively) within the respondents. 80%
of the nonrespondents were councillors and 20% were non-elected members compared to 83% and
17% (respectively) within the respondents.
137
Table 6: Descriptive Statistics of the Participants (N = 114-126)
Variable Values N % Mean S.D. Range Minimum Maximum
Gender Male 98 77.8 - - - - -
Female 21 16.7 - - - - -
Not Answered 7 5.6
Position Councillor 99 78.6 - - - - -
Non-Elected
Member
21 16.7 - - - - -
Not Answered 6 4.8
Title Cabinet Leader 7 5.6 - - - - -
Cabinet Member 54 42.9 - - - - -
Committee
Chairman
34 27 - - - - -
Chief Executive/
Executive Director
19 15.1 - - - - -
Not Answered 12 9.5
Age (in years) - - - 54.3 9.99 51 29 80
Education
(in years)
- - - 16.4 3.45 21 9 30
Tenure
(in years)
- - - 6.73 7.85 39.5 0.5 40
Table 6 shows that participants were reasonably split between genders, positions,
titles, ages, years of education, and years of tenure.
138
77.78%
16.67%
5.56%
Male
Female
Missing
Gender
20.0 30.0 40.0 50.0 60.0 70.0 80.0
Age
0
5
10
15
20
25
F
r
e
q
u
e
n
c
y
Mean = 54.263
Std. Dev. = 9.9987
N = 118
Age
Figure 8: Gender of Participants (%) (N = 126)
Figure 9: Age (in years) of Participants (N = 118)
Figure 8 and 9 show reasonable distributions of gender and age of participants.
139
5.00 10.00 15.00 20.00 25.00 30.00
Education
0
5
10
15
20
25
30
F
r
e
q
u
e
n
c
y
Mean = 16.4615
Std. Dev. = 3.45048
N = 117
Education
0.00 10.00 20.00 30.00 40.00
Tenure
0
10
20
30
40
F
r
e
q
u
e
n
c
y
Mean = 6.7309
Std. Dev. = 7.85686
N = 118
Tenure
Figure 10: Education (in years) of Participants (N = 117)
Figure 11: Tenure (in years) of Participants (N = 118)
Figure 10 and 11 show reasonable distributions of years of education and tenure of
participants.
140
78.57%
16.67%
4.76%
Elected
member/Councillor
Non-Elected
member/Executive
officer
Missing
Position
5.56%
42.86%
26.98%
15.08%
9.52%
Cabinet leader
Cabinet member
Committee chairman
Executive director
Missing
Title
Figure 12: Position of Participants (%) (N = 126)
Figure 13: Title of Participants (%) (N = 126)
Figure 12 and 13 show reasonable distributions of position and titles of participants.
141
Division of the sample into the three major groups according the variable
Recovery (dichotomy) showed that 38.9% were from consistently failing LAs,
29.4% were from recovered LAs, and 31.7% were from well performing LAs. The
variable extent of recovery only refers to participants from failing LAs, since
participants from good performers had no equal chance to improve their rate
compared to their ranks in 2002. Among the participants from failing LAs, 10.5%
were from LAs that stagnated, 46.5% were from LAs that moved up one category,
38.4% were from LAs that moved up two categories, and 4.7% were from LAs that
moved up three categories. The detailed descriptive statistics for the participants?
LA?s performance is presented in Table 7. The graphical descriptions of these
variables are presented next (see Figures 14 to 17).
142
Table 7: Descriptive Statistics of the Participants’ Local Authority’s
Performance (N = 126)
Table 7 shows that participants were reasonably split between levels of
performance and levels of recovery of LAs.
15
Extent of recovery refers only to participants of poor and weak LAs (N=86) while participants of
excellent performers are excluded. This point is discussed in details in Chapter 3.3.4.
Variable Values N %
Participants? LA Performance in 2002 Poor 43 34.2
Weak 43 34.1
Excellent 40 31.7
Participants? LA Performance in 2005 Poor 6 4.8
Weak 14 11.1
Fair 51 40.5
Good 16 12.7
Excellent 39 31.0
Participants? LA Recovery (dichotomy) Consistently failing LAs 49 38.9
Recovered LAs 37 29.4
Well-Performing LAs 40 31.7
Participants? LA Extent of Recovery
15
Stagnated 9 10.5
Moved up 1 category 40 46.5
Moved up 2 categories 33 38.4
Moved up 3 categories 4 4.7
143
34.13
34.13
31.75
Poor
Weak
Excellent
Participants' Local Authority's Performance in 2002
4.8
11.1
40.5
12.7
31
Poor
Weak
Fair
Good
Excellent
Participants' Local Authority's Performance in 2005
Figure 14: Participants’ Local Authority’s CPA Rates in 2002 (%) (N = 126)
Figure 15: Participants’ Local Authority’s CPA Rates in 2005 (%) (N = 126)
Figure 14 and 15 show that participants were reasonably split between CPA rates.
144
38.89
29.37
31.75
Failed & Failing
Failed & Recovered
Well Performing
Participants' Local Authority's Recovery (Dichotomy)
Stagnated Moved up 1
category
Moved up 2
categories
Moved up 3
categories
Extent of Recovery
0
10
20
30
40
50
P
e
r
c
e
n
t
10.5
46.5
38.4
4.7
Extent of Recovery
Figure 16: Participants’ Local Authority’s Recovery (Dichotomy) (%)
(N = 126)
Figure 17: Participants’ Local Authority’s Extent of Recovery (%) (N = 86)
Figure 16 and 17 show that participants were reasonably split between levels of
recovery.
145
3.3.5. Study Variables
3.3.5.1. Extent of Implementation of Turnaround Management Strategies
The aim of this study is to create a measurement tool for Turnaround
Management Strategies in LAs. Creation of a new measurement tool follows two
main steps:
1. Conceptualisation
2. Operationalisation
The literature review has dealt with the conceptualisation of TMS, their
characteristics, theoretical framework, and adaptability for LAs. The qualitative
data and particularly the interviews will further contribute to the conceptualisation
of a scale and fill it with content that reflects the field. This abstract level is the start
point for the second step. Operationalisation means linking and designing concepts
and definitions to a specific set of procedures, measures, questions, and items. It
employs the construction of the scale and the validation process.
The variable 'Extent of Implementation of TMSLA' is the operational
definition for the theoretical definition of TMS: „the actions taken to bring about a
recovery in performance in a failing organisation? (Pandit, 2000). This variable is
an independent variable, which may affect the achievement of recovery (Beeri,
2009a). Although existing literature has dealt with the measurement of TMS, we
found the measurement tools used inadequate for this research. In our view, the
way TMS have been usually measured in previous studies has yet to uncover the
full picture regarding the extent of implementation of TMS. The published work on
TMS largely consists of case studies of single organisations. As previously noted,
the methodological problem with such studies is that the strategies that supposedly
led to organisational recovery may also have been used in persistently failing
organisations. This study aims to be more accurate by comparing recovered and
persistently failing LAs. No research based on this comparative methodology while
using a detailed scale of TMS has so far been conducted in the public sector
(Boyne, 2004).
Additionally, it can be argued that the existing measurement of TMS tends
to treat the „black box? as a homogeneous set of strategies. Given that the „black
146
box? is heterogeneous, there is a need for testing and explaining the nature of each
group of strategies (or each strategy) in a recovery process (Walshe et al, 2004).
The quantitative part of this research dismantles the „black box? by using several
ways of measurement: extent of implementation of the overall TMSLA, TMSLA
according to the 3Rs dimensions, and TMSLA as individual strategies.
16
3.3.5.2. Recovery of Performance
According to Joyce (2004), a public organisation that experiences a
recovery process is ’an organisation moving from being a poor performer to being
a good performer’. Recovery of performance is the core and expected outcome of a
successful recovery process. While we have assumed that Recovery of Performance
may be positively related and affected by TMS, Recovery of Performance is the
dependent variable in this study.
The variable recovery was based on secondary data published by the Audit
commission between 2002 and 2006 (see Table 1). Since there is no measure for
LAs? recovery in previous studies, we created two optional operational definitions
for recovery. The secondary data contains all 150 English LAs and their CPA rates
over those years (The Audit Commission methodology and findings were specified
in Chapter 2.3. and Appendix 3). According to the CPA rates LAs were categorised
into five groups of performance: Poor performers, Weak performers, Fair
performers, Good performers, and Excellent performers. This data enabled the
measurement of recovery in two ways, which do not compete but complement each
other. The dual measurement will enable to run various tests and have several
points of view on the relationship between TMS and recovery:
1. Recovery as a Dichotomous Variable- The measurement level of this variable
is nominal. Each failing LA and the senior managers who participated in the
study were classified either as recovered or persistently failing. Since the
definition of recovery emphasises radical improvement and movement toward
being a good performer, improving performance in at least two categories
16
The construction and validation process of 'Extent of Implementation of TMS' will be discussed
after the Results and Discussion chapter since it is partly based on the Case Study chapter.
147
(from poor to fair, from poor to good, or from weak to good) was considered as
a significant recovery. Thus, the variable Recovery was coded as following:
Persistently Failing – 0 and Recovered – 1.
2. Extent of Recovery- The measurement level of this variable is ordinal. It could
be argued that it is impossible to make a decision regarding the exact point
from which a recovery is significant. In order to deal with this argument, this
variable regards the categories used by the Audit Commission as gradual levels
of performance and recovery. These levels reflect the extent of recovery. Thus,
climbing up three categories could be considered as a larger extent of recovery
than climbing up two categories.
3.3.5.3. Demographic Variables
In order to characterise the sample of participants and make sure it reflects
the general population of senior managers in LAs, several demographic variables
were measured. The demographic variables were Gender, Age, Years of Education,
Position (Elected Member – Councillor/Non-Elected Member - Executive Officer),
Title in the Local Authority (Cabinet Leader/Cabinet Member/Committee
Chairman/Chief Executive/Executive Director/Other), and Tenure in the present
position.
3.3.6. Analyses and Statistical Procedures
In order to describe the sample, test the validity and reliability, and test the
effectiveness of TMS, the participants? evaluations were inputted into a data file.
Using SPSS 14.0 (Statistical Package for Social Sciences version 14.0) the data was
manipulated, described, and analysed. As presented previously, descriptive
statistics were used to portray the sample. The demographic variables were
described using central measures (Mean, Median, and Mode), dispersion measures
(Standard Deviation, Range, Minimum, and Maximum), appropriate graphs (Pie
chart, Bar Chart, and Histogram), and cross tabulation.
Testing the reliability and validity to support new scales was done according
148
Neuman?s (2003) recommendations and the Vigoda-Gadot et al. (2007) process.
Multiple tests examined three major aspects of „Extent of TMS implementation?:
1. Content Validity- TMSLA scale was expected to have face and content validity.
That means that the conceptual and the operational definitions of the new scale
were expected to be internally coordinated. The items were expected to reflect,
cover, and represent the concept of TMS in LAs. In this case, the expectations
were examined with qualitative tools according to two criteria: Content
Validity, which answers the question whether the new scale captures the entire
meaning of TMS, and Face Validity, which focuses on the value of the new
scale in the eyes of others.
2. Construct Validity- In line with TMS construct, and consistently with the
reviewed literature, TMSLA was also expected to reflect aspects of three major
sets of associated strategies: retrenchment, repositioning, and reorganisation. In
order to support the convergent validity, which means that multiple measures of
the same construct hang together or operate in similar ways, these constructs
were expected to be associated with each other. These expectations were tested
using factor analysis technique (Principal Components Analysis) and Pearson?s
Coefficient Correlation.
3. Reliability- The new scale was expected to be dependable and not to produce
numerous results that vary across divergent contexts or groups. Thus, TMSLA
was expected to have internal consistency, equivalence reliability (comparison
between divergent contexts), and representative reliability (comparison between
sub-populations). These expectations were tested using various techniques:
Cronbach?s alpha was applied to assess the internal consistency; Split-Half
technique and Spearman-Browne Correlation Coefficient were conducted to test
the equivalence reliability; and lastly, to test the representative reliability,
independent samples t-tests for groups of different demographics characteristics
were conducted.
The core analysis of the quantitative data concerned tests that analysed the
effectiveness of TMS in achieving recovery. The inferential statistics required
various procedures, which were carried out in two stages:
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1. For each test (e.g., Chi
2,
Spearman, Pearson, T-test, Anova, Mann-Whitney U,
Regression), we tested whether the correlation/difference/prediction should be
rejected or not. According to the common recommendation for social sciences
scholars, the probability that our model or effect is generally applicable and not
just an occurrence should be tested. The more variation our model explains, the
bigger the test statistic will be, and the more unlikely is it that it occurred by
chance. Thus, as test statistics grows bigger, the probability that it occurred by
chance becomes smaller. When this probability falls below 0.05, it allows us to
assume with some extent of confidence that it reflects what really occurred
within the study population (e.g., failing LAs in general) (Field, 2005).
2. For each test, the effect size (e.g., Eta Squared, r), an objective and standardized
measure of the magnitude of the difference between the groups was calculated.
In other words, it was checked if the effect the test measured was meaningful or
important. Eta square can range between 0 and 1 and represents the proportion
of variance of the dependent variable that is explained by the independent
variable. The guidelines for Eta squared values interpretation are as follow: .01
= small effect, .06 = moderate effect and .14 = large effect (Pallant, 2001). The
„r? value can range between 0 to 1 and represents the proportion of variance of
the dependent variable that is explained by the independent-group variable; the
guidelines for r values interpretation are: .1 = small effect, .3+ = moderate
effect, and .5+ = large effect (Field, 2005).
In order to explore the nature and effectiveness of TMS, various tests were
conducted. While the above procedures describe the general stages of inferential
statistics, the following details the tests employed and their aims:
1. The extent of implementation of TMS in failing LAs- The first assessment
employed descriptive statistics procedures such as central measures (Mean,
Median, and Mode), dispersion measures (Standard Deviation, Range,
Minimum, and Maximum) and the analysis of shapes of distributions. Among
senior managers in failing LAs, the variables to be described were Overall
TMSLA, the eight factors, and the individual strategies. These procedures
provided the necessary information to estimate the extent of implementation of
TMSLA and particularly in failing LAs.
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In addition, a comparison made it possible to assess whether particular
TMS were more popular than other TMS. In order to compare the extent of
implementation of different factors, One-way repeated measures ANOVA
including Post-Hoc tests (i.e. Paired-samples T-tests) were conducted. This test
is used for comparison of mean scores of dependent variables (i.e., the eight
factors). This test has several underlying assumptions that had not been
violated: the use of a dependent variable, which is measured at ratio level; the
scores were obtained by using a random sample; the observations were
independent; the populations were normally distributed (however, this test is
tolerant for the violation of normality in large sample sizes (e.g., 30+)); and,
samples were obtained from populations of equal variance (Field, 2005; Pallant,
2001).
2. Comparison of the extent of implementation of TMS between failing and well-
performing LAs- This comparison enabled to assess whether TMS are more
popular within failing LAs. These comparisons were conducted by using Two
Independent Samples T-tests. This test is used for comparison of mean scores of
dependent variables (i.e., Overall TMSLA, the eight factors) between two
groups (i.e., participant from failing LAs versus participants from well-
performing LAs). This test has several underlying assumptions that are similar
to those presented for One-way repeated measures ANOVA.
Comparisons of individual strategies between senior managers of failing
and well-performing LAs were conducted with the use of Mann-Whitney U
tests. This non-parametric test is actually used to test the differences in medians
of two independent groups. This test has two underlying assumptions that had
not been violated: the scores were obtained by using a random sample and the
observations were independent (Field, 2005; Pallant, 2001).
3. Comparison of the extent of implementation of TMS between recovered and
persistently failing LAs- This comparison is aimed at assessing whether TMS
tend to be implemented to a larger extent in LAs that had successfully
recovered. Comparisons of TMSLA were conducted by using Two Independent
Samples T-tests. Comparisons of individual strategies were conducted with the
use of Mann-Whitney U tests.
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4. Correlating the TMS extent of implementation and recovery- This test was
aimed at estimating whether there are linear relationships between the variables
and whether increased implementation of TMS relates to increased recovery.
The correlation was tested using Spearman's Rank Order Correlation (Rho).
This non-parametric test is used to calculate the strength of the relationship
between two ordinal/continuous variables. The Spearman coefficient values
range between –1 (indicating strong negative correlation) and +1 (indicating
strong positive correlation). This test was used for the Overall TMSLA, the
eight factors, and the individual strategies.
5. Predicting successful recovery- The aim of this test was to assess whether
increased implementation of TMS can predict successful recovery. In order to
explore and assess the impact of a set of predictors on a dependent variable,
logistic regression was used. The underlying assumptions such as sample size,
multicollinearity, and outliers were taken into consideration. Multiple
regression is adequate to predict a categorical dichotomy outcome. Thus,
„Persistently Failing? LAs were coded as „0? and „Recovered LAs were coded as
„1?. An explorative approach required to follow Field (2005) recommendation
and use the stepwise Forward Wald method, which automatically excludes the
variables not explaining the dependent variable and presents the best possible
predicted model.
In sum, this chapter provides an overview of the operational crossroads of
this study. The description of these crossroads illustrates the decisions made in
reference to methodological questions like (i) how this study was carried out, (ii)
how information was gathered, (iii) how units were sampled, (iv) how variables
were measured, and (v) how statistical procedures were made. In other words, the
methodology chapter clarifies how the research questions were evaluated and tested
and how the results, which are about to be presented, were found.
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CHAPTER 4: CASE STUDIES
The following report is based on two stories of LAs. Although the ability to
infer from these two cases to all other cases is limited, the exploratory approach
enables an initial and basic overview of TMS and recovery process in failing LAs.
By being sensitive to the organisational narratives, as they appear in the documents,
self-reports, governmental reports, newspaper articles, and throughout the
interviews, the qualitative data enlightens the insight developed up to this point.
Namely, it provides a reshaped perspective concerning the characteristics of failing
LAs, the content of TMS used later to construct a matching scale, and the impact of
these strategies and recovery.
Before getting into the details, it is important to put the cases in the wide
context of English local government. Therefore, this report should be read as a
continuation of the literature review and as a detailed description of scenarios of
failure and recovery within the English local government case described earlier.
Assuming the reader bare those circumstances in mind, the first part of the report
consists in the political background and demographical population of each LA.
Second, the LA services' performance, financial status, and organisational climate
before the recovery process are portrayed. Third, managerial processes such as
triggers that led to change and strategic plan formulation are presented. Fourth, the
extent of recovery is evaluated and the strategies used to bring about these
recoveries are detailed. Lastly, a comparison between the cases concerning several
aspects is drawn.
4.1. Walsall and Swindon Turnaround
4.1.1. General Description of the Councils
According to the Audit Commission (2002) and the LA self reports (2005),
Walsall was formed in the 1970s by the merger of two LAs. It has a population of
more than one quarter of a million, and is close to the heart of the national road and
rail networks. It covers over 100 square kilometers and combines urban, suburban,
and rural communities that reflect the area?s socio-economic history of heavy
industry and craft based industry. About 33% of residents are aged under 25 (above
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the national average of 31%), 20% are under 16 (equal to the national average of
20%), 14% are from minority ethnic backgrounds (India, Pakistan, Bangladesh, and
Black Groups) and around 40 different languages are spoken. Compared to the
national average Walsall has a low percentage of residents in managerial and
professional posts - (20% against 26% at national level)
Walsall has more than 50 councillors: The Conservatives hold more than
60% of seats, the Labour has 30% of seats and the Liberal Democrats have around
10% of seats representing 20 wards. Walsall currently has an overall Conservative
administration majority and the same leader since 2001. Walsall has „leader and
cabinet? constitutional arrangements. There is a one-party Cabinet and five scrutiny
and performance panels. The posts of chair and vice-chair are shared between the
three political groups. The council provides work for around 10,000 employees and
the draft net revenue budget for 2005/6 was about £350 million.
Since the 1970s and during the 1980s and the 1990s there was a decline of
the local economy with the loss of traditional sources of employment. Urban
Program, City Challenge, Single Regeneration Budget (SRB), New Deal for
Communities (NDC), Neighbourhoods Renewal Fund (NRF), and other regional
development assistance plans have sought to regenerate the local economy and its
communities. This was done by restoring previously contaminated brown field
sites, building capacity in the local workforce, developing fresh industrial and
commercial business opportunities within the borough, and improving the physical
infrastructure (Audit Commission, 2002). However, these national plans had not
prevented poor performance in Walsall, as will be described later.
According to the Audit Commission reports, the second case study,
Swindon, has a population of about 200,000 people, most of whom live in urban
areas. Since the 1950s, the population has doubled, compared with a 20%
population increase nationally, and it is projected to continue to be one of the
fastest growing areas in England. The population is slightly younger than the
national average (50% aged fewer than 40 while 54% is the national average). The
proportion of people from black and minority ethnic groups is 3.3% compared with
the national average of 7.25%.
The LA area economy is buoyant. Despite the loss of its railway base,
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effective dialogue with the business sector encouraged firms of significant size to
relocate their headquarters to its area. In 1998 the Office for National Statistics
listed Swindon as having one of the highest gross domestic products per capita in
England outside London. Unemployment levels continue to be well below the
national rate, falling to a record low of 1.55% in 2000 compared with 3.4%
nationally. The LA rank of Area of England has passed the median in 2005, which
reflects the improving status of residents in past years. Despite this, it has
significant social and economic diversity within its relatively small and compact
area, with two wards that are nationally ranked amongst the most disadvantaged
wards.
The Audit Commission?s reports points out that, for many years Swindon?s
Council and its predecessor had a Labour majority, but in the last couple of
elections the majority changed more than once. Swindon?s council comprises more
than 50 Councillors. The Conservatives hold more than 50% of seats, the Labour
has 33% of seats and the Liberal Democrats have about 17% of seats. In 2000
Swindon adopted a decision-making model based on a Cabinet with Leader. The
cabinet has responsibility for executive decisions within the overall budget and
policy framework, whilst a scrutiny commission monitors and assesses the
performance of both the cabinet and the LA as a whole. The cabinet includes the
leaders of both conservative and liberal democrat groups as members without
portfolio. There are four area panels, consisting of ward councillors meeting with
local people and groups to develop services. Finally, Swindon has a standards
commission of councillors and independent people to consider issues of probity and
to establish ethical codes of behaviour.
The overall revenue budget of Swindon for the year 2004/05 was around
£300 million. The LA employed around 8,000 people making it the largest
employer within the borough. The Chief Executive is supported by a team of five
directors that represent different areas: Education and Community Services,
Housing and Social Services, Resources, Environmental Services, and the LA's
Services. Yet, this organisational structure had not prevented poor performance in
the case of Swindon as well, as will be portrayed below.
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4.1.2. Poor Performance
In December 2002, Walsall was labelled by the CPA report as a „poor
performer?. A number of serious concerns relating to the LA corporate governance
arrangements, services delivery, and organisational culture were described in an
earlier governmental Corporate Governance Report, published in 2002 (p. 7). As
described by the report:
'We found significant weaknesses in Walsall?s corporate governance
arrangements…
Community Focus- The Council does not have a corporate vision … and as
yet has no community strategy… no strategic approach to community
consultation and involvement. There is cynicism about council politics in
Walsall and mistrust of local politicians...The Council does not have a
communications strategy and there is no overall management of
communications or image. This leads to a fragmented and reactive
approach, and results in negative media coverage and a poor external
perception of the Council. Without clear political leadership…Walsall?s
community focus is unlikely to improve.
Structures and processes- The Council lacks the infrastructure for effective
modern local government…There is no systematic approach to planning or
performance review to drive service improvement and the Best Value
process is not being used to challenge and make significant service
improvement…
Risk management- The Council?s finances are critical and precarious.
Action taken to date is inadequate given the longstanding nature and
seriousness of the problems. There has been no review of how resources are
spent, nor any attempt to take a strategic approach to the budget or use best
value to look at fundamentals.
Service delivery- There are pockets of good service delivery but the Council
is unable to learn from these or integrate improvement or good practices.
This is because there is no corporate process of performance and service
improvement.'
As a consequence of these findings, the Council crisis has been widely covered by
the media. While shaping the public view, it stressed out the tensed central-local
relationship, as the BBC (2002a) reported:
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'Sir Andrew Foster, controller of the Audit Commission, said the situation
was "very grave… Walsall Council has failed local people… The findings
of the inspection team include poor financial management such as "hand-to-
mouth" budgets with the authority lurching from one financial crisis to
another. Uncontrolled over-spending and unrealistic budgets often set too
late had led to "serious inaccuracies" in the figures, according to the
auditors. Funds intended for long-term investment had instead been raided
to tackle short-term financial problems. As a result, roads in Walsall were
the "worst" of any local authority in England or Wales.'
This paragraph demonstrates the extended role taken by the Audit Commission in
interpreting local needs and local priorities. Similarly, the Birmingham Post
(2002a) reported:
'Council is 'hopeful' of getting better. A crisis-ridden Midland council
condemned by inspectors in a devastating report is getting better but still has
a long way to go, Ministers have warned. Walsall Council had made some
improvements, said a spokesman for Local Government Minister Nick
Raynsford. However, it still suffers from many of the problems that led it to
receive the worst inspection report ever published about a local authority…
The inspectors concluded Walsall council was "in a crisis". It was given a
deadline of the end of April to improve. Yesterday, the council said it was
"cautiously confident and hopeful" it would be able to show progress by
then, but admitted "there is a huge amount still to do." They warned the
council had no communications strategy, there was "cynicism about council
politics in Walsall and mistrust of local politicians", there was no clear
political leadership, the council "lacks the infrastructure for effective
modern local government", its finances were "critical and precarious" and
"medium term financial planning is virtually non existent".'
Obviously, local decision makers were not happy with the results presented
by the Audit Commission and newspaper reports. Since locals held the idea that the
Best Value regime and CPA were not free of lacunas, decision makers fought back
and criticised these reports, ideas, procedures, and performance measurement
system, while the Audit Commission justified them. For instance, the following
report demonstrates this struggle:
'Some councils complained that the exercise was unfair and one even
threatened legal action on finding itself marked down. But James Strachan,
commission chairman, said: "It was definitely and absolutely fair. Local
people will have a stronger and clearer idea of the overall performance of
their council than they have ever had before."... Even the best performing
councils had misgivings about the tables. Simon Milton, leader of
Westminster, said: "The 'name and shame' regime will see the reputation of
local government decline, not improve.' (Johnston, 2002).
157
Though that the media describes some kind of resistance to the CPA
methodology at the end of the day LAs admitted their bad performance and
eventually fully cooperated with central agencies. The audit report and the media
coverage supply evidence for a failure characterised by multiple and interrelated
factors. When the interviewees were asked to describe the council's performance
during this period (the late 1990s and early 2000s) they chose to use a tough
language, indicating that the failure was recognised by more than one stakeholder.
This description goes hand in hand with the governmental Corporate Governance
Report (2002) previously presented. As the interviewees described:
'[T]he services that were delivered to the citizens were crap, poor and low...
Financially, Walsall was bankrupt... As a result, there was a deep
dissatisfaction regarding the leadership, their behaviour, and their
managerial tools... This was the leadership fault since they were using an
old fashioned approach and they were managing the crisis unprofessionally.'
Trust and commitment had deteriorated and reached a point that employees
made a call to replace the chief executive. The poor performance led to criticism
and poor reputation among external stakeholders as well. According to the
interviewees, Walsall was labelled by public opinion as "the worst council in
England". The evidence showed that criticism resulted in pressures from external
stakeholders, e.g., politicians and the media, to bring about a recovery. The
interviewees felt that the government put Walsall under heavy pressure to change
the situation, creating in this way a stressed relationship. In addition, the
interviewees described a feeling of struggle with their environment. Their
relationships with other authorities and institutions were tense and demanding.
Examples for these pressures can be found in the media. These examples
provide evidence for the use of governmental statutory powers to regulate
individual councils. According to the Best Value principles, the Government
decided to massively intervene in Walsall Council, as reported by the BBC
(2002b):
'The government has ordered intervention in another three local education
authorities following critical inspection reports... Consultants are to be sent
into ... Walsall council as a result of the Office for Standards in Education
(Ofsted) reports... The inspectors' verdict on Walsall was that key functions
were not being performed adequately. These included planning the
education budget, support for schools causing concern, support for
maintaining discipline in schools, and support for pupils with special
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educational needs.'
Second, alongside governmental and inter-organisational pressures were
coming from the opposition and strengthened by the media:
'"Rotten borough" screamed out from the front page of the local paper in
Walsall. Just days before the polls open in the elections, the Advertiser was
quoting the latest campaign material by the Labour group. It reminds the
people of the West Midlands town their council was almost taken over by
central Government just two months ago. In a last bid for votes, Labour has
sought to distance itself from the way the council, currently under a
Conservative/Liberal Democrat leadership, has been run. The party has used
evidence from the Audit Commission (AC), which delivered a damning
report on all aspects of the council's work in January. "Walsall council has
failed local people," said AC controller Sir Andrew Foster, when it was
released.' (Schaffer, 2002).
Not surprisingly, while failure found impression in low standard services,
consumers were not the only ones to suffer from Walsall's failure; internal relations
were affected as well. Accordingly, the interviewees? revealed:
"[the employees]…suffered from negative feelings like guilt, regret, and
even shame... We all had negative attitudes... we went through ongoing
conflicts and we felt our jobs were not secure anymore… we had mixed
feelings: wanting to leave and be part of the solution."
Conflicts within the management were also present. As the Corporate Governance
Report (2002, p. 9) reveals:
'The Council has made little progress in ensuring transparent governance
and high standards of conduct. This may have contributed to the passive
approach of officers and their acceptance of the way in which business is
done in Walsall. The relationships between officers and councillors are
often unacceptable and the poor relationships between councillors are not
conducive to effective governance. There is a culture of fear and mistrust at
senior levels. We saw no signs of anyone being able or willing to challenge
poor conduct.'
Professionals are central players in local activity while taking a crucial part
in both policy formulation and policy implementation. Thus, they were part of the
conflict and public debate:
'A mayor is at the centre of a fierce row after a council officer stormed out
of a meeting in disgust at the civic chief's treatment of him. Walsall Mayor
Coun Roger Collins was accused of being sarcastic and using put-downs to
Neville Ball as colleagues discussed a seemingly innocuous application for
a garden fence last night.' (Hardy, 2002b).
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Internal conflicts were not kept behind closed doors and were expressed and
criticised in the media. The BBC reported 'Councillors in Walsall have been
accused of bullying and intimidating senior officers and being more concerned with
feuding and in-fighting... there are a lot of egos in there at the moment' (BBC,
2002a).
From the interviewees? point of view, the poor performance and abandoned
staff created a negative and unproductive organisational climate. The staff had
many internal political struggles, not just between politicians but between non-
elected officers as well. The interviewees reported that there were extreme cases of
"managers who were bullying and depressing staff, and staff that reacted by
expressing anger and fear." At this stage, the attitude of both leaders and employees
toward the failure was of denial and resistance to change, as stated by one of the
leaders: "people had difficulties to accept the governmental reports that actually
said that we are a rubbish organisation." This difficulty reflects the problems
inherent to public failure, e.g., the ambiguity around its recognition, seriousness,
declaration, and the need to tackle it. While the Audit Commission did recognise
the crisis, it recommended the Office of the Deputy Prime Minister (ODPM) to
remove the executive team and to bring in an interim management team to support
the original management team and the recovery process. In this case, the original
executive team was retained together with the supervision of an appointed interim
board.
Yet, this move created further pressure on the Council and the conflicted
relationship with central government has worsened since intervention was massive
and destabilised local leadership:
'Walsall has just 48 hours to stop Whitehall ordering a private takeover of
the crisis-hit council. Senior officers, including chief executive Hardial
Bhogal, will all be axed unless councillors are able to persuade local
government minister Nick Raynsford by Thursday that they can turn round
the council's fortunes' (Hardy, 2002a).
'Proposals to prevent several senior council officials in Walsall from being
sacked have been rejected by the government. Ministers have said that 10
officers, including the chief executive, should be replaced by a team of
management consultants. But councillors say the authority can solve its own
problems and Whitehall should not impose the new team on the borough.
After a meeting between the two sides on Thursday the borough council has
been given just over a week to come forward with "more robust" plans to
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improve performance' (BBC, 2002c).
Similar to Walsall, Swindon was also rated in 2002 as a poor performer.
According to the Audit Commission reports, the council was just beginning to
tackle long-standing and serious weaknesses. Whilst Swindon had started to
address these issues, the progress was limited and it was unlikely that
improvements would be recognised by the public. Swindon received a score of 1
out of 4 for the way the Council was run. The council?s ambitions were large but
were not backed by clear targets. As a result, there was confusion amongst partners
and service users regarding what Swindon was trying to achieve. The LA did not
have a medium or longer-term strategy, everything was regarded as first priority,
and therefore nothing indeed was treated as such.
As a result of this lack of clarity, Swindon had no focus. The council
recognised that it still had significant work to do in order to engage effectively and
set clear priorities regarding partners and the local community. The management,
which was described by the Audit Commission as weak, promised to tackle several
issues, though none of them was delivered on time. The average satisfaction level
of consumers with the LA was low. The delivery of key services, such as education
and social care, were still weak, though there were some important achievements in
other areas such as community safety. There was sound planning in isolated areas,
such as asset management and education, but robust plans for future improvements
were missing (Audit Commission, 2002).
The following newspaper reports demonstrate the poor services provided:
'Swindon Borough Council was rated as 'poor' in the report. Swindon
Borough Council has been ranked as one of England's worst according to
league tables published by a public services watchdog… It is the second
year running that Swindon has been ranked as "poor", the lowest possible
rating of five. Mike Bawden, leader of Swindon Borough Council said: "As
we have set a new administration… we will be driving change through in
2004. If we don't deliver then there needs to be some fundamental questions
asked" ' (BBC, 2003d).
'Social services in Swindon are amongst the worst in England, says a new
report. The authority [Swindon] is one of eight in the country to receive no
stars from the Department of Health's Social Services Inspectorate (SSI). It
is the second year in a row the council has received the lowest rating,
because it is deemed not to be serving children well, although its adult's
services are better.' (BBC, 2003c).
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Similar to Walsall, and in accordance to the arguments of this thesis, the
interviews confirm that sustained deterioration of performance in the supply of
services is a reliable indicator for failure in a public agency. As the 2002 Audit
Commission report (p. 4) summarised, the approach of the Swindon council to
performance management and to the best value process had been weak:
'Despite some signs of improvement, attention to performance management
from members and officers has been poor and sporadic. Financial
information is not linked to performance and therefore the council is unable
to determine if it is providing effective services at a reasonable cost.'
The report portrays the roots of this deterioration (p. 4):
'The council's corporate centre is almost non-existent and, in its absence,
there is a fragmented approach to corporate planning with individual
departments dealing with different plans and with no framework for
integration. This weakness at the centre of the council?s activities is
exacerbated by the difficulties, which members have encountered in
operating politically in a situation where there is no overall political control.
There are only the very fragile beginnings of co-operation across the parties
on agreed areas of difficulty.'
These findings support the argument previously presented that indicate the
management as the core cause for decline. The interviewees? description of
Swindon matched this argument. According to them the poor performance was
rooted in mismanagement, specifically organisational negligence:
"The internal services for staff were abandoned or completely missing. I
admit we did not invest in our own people… For instance, on average, there
was about one day of training per person per year."
Interestingly, the interviewees maintained that while the financial reports
were good, poor services were delivered, as one of the interviewees stated:
"[W]hile the economic condition was satisfactory, the facilities provided to
the community were poor. There was an unacceptable gap between the
financial evidence and the way the LA?s environment looked like."
The given explanation for this gap was that although the budget was balanced, it
was used ineffectively. This further enhances the conclusion that failure in public
organisations does not necessarily depend on, is related to, or is rooted in financial
deterioration.
The poor performance and abandoned staff created a negative and
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unproductive organisational climate, a climate that was portrayed as „long corridors
and closed doors?. The common spoken language reflected the negative climate
using judging terms like „fault and guilt?. Part of this negative climate resulted in
internal political struggles and conflicts. The interviewees argued that the extent of
these political struggles was greater than normal and it caused dysfunction within
both the management and employees:
"…within part of the management team members, the attitude toward failure
was of denial and ignorance. There was a wide resistance to changes…
Even when the failure was recognised, a culture of no risks taking and
innovativeness avoidance was widespread… At this stage, there were still
signs of stagnation. For instance, too many discussions were around the
belief of 'no can do' and they were focused on the employees rather on the
consumers… unfortunately, during that period, the council had the political
power, but it was not a guarantee for success."
Consistent with the integrated analysis of the interviews, documents, and
literature, the major implications for LA failure could therefore be classified into
two groups: externals and internals. Externally, the core mission of a failing LA is
not accomplished. The obligations to the consumers are not fulfilled, or more
practically, poor services are delivered. As a result of unresponsiveness to
consumer needs and poor reputation the LA relationship with the environment is
tense. The consumers, the media, politicians, and national decision-makers put the
LA under heavy pressures to bring about a recovery. Internally, the management of
failing LAs is usually poor, unskilled, centralised, stagnated, inflexible, and suffers
from lack of leadership. Alongside supplying poor services, the LA suffers from
inability to bring about a recovery. The management's inability to lead the staff and
deal with emotion management results in a negative and unproductive
organisational climate. The employees suffer from negative attitudes, discomforts,
and conflicts, which make the employees relatively unmotivated and unproductive.
In sum, failing LAs are characterised by these internal and external implications.
However, these characteristics are not conclusive. Drawing the line between failing
and non-failing LAs is still a hard task that requires appropriate measures.
Interestingly, the description of English LAs pointed out that LA failure is
possibly rooted in decreased external resources, environmental factors, and external
causes (e.g., governmental changes of ideologies and priorities, external pressures,
and financial restrictions concerning the entire population of LAs). By contrast, the
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Audit Commission reports, the LA formal self evaluations, and the interviewees, all
pointed out decreased internal resources, organisational factors, and internal causes
for failure, for instance, poor leadership, mismanagement, deficient organisational
learning process, poor decision-making, inadequate financial control, inadequate
financial policy, and internal conflicts.
Another important point reveals that the characteristics of failing LA were
found to be quite similar in Walsall and Swindon except for one. Whereas in both
cases dysfunction, poor performance, and financial mismanagement dominated the
LA, these took place while Swindon was financially balanced and Walsall was
insolvent. In contrast to failure of private business, which is most likely to be
characterised as non-profitability and deterioration of resources (McKiernan, 2003;
Trussel, Greenlee and Brady, 2002), a failure of LA can exist while finances are
balanced yet utilised ineffectively. In other words, a proper financial control does
not indicate a high quality of services and failure in LA does not indicate the
financial status. Hence, finances are neither the major nor the singular indicator for
a failure in a public organisation; however, poor services almost certainly are.
4.1.3. A Comprehensive Recovery Plan and General Improvements
In 2003, the failure in Walsall, led the new management team to conduct a
diagnosis of the LA and formulate a corporate recovery plan. Yet, this plan was
approved only after previous version was rejected, demonstrating the strict and
harsh relationship with central government:
'Minister throws out Walsall plan. Walsall Council's action plan designed to
save it from takeover by private consultants has been rejected by the
Government. Ministers are not convinced proposals drawn up by council
leaders and managers would solve the problems identified in a damning
report by the Audit Commission. Now the authority has been given extra
time, with a deadline of July 9 to produce a more "robust" and "plausible"
scheme. If it fails, the Government will appoint consultants to take over key
positions and up to ten top managers, including the chief executive, face the
sack... The proposals were rejected in a letter from Local Government
Minister Nick Raynsford. He said: "This is a council that is failing its
citizens on many levels. Walsall has reached the end of the line. Walsall has
a matter of days to put up a convincing case that they can change - if not, I
will direct them to make substantial changes in the way they manage the
council" ' (Walker, 2002).
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The approved plan included a management performance plan and the
recovery was defined as a reinvention of Walsall. The plan set out the journey to
convert Walsall into a showcase to be rated as an excellent performer by 2008.
A vision adopted by the council expressed high levels of desired standards,
as the 'Developing Our Vision – Corporate Assessment – Self Assessment' (p.17)
declared: '[Walsall] will be a prosperous, inclusive, and competitive Borough, in
which its diverse communities feel involved, safer, healthier, and can take pride in
its future'. The „Vision 2008? set out clear ambitions and immediate priorities for
the area, established a framework for financial and performance management, and
defined comprehensive service planning. The vision was promoted through seven
themes, which formed the standards for the community and council:
1. Raising educational standards through lifelong learning
2. Improving health, well being and social care
3. Regenerating the economy
4. Creating a better place to live and work
5. Improving community safety
6. Enhancing community participation
7. Effective and modern council
The plan was designed to ensure that all areas and concerns highlighted by
the Audit Commission and other inspection agencies would be tackled in a
systematic and coordinated way. Internal and external areas and activities were
reshaped in order to return to healthier ways of working with partners and
communities. It contained details of several projects. Each individual project
included an action plan that identified the objectives, the milestones, the outcomes,
and the public impact. Second level documentation added a Gantt chart that trailed
implementation and effective monitoring. In order to set the recovery plan projects
within a wider context, the projects were connected to the strategic vision and
linked to one of the seven themes mentioned above. In addition, the recovery plan
included the definitions of roles and responsibilities of the executive management
team, monitoring, and consultation mechanisms. As was argued in the 'Re-
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Inventing Walsall – Corporate Recovery Plan' (2003, p. 3):
• 'Re-Inventing Walsall has at its heart the recovery of the council in a
range of specific areas of activity... it does comprise projects of strategic
and operational importance for the return of the council to healthier
ways of working internally and externally, with its partners and
community...
[The plan]
• Includes transformational projects such as cultural change and
management development
• Includes other key issues such as supporting people
• Has an outward looking focus
• Has a focus on the enabling infrastructures
• Seeks to engage all employees'
The corporate recovery plan was followed by a corporate financial strategy.
According to the cabinet meeting reports and the head of finance reports, the
adopted financial strategic framework reflected the recovery plan. It defined the
highest priorities, funded them, and set a balanced budget for 2002 to 2008. One of
the sources that enabled putting into practice the planned changes was aid coming
from the central government:
'New centre scheme for Walsall. Plans for a multi-million pound revamp of
a town centre's transport system have been given the green light. Transport
Secretary Alistair Darling last week announced a £11.4 million package for
the development of a ring road to the north of Walsall town centre. Walsall
council expects the scheme to pave the way for a major reduction in traffic
congestion, which will boost regeneration and the local economy. "This is
the best news to hit the local transport infrastructure for years," said
highways cabinet member Coun Gary Clarke.' (Birmingham Post, 2002a).
Additionally, a comprehensive view over a five-year period was considered,
services objectives were linked to the budget, and headroom for investment was
created. The financial framework strategy was based on principles of financial
stability and sustainability, and it had a political impact since there was no escape
from the review of fees, charges, and council tax levels.
A move such as raising local taxes made by the council is not usual and not
taken for granted and thus, it has a political price, as the following reports describe:
'The survey of local authorities across the region puts Walsall Borough
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Council at the head of the council tax charging league. Its bills rocketed by
108 per cent between 1993/94 and 2002/03, while the RPI rose by 27 per
cent during the same period… Walsall Council spokesman Robert Blower
said the sharp increase had been necessary to bring the authority into line
with the rest of the West Midlands' (Dale, 2003).
'The leader of Walsall Council says a decision to raise council tax by nearly
20% will greatly enhance services in the borough. The vote to approve the
19.3% increase was taken by councillors on Monday. It comes after a
damning report by the Audit Commission last year that criticised the
authority's education and social services departments. Council leader Tom
Ansell said the extra money is needed to improve those services. "I am sorry
that we have had to put this increase on for the people of Walsall, but the
people of Walsall deserve a service that they haven't had for 20 years," he
said. "I am going to deliver that service. I am going to turn Walsall round.
That I promise." Some residents unhappy with the increases are now
threatening to take the issue to the government.' (BBC, 2003a).
In addition, the corporate recovery plan necessitated not only tax raises but
retrenchment, which stakeholders had paid the price for:
'Unison members at Walsall Council are threatening to strike after their
branch office was closed down and an official was suspended by the
council" ' (BBC, 2003b).
Overall, the Audit Commission, as an external auditor, perceived the
recovery plan as a great change in Walsall, both for formulating this plan and for
continuing to implement it, as will be portrayed below.
Not long after the corporate recovery plan was launched, the Audit
Commission in their annual report recognised a positive change in Walsall's
performance. A further corporate governance inspection in 2003 identified
improvement in the way Walsall was run. As was described in the Audit
Commission Annual Inspection (2003 p. 7):
'[concerning] Council performance, Walsall Metropolitan Borough Council
has made improvements to its services and its ways of working over the last
year… The Council has made significant improvements to its financial
standing... Systems of internal financial control… are sound and have
shown considerable improvement over the recent past. There has been
progress in the development of risk management and in the ability of
Internal Audit to deliver all its planned work… [in relation to] Legality of
transactions, The Council is learning from past experiences and now has in
place processes which will help ensure that its financial transactions are
within its powers.'
Alongside these changes, a package of support measures was put into place,
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including a supervisory board. The Comprehensive Performance Assessment report
in 2003 showed that indeed, there had been some progress. However, there were
still areas of concern. Walsall had to improve, as was specified at the Audit and
Inspection Annual Letter (2003, p. 8):
'The Council recognises that it still needs to make changes to its ways of
working and has sound plans for these in the form of a continuous
improvement plan and the response to the corporate governance re-
inspection. The current overarching priorities for improvement are:
• Developing the vision
• Political governance arrangements
• Human resources and organisational culture
• Performance improvement in key services.'
The next corporate assessment in 2004 concluded that Walsall had made a
long journey since the findings of the Corporate Governance Inspection in 2001.
The improvements have continued with notable achievements. For instance, the
education services were rated as „highly satisfactory?, Local Neighborhood
Partnerships that enhanced citizens? involvement were implemented; some
important achievements were made in the environmental services; the project
„putting the citizen first? achieved rapid progress; and the LA use of resources was
enhanced. Similarly, the employees? spirit was improved and visible drive and
hunger to improve was shared by most staff and councillors. In sum, the 2004 CPA
identified significant improvement in some key service areas and rated Walsall as a
„weak performer?, having improved from being a „poor performer? in 2003.
The overall corporate governance arrangements were satisfactory in most
key areas. However, further needs were identified. For instance, ensuring that the
long-term plan is followed by continuous adoption of defined priorities and
activities; ensuring greater focus on improvements of services. In other words,
varied results were identified by the Audit Commission, as was detailed in the 2004
Annual Report (p. 8):
'The council?s ability to improve and the standard of its services have both
improved significantly. Service scores improved in education, housing, and
use of resources. The council has made significant improvements to the way
it works and many of its services over the last year. .. There has been good
progress in a relatively short time, but the council and its education partner
realise that much remains to be done to improve attainment. The housing
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services, which the council still runs, are improving, with particular
improvement in services for the homeless. Environmental services have
improved significantly and are well placed to improve further as a result of
investment in road repairs, composting and recycling. Walsall again has
„one star? for its social services and they are improving steadily. The council
has improved many aspects of the way it is managed. It has set up new
arrangements for involving local communities and working with other
organisations at a local level. It has maintained its very strong focus on
improving services. Based on Walsall?s current plans, the council has the
potential to significantly improve the way it works and the services it
provides to local people.'
While according to the Audit Commission improvements were moderate,
gradual, and slow, the council leaders were more optimistic and perceived the
improvement as more significant:
'Two councils given 'weak' rating. Council services in Birmingham and
Walsall have been rated as the worst in the West Midlands region…
Birmingham City Council was rated as weak for the third consecutive year
and Walsall received the same rating… Tom Ansell, leader of Walsall
Metropolitan Borough Council said: "I am a little disappointed that the
Audit Commission has put us in that bracket because we have done enough
work and scored enough points. But I have to say the amount of work that
has gone into Walsall, to change the face of Walsall, to change around how
its servicing the people, has been phenomenal" '(BBC, 2004a).
According to the CPA report, in 2004, Walsall changed the way it worked
with the community. It used effective consultation for the development of 'Vision
2008' while striving to develop it through a full dialogue with the community. This
tendency was welcomed by the press:
'Walsall Council's planning process is to undergo fundamental change, with
members of the public to be allowed to have their say on development
applications. District committees are to be replaced by a single super
planning committee, consisting of one councillor from each of the boroughs
20 wards. The new body will meet every three weeks to consider major
development schemes. Tom Ansell, Conservative leader of the council,
explained that people attending the meetings would be allowed for the first
time to comment on applications before the committee reaches a decision.
… "The new committee will speed up and streamline the process. Local
people making planning applications will have a much more effective way
of engaging with the system." Liberal Democrat leader and Cabinet member
for regeneration Councillor Ian Shires said: The council intends that a new
system of decision-making is introduced that is transparent and will allow
individual members of the public to gain access to the decision makers and
put their case. The new set-up is intended to help Walsall meet the
Governments target of 90 per cent of planning applications being decided
by council officers rather than councillors' (Birmingham Post, 2003a).
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The council addressed the weaknesses regarding the relationship with
Strategic Partnerships. It tackled the poor performance of district committees by
creating a single development control committee and the introduction of local
neighborhood partnerships. Nonetheless, some sections of the community felt
excluded. Thus, Walsall needed to systematically engage with volunteers and
representatives of defined communities. Walsall was open and honest about the
challenges it faced. The management was flexible and imaginative when they
sought for solutions. Learning from the past was evident across Walsall although
there were small pockets of resistance, particularly amongst some councillors.
In 2004, the impressive improvements made by the Council were not
ignored by the press, who flattered the local team:
'Praise at last for council. A council once dubbed the worst in Britain was
celebrating today after it was praised in a Government report. The Audit
Commission commended Walsall Council for improving a wide range of
services for tax payers and having strong leadership. Yet in 2002 the council
was slated by the commission and came within a whisker of being taken
over by Whitehall if it did not improve. Heavily criticised for financial
mismanagement, it was £10 million in the red, delivering a poor standard of
education and social services, and with crumbling roads. But in a report
today, commission inspectors said the council had "traveled a long way"
since those dark days and now has strong finances, improved delivery of
services and better roads. They also feel staff morale is high and the
authority is ambitious and is learning from past mistakes. Council leader
Tom Ansell said: "We feel on top of the world at the moment, the Audit
Commission has recognised that we are making very strong and rapid
progress towards our goal of becoming an excellent local authority. We will
continue our momentum to become the best council that has ever been in
the history of Walsall." The council only escaped being taken over in 2002
with the introduction of a new management team headed by chief executive
Annie Shepperd, which set about reducing the deficit and improving
services. It included a 19 per cent rise in Council Tax in 2003 which has
helped put the authority back in the black with a £4 million reserve. Mrs
Shepperd said: "Where once Walsall was deemed to be the worst council in
the country, it is now being recognised for achieving perhaps the greatest
turnaround ever seen in local government" ' (Thandi, 2004).
Nevertheless, it is important to note that in the background of the recognised
improvements, there was still a serious criticism concerning the CPA test and actual
measurement. This criticism was part of conflicted and tensed central local
relations, as was reported by Thandi (2004):
'Legal threat over rating. Furious council chiefs threatening to sue a
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Government agency over their inspection rating believe they have a "strong
case". Walsall Council is locked in a battle with the Audit Commission
following a Comprehensive Performance Assessment report, which praised
the authority for making dramatic improvements after it was severely
criticised two years ago. The report saw Walsall move up from being rated
as "poor" to "weak", but council leader Councillor Tom Ansell said they had
secured enough points to be awarded a "fair" tag. He said: "We have got our
lawyers looking at the situation and they feel we have got a strong case. The
Audit Commission is entrenched in their argument that we can't jump two
places, so they won't give us the credit we deserve when they should be
celebrating with us. This stinks to high heaven as the Government set us
targets two years ago which we have more than met." A report on the
inspection results will go before Walsall Council's cabinet tomorrow.'
Swindon went through a similar process. In order to improve its poor
quality of services and improve the quality of life for the local community, the
Audit Commission inspectors recommended (2003, p. 6) that the council to adopt
various steps:
? 'In order to have a clear strategy with identifiable targets:
o build on the outline medium term strategy to establish clear,
realistic, and achievable priorities across all its activities;
o and ensure that council officers responsible for the medium-term
strategy…
? Rigorously carry through all the service option appraisals in the medium
term strategy, without further delay…
? In order to ensure that financial base is sound and measure performance:
o ensure that the current financial position is rigorously analysed to
provide comprehensive options for tackling financial difficulties…
? Build capacity in the council by:
o strengthening the corporate centre and ensuring adequate
o financial provision is made to support the improvement plan…'
In 2004 the cabinet carried out a consultation on medium-term planning and
budget. This was essential to reinforce objectives and directions. However,
significant further development was needed to build a corporate framework, which
would include effective acquisitions, corporate human resource management, and
improved communications both inside and outside the organisation. The cabinet
and the council formally recognised these needs, and in accordance to the Audit
Commission recommendations, they formulated a long-term plan. The LA
'Corporate Plan 2006-2010' (p. 3) reflected great ambitions of the leadership:
171
? 'Making Swindon the UK?s best business location
? Making Swindon Borough Council one of the UK?s best local
authorities
? Making Swindon an enjoyable place to live, work and play'
Accordingly, the leadership defined in this document the following LA's corporate
priorities:
1. 'To plan and successfully manage the growth of Swindon over the next
20 years
2. To consult and ensure policies and services are highly responsive to
needs
3. To deliver excellent services...
4. To lead the community...
5. To build neighbourhood capacity
6. To transform the performance and effectiveness of the organisation
7. To make the best use of resources'
This Corporate Plan was designed to trigger a program of radical change.
Swindon?s recovery plan was to be formulated by setting out a clear direction for
the Council, by describing top priorities, and by working with partners. In contrast
to the criticism regarding central intervention, the recovery process in Swindon
demonstrates that intervention strengthened localism. Swindon?s recovery process
supplies an example to the swift between local government and local governance.
Interestingly, consultation took place even in relation to sensitive issues. As
described by the BBC (2004b):
'Swindon residents are being invited to have their say on proposed council
tax increases. The Borough Council has organised two public meetings to
debate possible increases of between 5% and 11%. Leader of the Council
Mike Bawden said: "I welcome an honest and open debate and these
meetings are an important part of the consultation process. I and other
elected members are very happy to meet with local people to answer any
questions they have" '.
In reference to these consultations, the final program was headed: 'Radical
Transformation' (p. 6) and stated that:
'In the last 12 months, Swindon Borough Council has experienced a radical
transformation. This has included new ways of working for both members
and officers. National recruitment has brought in new people to the top jobs
and we have re-organised the way we run our big services. We have also
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introduced robust medium term planning to the Council and carried out a
thorough review of the way we work with our partners…'
The LA?s priorities, as they were identified by the management, were to
ensure access to good education for all ages, good health services, decent housing,
job security, good transport systems, and to lower the levels of crime. Yet, as
described earlier, most successful recovery plans will include retrenchment
strategies, which go hand in hand with NPM and Best Value values. Consequently
some stakeholders, both consumers and employees, paid the price:
'End of the line for special needs. A total of 10 special needs units are set to
close. A decision has been made to shut a unit for children with special
needs at Wroughton Junior School in Swindon. Nine other special needs
units across the town are already due for closure in the town's infant, junior
and primary schools. The Office of the Schools' Adjudicator has now
approved the closure of the Wroughton unit because it says it is too
expensive to maintain. From September, special needs pupils will be
included in mainstream classes. This is part of a strategy to improve local
provision for children with special needs. Swindon Borough Council says it
would rather spend what money it has on serving all of its pupils in the main
schools, than managing the upkeep of the additional units. A spokesman
said they would still have additional help while in the mainstream classes.
"The benefit of this is that the funding follows each individual child." The
National Union of Teachers says many of its members are confused about
this policy of inclusion. They may not necessarily have the training or the
support they need, a spokesman said.' (BBC, 2004c).
'A document shown to the BBC apparently reveals plans to make cuts of
£10m to Swindon Borough Council's budget (BBC, 2004f).' 'Council's cost
cuts may hit jobs. Jobs could be under threat at Swindon Borough Council
as part of a new cost-cutting drive. The 8,000 workers at the authority have
been told £15m of savings must be made over the next three years. The
council is now looking at how this will be achieved and has refused to rule
out job losses. "Staff costs are an issue. I can't... say there will be no
redundancies," Cllr Mike Bawden, leader of the council, told the BBC. "It
would be totally wrong of me, because I cannot guarantee it and I am not in
the business - after being a councillor since 1967 - of making promises
which I am not sure I can keep." Cllr Bawden said the council's budget was
under pressure because local authorities were being asked by the
government to take on extra responsibilities. The government has also told
councils that it expects council tax bill hikes to be kept to a minimum.
Swindon Borough Council is looking at other areas of operations where
savings could be made, such as procurement - the purchase of goods and
services. But councillors are determined cuts will not have an impact on
public services. A letter has been sent to all council employees informing
them of the moves. One worker said: "It's a bit concerning for everyone who
works at the council. At the end of the day, we won't know anything until a
decision is made and presumably we will be told what the outcome is as
173
soon as possible' (BBC, 2004e).
Consequently, protests against local plans to reduce services and number of
positions increased pressure on local decision makers, as expressed in the following
examples:
'Protesters march against plans. Protesters have marched through Swindon
to demonstrate against planning decisions made by the borough council.
More than 1,000 people attended the event, organised by Swindonians
Together Against Planning. The group is protesting against what it says are
broken promises over proposals to develop areas such as the Shaw
Community Forest. The march included a rally outside the council's Euclid
Street offices, where a petition was handed to councillors' (BBC, 2004d).
'It has drawn up proposals which include closing some older primary
schools in the area and replacing them with a bigger 'extended' school. But
some parents fear the plans will restrict their choice of schools' (BBC,
2005a).
As part of the long-term plan, a paper called „The Promises Paper? was
published by the top management and distributed among the wide public. This
paper reflected the management accountability by including the council?s
obligations to be fulfilled by 2010. „The Promises Paper? (2005, p. 3) covered a
vision, measurable promises, and required actions in a wide range of services:
'The council – Swindon will be an excellent Council…We will provide
effective, customer focused services that represent good value for money
and are easy for everyone to access. We will build trust and confidence in
the Council by communicating and consulting openly and honestly with
local people and partners. Promise: We will establish a new Contact Centre
so that all residents can telephone us for information about council services
day or night, seven days a week with 95% of telephone calls answered
within six rings...'
Interestingly, the media welcomed this new paper, giving it wide coverage:
'Council approves shake-up plans. Radical plans to restructure Swindon
Borough Council have been official adopted by the town. A 50-point plan to
boost Swindon's fortunes by 2010 were given the stamp of approval at a
meeting on Thursday. Conservative council leader Mike Bawden told the
BBC: "It's full steam ahead now. We'll post the ad for the management team
next week, and we hope to post the promises to residents in July. I think it
will be quite effective. We want people to say they are interested in the
pledges and we'll be delighted if they are using them to hold us up and get
their argument across." Mr Bawden added that he wanted the promises to
help give residents more confidence in the council. "We have put ourselves
on the line and want people to monitor us. We are even setting up internal
processes to monitor ourselves. "This does give us a focus. We will become
and progressive council, and this will inject a 'can-do' attitude."…
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Promises on the list include:
? A "first stop shop" for council inquiries
? Reducing the number of council directors from eight to five
? Bringing in a full-time council chief executive
? More CCTV cameras to help cut crime
? No more graffiti - it will be cleaned up within 24 hours (BBC, 2005b)
The interviewees were very proud of this document, as an unusual act of
explicit obligations that could be tested by the voters. They mentioned that
politicians would usually avoid making specific and measurable obligations and
promises. Politically, the promises paper was a risk. On the other hand, it was a
sign of new commitment and honesty.
Over the years 2003 to 2004, after the recovery plan was formulated, the
Audit Commission reports pointed out a gradual improvement in Swindon's
performance. In 2003, Swindon was still rated according to the CPA as a poor
performer. A new chief executive was appointed. He restructured the departments
and appointed some new executive directors. The LA has begun to address
weaknesses in its corporate systems, such as the way it managed its performance
and staff. There was considerable energy and willingness among managers, staff,
and backbenchers to tackle the problems and achieve improvement. There were
some achievements in relation to education, community safety, and social services.
However, in 2003, other services had not yet been improved. This was because at
this stage, improvements were focused on internal management arrangements.
Swindon still needed to maintain its commitment to change and continued to
address its weaknesses. The approach to performance management and to the best
value process was still weak, as the External Annual Audit Letter (2002-3, p. 4)
demonstrates:
'…[T]he Council has yet to implement an effective system of performance
management. Resources have been invested in improving the collection of
data for the statutory performance indicators, but the embedding of a
performance management framework across the Council has yet to be
achieved… A significant amount of work has been undertaken during the
year to refine and improve the scrutiny function, although the impact has yet
to fully take effect.'
Financially, information was not linked to performance and therefore
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Swindon was unable to determine if it was providing effective services at a
reasonable cost. The LA was still dependent on external reports and associated
plans. However, some decisions of the cabinet and the council provided a formal
recognition of the financial barriers to change.
From 2004 and on, Swindon had a single party administration and some
new service directors. These factors helped to increase stability on one hand and to
introduce new blood on the other. The changes supplied a sufficient basis to move
Swindon from the poor to the weak performer category. It developed a framework
to ensure there were systematic developments, implementations, and a review of
policies. Good progress was achieved in several areas where weaknesses were
tackled and managed in a better way. The overall quality of governance
arrangements, particularly in respect to leadership and joint areas of service were
improved. However, although there had been sustained improvements in a number
of areas, the pace had been too slow and results were mixed. As the Annual Audit
and Inspection Letter (2004, p. 2) reveals:
'…[R]esponsibility for the management of the education service could be
returned to the Council?s Education Department… the Council is not
successful at communicating its aims and direction to its community and is
not exercising clear community leadership… the Council?s corporate
approach to internal control is weak with few strengths… leading members
and directors are becoming increasingly effective in leading their service
areas, but have yet to develop the mechanisms for corporate policy
development…The Council has yet to meet any of its performance
standards, although there have been sustained improvements in a number of
areas:
? Developing a framework to ensure there is systematic development,
implementation and review of policies
? The overall quality of corporate governance arrangements, particularly
in respect of leadership and joint working between service areas
? Making more support available to members engaged in the scrutiny of
services.'
In a 'Corporate Assessment – Self Assessment' report (2004, p. 3), the
Leader and the Chief Executive were trying to assess and summarise the Council
achievements over these years:
'Following the CPA inspection in 2002 the Council went from an initial
phase of „denial? through „realisation? and finally into „planning and action?
mode. The Council revised its senior management structure to make it „fit
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for purpose? and replaced its Chief Executive as well as a number of
Directors. Embedding strong organisational leadership has been at the core
of our recovery as a Council. As a result we have been able to focus our
energy on achieving improvements in key service areas, re-engaging with
the community, building and embedding management processes, re-
establishing the Council?s corporate centre and establishing the appropriate
culture both to sustain the gains we have already made and to develop our
capacity to ensure further improvement.'
Yet, the 'Corporate Assessment – Self Assessment' report (2004, p. 4)
reveals that the top management was aware it still had a long way to go ahead and
many issues to tackle:
'There is clear evidence that the Council is now ready to tackle difficult and
previously un-resolved issues with a "can do" culture in which members and
officers work closely together to deliver the Council?s ambition for
Swindon… we know that we are at an early stage on the journey with a long
way to go. We need to develop our community leadership role. We
recognise that there is more we need to do in defining and embedding new
management processes and that there is significant work still to do in
developing the "can do" culture across the organisation.'
These mixed results led the inspectors to recommend (p. 3) further attention,
which was needed to ensure that:
'the proposed framework for policy development is implemented
effectively…Clear leadership, an effective training programme and a means
of enforcement will be necessary to embed the new arrangements…the
arrangements for service and financial planning are strengthened with better
integration in the planning framework…'
Throughout 2003 to 2004, both Walsall and Swindon leaderships showed
commitment and desire to improve the LAs? performance. Therefore, an ambitious
vision and long-term comprehensive performance plans were adopted.
Consequently, the implementation of these plans involved gradual improvements
alongside other areas and missions to be fulfilled. This tendency became stronger
over the years to come.
4.1.4. Recovery
According to the 2005 annual inspection report, Walsall?s improvement was
rapid. The LA was ambitious and a visible drive was shared by most staff and
councillors. For example, better governance and councillors? managerial standards
177
were adopted. According to the report there was strong leadership, both in the
cabinet and in the new executive team, and morale was high. There were
development plans for staff, councillors, and the organisation, which had already
had a visible and positive impact on the way Walsall operated its capacity, and on
service delivery. Old-fashioned behavior was effectively changed; however, not all
councillors were tuned with the modernisation agenda. In addition, fundamental
corporate systems were established to ensure sustainable and effective management
and services. Poor performance was identified and remedial actions were taken.
The financial capacity was strong and the financial management was transparent
and effective since there was a strong process for linking priorities to budget
decisions. The above rapid improvement was straightforwardly described in the key
messages section of the Audit Commission 2005 Annual Report (p. 5):
'Overall the Council has continued to make good progress and has recently
been categorised as a three-star Council which is improving well. The
Council's previous investment in improving the way it is managed is now
delivering improved service performance, with particularly remarkable
progress in children's services. Social care received an overall two-star
rating. The Council has established a sound framework for working with
other partners, such as the Walsall Borough Strategic Partnership, the
Health and Social Care partnership, and the New Deal for Communities
Partnership. Part of the Council's overall strategy for further improvement
was entering into a strategic partnership for the provision of a wide range of
back office and customer-facing services… The Council's finances are
generally very well controlled... Weaknesses were identified in payroll,
creditor payments, debtors, and contracting. Officers acted quickly and
decisively to rectify the situation and we are happy that these weaknesses
have been or are being addressed.'
The significant improvements were covered by the press as well:
'Councils praised for better services…Walsall,… earned three stars…The
result is particularly impressive for Walsall Council, which was dubbed the
worst in Britain after a damning inspection just three years ago, but has
turned its fortunes around' (Walker, 2005).
Though there were general improvements since 2002, the 2005 CPA report
pointed out some areas that have not reached a satisfactory point of performance.
For instance, Walsall initially improved services from a low starting point, so that
although these services were improved, they did not reach the required standard. In
addition, a consistent pattern of improvement was not spotted. Similarly, education
and social services were improved; however, services performance measured by
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Best Value Performance Indicators (BVPIs) was not systematic or consistent, as
was detailed in the 2005 annual report (p. 15):
'For the year 2003/4 63 per cent of best value performance indicators
(BVPIs) remain below average, with 29 per cent in the bottom quartile.
Between 2002/3 and 2003/4 58 per cent of BVPIs did not improve, this
ranged from 90 per cent not improving in the Benefits Service to 50 per cent
not improving in Social Care. However, during 2004/5 there are signs that
this profile is beginning to positively change.'
As it appears in the reports, although improvements were achieved, the
overall service performance was not strong enough. Accordingly, the Audit
commission urged the council to take further steps, as was mentioned in the Audit
Commission 2005 Annual Report (p. 6):
'The broad message for members is to continue with the existing drive for
improvement, using the Council's performance management arrangements
to monitor and manage progress. More particular areas for action at present
are ensuring that:
? Appropriate alternative plans are firmed up for those services which
were to be part of the strategic partnership
? Action is quickly taken to improve the performance of the benefits
service
? Action is taken in response to the annual assessment of adults' services
and in particular to increase the pace of change in services for older
people
? There is adequate control over the two major areas of grant-funded
expenditure where we encountered problems this year - benefits and
Sure Start.'
In 2005, alongside the governmental bodies inspected, Walsall published a
self-report named „Corporate Assessment-Self Assessment?. According to the chief
executive's report, the overall progress pointed out strong governance, challenged
agenda, and improved services. Walsall regenerated the local community by
establishing an urban company and local neighbourhood partnerships. Areas such
as education, environment, housing, and social services were improved
significantly and showed an increasingly consistent pattern of improvement. The
corporate infrastructure and resources were sound. The key processes for finance,
performance management, and organisational development were modern and
appropriate. Walsall became a learning organisation; it had a high degree of self-
awareness and maintained the focus on performance improvement, partnership
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working and community engagement. Inter alia, the report (p. 4) details the
achievements of improvements:
'Following the establishment of the council vision and priorities... actions
were translated into pledges aimed at improving service delivery, quality of
life and the council objective of becoming excellent by 2008. Within each
of our vision strands, examples of improvement include: ...the appearance of
Walsall town centre... road conditions and quality of life for local
community... a set up of special team to tackle anti social behaviour... the
quality of Walsall's school buildings... implementation of the National
Service Framework for Older People.'
This self-report tends to be slightly more positive and favourable, compared
to the Audit Commission report published at the same period. The willingness to
impress and present success might bias some evaluations. On the other hand, the
CPA test is partly based on self-assessments and reports that LAs supply to the
Audit Commission?s representatives.
Overall, the case of Walsall portrays mixed results. Compared to its own
performance in previous years, the data analysis reveals a dramatic transformation
from being in a very poor position in 2002 to being rated as a good performer in
2005 with a potential to keep improving (see Table 8).
This impressive step can be interpreted as a recovery in performance. In
contrast, compared to ideal standards and other LAs, the data analysis reveals that it
still has a way to go in order to achieve full recovery. However, whether Walsall
recovered or only made a significant step toward a successful recovery, it is
worthwhile to explore the change strategies that led to these achievements, as will
be discussed later. Meanwhile, the description of Swindon?s recovery tends to
reveal achievements that are more moderate.
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Table 8: CPA Scores for Walsall (2002-2006)
Service Score (1 to 4 scale where 4 is best)
2002 2003 2004 2005 2006
Education 2 2 3 3 3
Social care (adults) 2 2 2 2 2
Social care (children) 2 2 2 3 3
Environment 2 2 2 3 4
Housing n/a 1 2 3 4
Libraries and leisure 2 2 2 2 2
Benefits 3 3 3 2 2
Use of resources 3 3 4 3 3
Overall Performance Poor Poor Weak Good Good
Source: Audit Commission Annual Reports (2002-2006)
In 2005, after another Comprehensive Performance Assessment test,
Swindon was rated as a fair performer. The LA has achieved significant
improvements in its priority services (see Table 9). For instance, education and
adult social care were much improved as a result of focusing on aspects that failed
in the past. Users had good access to services, good information on services, and
they have been involved in planning forums.
As the Annual Audit and Inspection Letter (2005, p. 4) indicated:
'Swindon Council continues to make good progress as shown by its CPA
score… It has achieved significant improvements in its priority services and
in areas that are important to the public... The Council has sound
improvement plans in place, at both the corporate and service-level. Key
objectives and deadlines are being achieved, and tight monitoring of
performance is helping to keep plans on track.'
The sound innovative improvement plans, emphasizing modernisation,
could be demonstrated in the following example:
'Private partner plan for council…A call centre open 24 hours a day is one
option being considered by Swindon Borough Council to help improve its
level of service. A report, due to be considered by the council in October,
suggests the centre be run by a private sector partner.
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Table 9: CPA Scores for Swindon (2002-2006)
Service Score (1 to 4 scale where 4 is best)
2002 2003 2004 2005 2006
Education 2 3 3 n/a n/a
Social care (adults) 2 1 2 2 2
Social care (children) 2 2 1 2 2
Environment 2 1 2 2 3
Housing 2 2 2 2 4
Libraries and leisure 3 3 3 3 3
Benefits 1 1 1 3 3
Use of resources 3 3 3 2 3
Overall Performance Poor poor weak Fair Fair
Source: Audit Commission Annual Reports (2002-2006)
It also looks at making cost savings through new IT systems, re-structuring,
and "streamlining back office systems". Council leader Mike Bawden said:
"The private sector can help us make changes quicker and more cost-
effectively." The call centre would be a one-stop-shop to help Swindonians
with their enquiries about council services. The private sector company
would also take responsibility for a new drop-in centre, and the council's
HR and finance departments, plus some of its IT systems' (BBC, 2005d).
Over 2005, one of the council achievements concerned its relationship with
external players, which positively affected the corporate governance and the
leadership's perceptions, status, and extent of involvement in partnerships. The LA
had a history of successful long-term partnerships and was increasingly aware of
the need to build newer ones. For instance, there were positive outcomes for
vulnerable people as a result of successful multi-agency work between social
services and housing. Another example could be drawn from the following
newspaper article:
'Council bids for centre overhaul. A spokesman said the council had
ambitious plans for the centre Swindon Borough Council is seeking a
commercial partner to help regenerate the town centre. A spokesman said
the council had ambitious plans for a quality development on the site. "As
well as shopping and leisure, the council is encouraging potential partners to
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consider options for homes, car parking and a cinema," he said. The
development is a key element of The Hub part of the Regeneration
Framework set out by The New Swindon Company. Roderick Bluh, of
Swindon Borough Council said: "I'm keen to get started on this scheme.
We've got some really exciting ideas for the area which responds to issues
raised by the people of Swindon." Philip Watkins of the New Swindon
Company added: "We're delighted that progress is being made on this key
area within The Hub" ' (BBC, 2005c).
As the Annual Audit and Inspection Letter (2005, p. 4) indicated:
'The Council is also working well with partners to deliver shared priorities
and is actively strengthening its community leadership role… Substantial
change has been implemented at the top of the organisation.'
Financially, some areas were improved while others were still needed to be
addressed, as the Annual Audit and Inspection Letter (2005, p. 5) indicated:
'… the Council is developing fresh structures and arrangements to ensure
that good value for money is delivered for all of its services…The Council
is fundamentally reviewing its business and financial planning processes. A
new corporate plan, introduced mid-way through the financial
year…Tighter budget monitoring arrangements are being introduced by the
Council…The Council needs to build upon its recent initiatives to evaluate
and deliver value for money in its services. In particular, benchmarking data
should be utilised more extensively across all service directorates.
Efficiency targets should be more focused.'
Alongside considerable improvements made by Swindon, a significant
amount of work was still required. The top management of Swindon recognised
that it still had more to do in areas such as waste management and children?s social
care. Thus, corporate recovery plans continued to be focused on initiatives that
would improve access to services and value for money. Accordingly, while reports
indicated satisfaction with areas, which were improved, they indicated other areas
to be further developed, as the 2005 Annual Audit and Inspection Letter pointed out
(pp, 4-7):
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'Councillors and senior managers recognise that further cultural change is
needed throughout the organisation to ensure that this trend of improvement
continues…[therefore,] The Council should:
• further integrate corporate, service and financial planning
• develop risk management arrangements both corporately and across all
service areas
• improve the preparation and reporting of its annual accounts
• continue to address the weaknesses identified by audit in core systems
• produce better evidence that it is managing and achieving value for money
across all of its services, based on better benchmarking against
other councils and evidencing of efficiency gains.'
Overall, the Audit Commission reports indicate a broad shift in Swindon's
performance, from being in a very poor position in 2002 to a fair performer in
2005. Yet, results are mixed, recovery is not conclusive, and it is hard to judge what
its extent is.
In sum, the overall recovery of both Walsall and Swindon since the 2002
CPA report was substantial though this change is not perfect. In both cases, there is
still work to be done in order to achieve a full recovery and before the quality of
services will reach the expected level compared to excellent LAs and ideal
standards. Progressions and improvement alongside continuous efforts to keep
improving may be demonstrated in the following example:
'Private sector companies which have taken over failing Local Education
Authorities (LEAs) are improving school results faster than the national
average, a new report shows…Analysis of 2004 figures from the
Department for Education and Skills (DfES) showed that in the nine
outsourced LEAs (…Swindon, Walsall…) the proportion of pupils
obtaining five or more A*-C grade went up by 6% year on year, more than
twice the national average over the same period. But although reports from
the schools inspectorate Ofsted on LEAs in Walsall and Leeds found that
private sector involvement had been beneficial, educational attainment still
lagged behind the average' (Bawden, 2005).
On the other hand, it seems that in both cases the senior management led a
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positive change in the organisational culture and climate. This change stimulated
both internal and external stakeholders and resulted in improved areas of action.
Cooperation and partnerships with employees, external public agencies, and private
players were reshaped and strengthened, and the quality of performance was
improved within both governance and services. These changes supply a worthwhile
basis for the exploration of the change strategies that led from one point to another.
Nevertheless, the Audit Commission reports describe only four points in time, once
a year, without exposing the continuous occurrences or the full story. They clarify
the changes in the quality of performance but skip the process behind the scenes,
the 'black box'. The managerial aspect and the change strategies that were employed
during this recovery process are not covered in the reports. As previously discussed,
the reason for this omission is rooted in the government policy and predominant
ethos which is focused on excellence, and consequently the Audit Commission has
a tendency to deal with outcomes and performance, rather than process and
strategies (see Chapter 2.5.). Therefore, the following description, which covers the
actual implemented change strategies, is mostly based on information gathered
during the interviews.
4.1.5. The 'Black Box' - Turnaround Management Strategies
The interviews with Walsall?s leaders were focused on the "Black Box".
The interviewees were asked to provide their insights regarding the actual
managerial process, carried out from 2002 to 2006. With the intention of exposing
strategies implemented to bring about a turnaround in LA's performance, the major
question the interviewees were asked was: "What have you actually done in order
to improve the LA's status from being a poor performer to being a good
performer?" (for the full questionnaire, see Appendix 4).
Prior to attacking the failure itself and planning the recovery of Walsall, the
management conducted two actions that were the starting point for the recovery
process:
1. The management conducted a brave diagnosis of Walsall?s strengths and
weaknesses, while mapping the causes of failure and their symptoms. For
instance, a Finance Self-Assessment Report (2002, p. 8) written by the finance
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executive director, described some of Walsall?s weaknesses:
"[Walsall] suffered from Organisational total crisis, poor reputation,
departure of entire top team, initial denial and disbelief, [negative] national
spotlight, low morale, member resistance, financial crisis…, avoiding
unpopular cuts…, innovative but expensive policy choices (e.g., local
committees, decentralisation)…, avoidance of problems as redundancy/
early retirements…, political reluctance to set higher tax increases, increase
fees and charges..., not funding inflation/pay awards/pension increases,
unavoidable pressures …"
2. The management formulated a recovery plan (see Chapter 4.1.3.).
From that point and onward, leaders, managers, and departments
implemented a wide range of strategies that were carried out over a period of
several years. The following description does not necessarily follow their
chronological occurrence but describes the implemented strategies according to
their objectives, as portrayed by the interviewees.
First, the management chose to tackle the failure internally, which means, to
focus on the council as an organisation, to solve internal work relationships and
conflicts before dealing with consumers. The interviewees described the
management?s first steps of the recovery process as being aimed at stabilising
Walsall. One of the aspects of stabilisation included halting climate deterioration,
reversing it into a positive climate, and creating greater organisational trust. This
step created general cooperation that was essential even for pre-recovery actions
such as diagnosis and recovery plan formulation. Recovering the organisational
climate and trust was mainly accomplished by the management?s efforts to rebuild
communication mechanisms that professionally and emotionally supported the
employees. As one of the interviewees stated:
"The managers wanted to be involved in the employees? organisational life
and by doing so, to increase the employees? confidence in their abilities…
We were talking and listening to employees? emotions and needs. We held
one-on-one conversations and discussions with small and large groups of
subordinates. There were no planned points to go through in those
conversations. However, they were very important for building bridges, for
understanding the problems that employees faced… for creating a culture of
commitment… [and] for motivating the employees."
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Next to reversing the climate, it was necessary to financially stabilise and
managerially control the LA. In other words, stabilisation was aimed at preventing
further financial deterioration that could lead to bankruptcy, and at rectifying the
lack of leadership. The management wanted to show the stakeholders that
something big is happening in the council: there is new leadership with new
intentions, or as one of the interviewees phrased it: "there is a new sheriff in town".
Thus, in order to achieve the objective of the first group of strategies: stabilisation,
the management implemented a reduction in expenditures. Through this act,
significant poor performing institutions, departments, and services were abolished.
For instance, the management eliminated backroom services (e.g., decreasing
payroll office opening hours), which served employees and not consumers. These
services were eliminated first for two reasons: they were not cost-effective, and
external stakeholders had not been directly affected by these eliminations so they
did not resist them. Yet, resistant and protest were announced by officers and local
unions. On the other hand, further straightforward reductions in expenditures,
which were not popular among consumers, were carried out as well. The
management closed up non cost-effective public organisations, which as estimated
by the management, performed poorly and their contribution to the community was
not worth the price. For instance, the management completely exited from services
given by a golf club. In this case, Walsall did not supply an alternative service.
Yet, the most radical example for cuts made was closing down four local
schools. The extreme decision was taken because the four schools performed poorly
compared to others. Additionally, the management thought it was a proportional
reaction to the severe condition of the education system. In this case, the consumers
were transferred to other local schools. The school services, therefore, were not
eliminated but delivered by different suppliers, in a more efficient and effective
way. According to the interviewees, since the above abolishment of services
hindered the quantity and quality of services, consumers protested and opposed
these strategies.
While tackling internal aspects of the failure, the management tackled its
external aspects as well. Alongside stabilisation, there was a need for a dramatic
comprehensive improvement of many services delivered by the council. The
objective of the second kind of strategies was to provide excellent services, both in
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existing and brand new areas, and both to existing and new communities. For
example, as the interviewees reported:
"[A]s part of being focused on high performance standards, the management
invested in training of employees who gave front line services… In order to
give the end-users the best possible services, some of the services were
completely privatised, or transferred to external suppliers, e.g., educational
services… Under the umbrella of "Investing in people" and in order to reach
new communities, new programs like a program for disabled people, and a
brand new program for young people, were developed and funded."
In addition to investment in people, Walsall invested in facilities. An
important element of the recovery included changing the face of the environment
the citizens were living in. The management invested money in areas that were
neglected for years. For instance, massive investments were made in road
maintenance; a lighting project was accomplished in the LA?s geographical area;
and brand new recycling sites were launched.
Prior to the recovery process Walsall had experienced bankruptcy. The new
programs and investments that were about to bring higher standards of performance
required further resources. These resources were far from being covered by
reductions in expenditures alone. Thus, although the decision was unpopular, the
cabinet decided and the council members approved a tax increase, after many years
of avoiding such a decision. Additionally, the council changed its policy
dramatically with regard to LA assets. After gathering services under one physical
roof, some of Walsall?s assets were sold, rented, or mortgaged. Consequently, these
strategies increased the LA income by millions of pounds per year. In addition, new
opportunities for investments and the funding of projects and plans such as a
special program for single parents, were now available.
The second group of strategies described above was directed toward
Walsall?s environment and external stakeholders. However, an authentic,
fundamental, and comprehensive recovery required internal changes within the LA
as an organisation and among staff members. In other word, there was a need to
support the stabilisation and renewal strategies with internal organisational
strategies. The management had to assure that the recovery process would be
managed and maintained by the best staff-members and that they had the
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appropriate tools for it. Thus, the objectives of the third kind of strategies were to
reorganise the LA, support other strategies, and generally contribute to recovery.
One of the drastic reorganisation strategies was implemented at the
beginning of the recovery process. Managers, who had a lack of capacity, did not
feel part of the new spirit, and did not fit the atmosphere or the general will, were
asked to resign. Most of the senior officers in the management team were replaced.
In 2003, a new Chief Executive and five Executive Directors were employed. Each
Executive Director carried a portfolio of corporate responsibilities and provided
strategic leadership for a range of metropolitan services. By appointing a new Chief
Executive and Executive Directors, a new leadership was born. Yet, parallel with
this, as a result of employing replacement strategy, contracting services, and closing
down public agencies, some employees lost their position and their co-workers?
morale was harmed. In the view of some employees, these strategies contradicted
the managerial efforts to „invest in people? and enhance organisational trust.
Though the disadvantages of these strategies were known to the management, one
of the interviewee claimed that:
"[The top managers] decided to take those difficult decision and actions,
pay the price in the short run, but provide better services in the long run.
You see… organisational trust therefore was at the same time hard to
achieve, fragile, and necessary for continuous cooperation."
Additionally, reorganisation strategies such as investment in people were
employed. In order to achieve the recovery goals, it was necessary to get to the
point at which senior management and all other employees would have the
appropriate skills. Thus, the management made great efforts to follow the concept
of a learning organisation: a new comprehensive training program was launched;
the management team made trips to well performing LAs and explored their
experience; the management consulted and was trained by private organisational
advisors; and the employees improved their services skills after participating in
training sessions.
In sum, the senior management of Walsall explained in detail the various
and gradual strategies used to turnaround the LA's performance. Some strategies
were directed toward achieving better internal steadiness and control by stabilising
managerial, cultural, and financial problems. Numerous strategies were directed
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toward external partners such as reshaping priorities and efforts to rehabilitate
services. To support those, a set of strategies was directed toward reorganising the
council. The next Chapter follows the case of Swindon. Since each organisational
failure is unique, the interactions and occurrences of each recovery process are
probably different. Nevertheless, as will be described next, some elements and the
general format of strategies implemented by the senior management in Walsall
were repeated in Swindon.
As in the case of Walsall, the Audit Commission reports pointed out that
significant progress was made in some areas in Swindon. Overall, Swindon was
transformed in about three years from being a poor to being a fair performer. In
order to track the way these achievements were managed, we conducted face-to-
face semi-structured interviews. As in Walsall?s case, the interviews with
Swindon?s leaders were focused on the "Black Box", the strategies that were
implemented in order to bring about a recovery.
As a first step, the management in Swindon concentrated on stabilising the
organisation. The leaders mentioned three actions that contributed to stabilisation
and avoided further climate deterioration.
1. The leadership tried to improve the organisational climate by creating a positive
atmosphere. As one of the leaders stated: "we wanted to show our commitment
to radical changes so we could expect the employees to show organisational
commitment as well."
2. As part of the demand for commitment, the leadership was able to recognise
partners and dismissed those who did not follow this criterion: "we could easily
recognise who was not with us... Staff members who were not committed to the
new regime were asked to leave, or alternatively, left under their own
initiative." While this radical and not common strategy was employed, the
supportive organisational climate was again under threat, this time by the new
top team. However, in the long run, for personnel who kept working under the
authority of the new top management, commitment and job security were more
certain than before.
3. Although it was clear to all that the general performance was poor, in order to
improve the organisational climate and promote commitment to the
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organisation, the leadership recognised and flattered employees who had shown
good will.
In order to achieve financial stabilisation and to increase efficacy, the
management decided to retrench expenses. The decision where to cut was
influenced by political considerations, as was explained by one of the interviewees:
"At this point, we wanted to avoid conflicts... [thus,] we retrenched services that
were not supplied directly by the LA. We decreased the financial support in
external organisations that were traditionally annually funded by the LA." These
external organisations were usually non-profit and non-governmental organisations,
which were run for the common wealth. The interviewees emphasised that this
decision was taken and implemented with care and not as a blind crosscut.
Consequently, the decreased financial support in external organisations has saved
money from the year the decision was made and on.
Next to stabilising the LA, there was a need for innovative and renewal
actions to improve dramatically the performance within most of the areas. The
objectives of the second kind of strategies were "to deliver excellent services... For
instance, the management invested in modernising services by making them
available online." In addition, one of the main changes was reconstruction of the
relationship with stakeholders. This was achieved by implementing three major
actions:
1. The 50 promises and the vision were perceived as a renewed contract between
the elected members and the voters. In addition, it helped to push the staff
forward in a wide area of activities. However, the LA website detailed the 50
promises and stated that up to mid 2006 only four of the promises were
fulfilled. This evidence reflects the mixed results previously reported.
2. Another aspect of the improved relationships with stakeholders relates to
external organisations, traditionally funded annually by the LA. The decreased
funding of these organisations was followed by increased involvement in their
activities. Since the LA was their major financier, the management demanded
participation in the organisations? policy making, by appointing representatives.
The leaders claimed that "in that way, the management could effectively
control, direct, and follow its policy implementation through other supported
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organisations."
3. The third aspect of renewing relationships, which was emphasised by
interviewees, was enhancing relationships between Swindon and private
organisations. The management examined and redefined their financial
capacities and priorities. The LA strengthened its cooperation with existing
businesses and made efforts to attract new businesses to its area. A
comprehensive corporate cultural improvement plan was formulated. This plan
included activities and objectives related to the needs of mapping, improving
private sector services, and identifying outcomes in the area of corporate
capability.
Due to the previous poor norms and standards within the LA?s staff, there
was a need to support the radical changes by reforming the council as an
organisation. Thus, the management implemented reorganisation strategies that
enabled the use of relevant, updated, and available tools. Some of the organisational
mechanisms were changed in order to carry out the recovery process. For instance,
the management changed the face of human resources management, as stated by
one of the leaders: "Instead of an average of one day of training per person per year,
the management developed training programs and provided courses for individual
councillors and teams... The training was designed to inform on specific key
aspects of local governance such as effective member/officer relationships,
performance management, and leadership." Additionally, as part of officers?
replacement, the council approved hiring top managers and paying top salaries, as
in the best performing English LAs.
With the new management team, it was possible and realistic to shape a new
positive organisational climate. The management had a will to create a culture of
commitment and motivation to hard work. They had created mechanisms that
regulated top-down and bottom-up communication. As described by the
interviewees "the new atmosphere enabled us to demand results from subordinates
with no apologies when we knew it was the right thing to do." This supported the
movement toward performance orientation. In addition, the healthier organisational
climate influenced the senior management. One of the most interesting and
fundamental changes in Swindon was the change in the management?s own self-
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perception. According to the leaders' perception, the senior management
recognised, redefined, and perceived themselves not just as council leaders but as
community leaders. This change of self-perception symbolises the high level of
recovery the management was willing to achieve.
Overall, the senior management of Swindon used numerous strategies for
LA recovery. The earliest strategies were directed toward stabilising the climate by
declaring and demanding organisational commitment. Then, financial stabilisation
of the LA required acts of retrenchments. A second set of strategies was directed
toward dramatically improving services and performance, which was promoted by
modernising services and reconstructing the relationship with stakeholders. The
third set of strategies was designed for the recovery of the LA as an organisation:
training for staff, rebuilding positive organisational climate and replacing the top
management team while applying higher standards of recruitment enabled the
recovery of LA performance. This was achieved by creating a positive
organisational climate, assimilating professional norms, and using effective
mechanisms.
In sum, both in Swindon and Walsall the recoveries were achieved by
implementing strategies aimed at three kinds of objectives: stabilisation, delivering
excellent services, and reorganisation. As the analysis of the cases showed, the
change strategies employed by senior management follow the basic structure of
TMS and the 3Rs, as suggested by Boyne (2004). From the interviews, we can
learn that both LAs first made efforts to stabilise the council by halting
organisational climate deterioration and financial deterioration. These efforts
indicate and supply evidence for the use of retrenchment. Interestingly, while
governmental agencies demanded recovery plans and cutbacks, they also provided
aids for improving services. In order to halt organisational climate deterioration, the
management held different kind of communications with employees; rebuilt trust,
confidence and commitment among employees; closed up unnecessary/poor
services; mortgaged assets; and decreased financial support in non-governmental
organisations.
Then, a second set of strategies was aimed at renewal and delivery of
excellent services. These strategies created the core change from the external
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stakeholders? perspective. For instance, the management swapped services
suppliers; invested massively in facilities; increased taxes; implemented new
programs for specific communities; made services more modern and accessible;
influenced the policy of other organisations; and created new alliances with private
businesses. Hence, this evidence reveals the use of the second R, repositioning
strategies.
The third set of strategies was aimed at reorganising the LAs. These
strategies created the core change within the management and employees. They
enabled the LAs, as organisations, to implement other strategies and to maintain the
recovery process. For example, the management replaced the senior staff; they were
trained by organisational advisors; carried out training for councillors and officers;
altered the human resources management style; and reshaped a productive
organisational climate.
In order to better conceptualise these strategies, the interviewees were asked
to point out their characteristics. The description the interviewees provided
supported the previous argument concerning the characteristics of TMS (see
Chapter 2.6.3.). As previously noted, the implemented TMS were carried out by
new leadership (i.e., elected, recruited, or promoted during 2002). According to the
interviewees, the strategies used were a planned radical act since they were aimed
at deep changes and comprehensive recovery. The interviewees approved TMS
were examined, supervised, and therefore implemented under pressure from
external stakeholders (e.g., the press, the wide public and governmental officers),
and were expected to be effective for a limited period. Some strategies were
planned to be completed in the long run, by 2008/10, and others up to the next
audit. During this period, the leaders themselves were under pressure of takeover
threats. However, according to the interviewees, after pockets of resistance were
dealt with, the management?s moves became legitimate: "changes were easy to
implement since it was already known that there was a mess… it was unarguable
that a transformation is needed so changes were easily accepted because the crisis
was visible…" Additionally, the implemented strategies were described by the
interviewees as urgent because they were implemented as a reaction to a crisis or as
an attempt to prevent a forthcoming crisis. As was stated by one of the
interviewees: "When it was clear that the present route has an uncertain end, we had
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to decisively introduce necessary changes to reduce the need for later painful
actions". Concerning the last point, as previously detailed by the interviewees, the
organisational climate during the opening stage was negative.
While generally, both leadership teams implemented all three types of
strategies: retrenchment, repositioning, and reorganisation, each one of them
emphasised different aspects and recovery process. At this point the discussion
turns to present a comparison of Walsall and Swindon, particularly in relation to
differences from which a lesson can be drawn about TMS and the recovery
processes in public organisations. Although this study was not designed as a
comparative research, the semi-structured interviews employed similar questions
and were conducted by the same interviewer. Thus, there is a reasonable
methodological basis for a comparison of the cases.
One of the main differences between Walsall and Swindon relates to the
severity of the negative organisational climate. While the interviewees of both
Walsall and Swindon reported that their LA had experienced negative
organisational climate, it seems that Walsall suffered from a more severe situation,
which had greater influence on the interviewees? own impression. This is not
surprising since the interviewees of Walsall had served on the council since the late
1980s as middle managers, prior to the recovery process and during the negative
climate deterioration. In 2003, these middle managers became senior managers and
led the recovery process. Given that, they personally experienced and suffered from
the negative climate. Since Walsall?s interviewees had greater sensitivity to the
organisational climate, they tended to consider it as a more central issue. They
expressed harsher feelings and opinions regarding the managers? personal failure,
the LAs? negative reputation and image, the employees? distresses, and the political
conflicts. As a consequence, when they chose strategies to tackle the failure,
Walsall?s leaders invested more energy in improving the organisational climate.
They made massive efforts to create personal and safe relationship with employees
while encouraging the employees? confidence and trust in the management.
Moreover, Walsall?s leaders considered the improved climate as a fundamental
achievement, emphasising its contribution to the recovery process as a whole.
By contrast, Swindon?s interviewees began serving the LA in 2003 as the
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recovery pioneers. They were aware of the negative organisational climate and
dealt with it as well, although less vigorously. Swindon's leaders tended not to deal
with the organisational climate as a personal mission, nor as the target, but as a tool
that contributes to the recovery. In addition, they demanded the employees?
organisational commitment rather than emphasising the trust the employees could
give their managers. Overall, it can be argued that the fact that Walsall?s leaders
had been personally under the influence of negative organisational climate probably
shaped their perspectives regarding the needs of the employees. Thus, it seems that
being part of a deterioration process may influence the profile of the reorganisation
strategies implemented. Where the management is involved in the period of failure,
even though it is not necessarily directly responsible for it, such experience
influences the management?s perceptions regarding the organisation.
In addition, the difference in the leadership employment backgrounds might
be a possible explanation for some of the observed differences between the two
cases. Prior to their current position, Swindon?s interviewees were working in the
private sector. Consequently, the knowledge and experience of the leaders probably
influenced their perceptions and thus, their preferences regarding repositioning
strategies. It seems that, relatively to Walsall, a greater proportion of the
repositioning strategies was oriented toward businesses and was focused on the
private sector stakeholders? needs and interests. For instance, along with the
formulation of a comprehensive recovery plan, Swindon?s leadership formulated a
comprehensive corporate-cultural improvement plan. This plan stated the objectives
and included the activities the LA intended to implement. In practice, Swindon
mapped the needs of private businesses, identified the expected outcomes of
corporate capability, and improved the services given to private organisations. The
interviewees highlighted ongoing efforts to rebuild the relationship and
communication mechanisms with businesses. These efforts created new co-
operations both with existing and new businesses. The interviewees claimed the
primary goal of this plan and strategies was to encourage investments in the LA
geographical area. In contrast, Walsall?s interviewees? employment background
was the public sector. These leaders did not mention a similar plan or intentions.
Nor did they report that they had implemented a set of strategies directed in
particular toward private stakeholders? needs. The lesson we can draw from this
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comparison reveals that a private employment background of the leaders may lead
to greater implementation of repositioning strategies emphasising the needs of
private stakeholders.
Alongside repositioning, evidence was found for the impact of the
employment background on reorganisation strategies and exclusively on
replacement strategies. While both Walsall and Swindon?s leaders implemented
replacement strategies and managed human resources, they preferred different
recruitment strategies. This point refers to non-elected members only, since
personnel changes among councillors are due to democratic processes (i.e., local
elections) and the wide public choice. In Walsall, the leaders preferred to replace
some of the senior dismissed officers with their subordinates, who were promoted.
These nominated officers might not have been experienced in their new position,
yet they were likely to be thoroughly familiar with Walsall, its failure, and
especially the causes and symptoms that led to it. By contrast, in Swindon, the
leaders preferred to replace the senior dismissed officers with externally hired top
managers. These nominated officers were most likely to have rich experience
relevant to their new position; yet they were not familiar with Swindon. In order to
attract the best available managers, top salaries (i.e., equal to the highest quarter in
other LAs) were offered. In general, this evidence gives the impression that
employment background impacts reorganisation. The tactics used to manage human
resources in Swindon were less traditional and more similar to the private sector.
As a result, these techniques attracted managers from the private sector to work in
the LA.
Therefore, though this comparison is not conclusive, there is evidence to
show that Walsall?s leaders had a tendency to deal with internal factors while
Swindon?s leaders had a tendency to deal with external factors. Relatively, the
leaders of Walsall paid larger attention to internal issues (e.g., the organisational
climate); they chose to implement fewer repositioning strategies directed to external
markets (e.g., private businesses), and they preferred reorganisation and
replacement tactics that took into account internal resources (promoting middle
managers to senior managers). In contrast to this, the leaders of Swindon paid
relatively greater attention to external issues and interests (e.g., development of
business plan), and preferred replacement tactics that took into account external
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resources (recruiting top managers from the private sector).
4.2. North East Lincolnshire and Sunderland
The case studies presented above provide a descriptive account of recovery
process of two failing LAs: Walsall and Swindon. Though neither persistently
failing nor well performing LAs, may supply an example of successful recovery
process, exploring these organisations may provide a counter example for the case
studies. Therefore, the following chapter makes an effort to expose the major events
and developments within two LAs: North East Lincolnshire Council, a persistently
failing LA, and Sunderland a well performing LA from 2002 to 2005. The scope of
the description of these LAs is limited to supply a control referent, which may
enlighten Walsall and Swindon and by no means to further evaluate two additional
case studies. The following description is based on Audit Commission reports and
contemporary newspaper accounts.
North East Lincolnshire is relatively isolated locality situated on the south
Humber coast having 156,000 inhabitants. According to the 2002 Audit
Commission Corporate Assessment report, most of the population live in the three
major towns and while only under one per cent of its population is from minority
ethnic communities. Historically, the local economy was based on the fishing
industry which suffered a major decline in the 1980s. Now the community depends
heavily on traditional manufacturing industry and tourism. Its port is the largest in
the country, making the area internationally important for freight distribution.
While unemployment has reduced over the early 2000s, North East Lincolnshire
still has the second highest unemployment rate in the region. There are significant
levels of deprivation as 75 per cents of the population live in wards that are among
the 30 per cent most deprived in England.
The North East Lincolnshire Council was established as a unitary authority
in 1996 which is under Labour control from the beginning. The current political
balance is 23 Labour members, 11 Conservative, 5 Liberal Democrat and 3
independent. The new democratic structure, effective from January 2002, is based
on a six member, one-party cabinet with each cabinet member being the portfolio
holder for one of the major service blocks. There are three scrutiny commissions.
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The council has faced major financial pressures, with year-on-year budget cuts over
a long period. Consequently, in 2001, while approximately 6,500 people were
employed by the council, making it the largest employer in the area, the council
restructured its organisation reducing the number of directorates from sixteen to
eight. The net revenue budget for 2002/03 was £163 million.
The case of North East Lincolnshire Council is similar to Walsall and
Swindon with one difference: between 2002 and 2005 North East Lincolnshire
Council had not recovered. The 2002 Audit Commission Corporate Assessment
report points out that beside attempts of improvement, the pace of fundamental
change is slow and the council has not fully aligned its energy and resources behind
a clear vision and a strategic focus on the key priorities for improvement (p. 4):
'The council made an uncertain start as a unitary authority and struggled
with financial difficulties. It was slow to identify a strategic direction and
introduce sound management. However, over the last two years it has
achieved stability and constructed many of the key building blocks that are
required to secure future improvement. The council has been unclear about
its long-term ambitions for itself and the area… it is less clear what the key
priorities for improvement are. The council has introduced a number of
strategies, plans and procedures that cover the key areas of the council's
activities; however, the challenge is to implement these effectively to make
a real impact on the lives of people…'
Not long after the first CPA report published, the BBC (2002d) reflected
the poor performance achieved by North East Lincolnshire Council:
'The Yorkshire and Humber region has the highest proportion of councils
given a rating of "poor" in a new national survey. Hull council was put in
the lowest bracket of the Comprehensive Performance Assessment (CPA)
along with…North East Lincolnshire. "Poor" rating did not surprise them
after their heavy criticism from Corporate Governance Inspection (CGI)
earlier in the year. But the authority has stressed they would be continuing
with their improvement plan. Audit Commission Chairman James Strachan
said: "Some… councils can be proud of what they're achieving for local
people, but for others, improvement is desperately needed" '.
The Audit Commission inspection report: progress assessment report 2003
emphasised the main difficulties the council faced (p. 3):
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? The council was unclear about its long term aims or its priorities for
improvement.
? The council had introduced a number of strategies, plans and procedures
but not implemented them.
? A performance management framework was in place but a culture was
not yet embedded.
? There was too great an emphasis on process and insufficient attention to
how the culture of the organisation can be changed.
? Community leadership by councillors was underdeveloped although
partnership working by the council was strength.
? There were achievements in some priority services such as education and
regeneration but a failure to achieve in others, particularly children?s
services and crime prevention.
The overall analysis of the council revealed a triple failure: failure in
service provision, failure in corporate management, and failure in finances. Limited
progress in managing performance has been made since the previous report in
2002. The Council had a severe budget crisis and a overloaded agenda. According
to the Audit Commission inspection report (2003), in order to recover, the council
(p. 4):
'…needs to focus on developing its corporate capacity and focus and
implementing proposed changes before there can be any sustainable
improvement in the services it provides to local people. The council must
develop a coherent overall programme to do this.'
Consequently, efforts have been made to increase revenues:
'Council gets tough over debts. Debt collectors will recover the council's
money. A new tougher approach to collecting outstanding rent from ex-
council tenants is being taken by North East Lincolnshire Council. With
almost £1m owed to the authority by former tenants the council now plans
to use a debt collection agency to claw back the cash' (BBC, 2003e).
The progress assessment reported in 2004 concluded that the Council
needed to focus on developing its corporate capacity and on developing a coherent
overall programme to address identified weaknesses. The program was aimed at
tackling lack of clarity about how the council has to change; lack of clear
managerial leadership and capacity to focus on the right things; continuing reliance
200
on process to deliver culture change; limited progress in managing performance;
and a severe budget crisis. The major breakdown in the Council?s financial
management was caused by a lack of leadership; a shortage of qualified finance
staff; ineffective organisation of the finance function; a weak financial management
system; and generally ineffective budgetary control and reporting.
In late 2003 and in 2004, the Council made the first steps on the road to
recovery, yet, results were mixed and the Audit Commission reports seem
confusing. According to the Audit Commission reports
„changes at executive level are providing clearer leadership to the
organisation and more capacity to drive improvement… There was now
greater clarity about what needs to change and a consistency of purpose in
making it happen. With the benefit of external support, the Council has
worked hard to stabilise its finances and to invest in the building blocks for
a more secure future… [However], progress since the corporate assessment
in 2002 was slow and lacked clear direction. The impact of these efforts is
not proven and the effects are not yet visible to the public but the early
indications are encouraging. There are some key areas for the Council to
address as it moves forward. Yet, priorities, necessarily, have been
internally driven and relate only to the short-term, the links to resource
planning have not been established, communication with staff is improving
but externally it is weak, and communities and partners have not been
effectively engaged in developing a clear set of priorities for the locality.?
Alongside this analysis, contradicting reports in the media also reflect
improvement alongside stagnation. Additionally, the following reports demonstrate
the mistrusted and tensed relationship between the council and governmental
agencies:
'Housing service 'improving'. North East Lincolnshire Council has almost
9,000 houses. Council tenants in North East Lincolnshire have seen
significant improvements in the way their houses are maintained - but much
more still needs to be done, a report says… But the report highlights a
number of problems that still need to be addressed to make the service
better. It says staff efforts to make appointments are being undermined by
poor IT systems and customer feedback is not being used to make
improvements to the service. Repair staff are also missing appointments and
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there is a backlog of jobs waiting to be completed. Housing inspector Nick
Atkin said: "we are worried that much recent improvement has relied on the
work of external consultants, and we are not yet convinced the council's
permanent staff have the necessary resources, skills and experience to build
on what has already been achieved" ' (BBC, 2003f).
'Council lashed by watchdog. Mistakes have been made, but changes are
being made. North East Lincolnshire Council has again come under fire
from a government watchdog. The Audit Commission says financial
management at the authority has been inadequate. Despite making
substantial cutbacks, the council has had to borrow more than £12m to pay
for day-to-day services. In its response, the council admits that mistakes
have been made, but says changes are already being made to ensure
mistakes are not be repeated' (BBC, 2004g).
In reference to these mixed results, it is worth mentioning that successes
were partly based on external financial resources:
'Lifeline issued to crisis council. Mistakes have been made, but changes
are being made. A lifeline has been thrown to North East Lincolnshire
Council, which is facing the worst financial crisis of its history. In a unique
move the Deputy Prime Minister's office has confirmed the authority will
get a grant of between £4m and £5m to help modernise it. It follows
damning criticism of the authority by the government last year. Plans
include 15 targets to turn the council around including a possible move to
new headquarters. Proposals unveiled in June confirmed a reorganisation
which will lead to 170 job cuts. It followed an audit commission report
describing financial management of the council was "weak". The authority
has had to borrow £12m to pay for day-to-day services' (BBC, 2004h).
Additionally, successes were not free of retrenchments, criticism, and
prices to be paid, which resulted in protests of residents:
? 'Jobs axed at cost cutting council. North East Lincolnshire Council was
described as "weak" in January. Major cuts to public services provided
by North East Lincolnshire Council are in the pipeline, along with the
loss of 20 jobs, it has been announced. Almost all public toilets in the
area will be closed along with four branch libraries. There will also be
cuts in social services and education, and an increase in car parking
charges' (BBC, 2004i).
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? „Protest against library closures. The council has had 'inadequate'
financial management. A council is coming under fire from residents
over its cost-cutting plans. North East Lincolnshire Council is to discuss
proposals to close libraries and public toilets in the area in a bid to save
£5m. Several petitions have been started against the plans and Grimsby
MP Austin Mitchell has also spoken against the proposals' (BBC,
2004j).
? 'Parents to fight school closures. Primary schools face mergers across
the county. Parents in North East Lincolnshire are preparing to fight
plans to close primary schools in the region. Councillors say up to five
schools must close to reduce 3,500 surplus places - a figure which could
rise to 4,500 by 2009 unless action is taken… Although there will be a
public consultation, parents are angry by the timing of the
announcement. Father-of-three Mark Baxter, who has two children at
Bursar, told BBC News: "They have just gone ahead with this and
dropped it on us. We want to make them aware that we plan to highlight
the fact we don't want this school to close and that we are going to fight
it" ' (BBC, 2005e).
By the end of 2004, things went even worse, as the powers to control
North East Lincolnshire Council education departments were taken. This move may
be perceived as one of the most radical governmental intervention in English local
government:
'Council blasted in Ofsted report. School standards and attendances have
come under attack. An outside team is to take over the running of North
East Lincolnshire's education department after a damning report by
inspectors. The Ofsted report published on Thursday said the local
education authority's performance was "unsatisfactory". The council,
which runs schools in Grimsby, Cleethorpes and Immingham, said the
study was "very disappointing" and "made very uncomfortable reading".
The authority said its director of education would take early retirement…
Ofsted said the savings the council is required to make "are so great that in
reality there is only one immediate corporate priority, the resolution of the
financial crisis" ' (BBC, 2004k).
Twelve months later, the 2005 Audit Commission progress assessment
report exposed again mixed results while some areas continuously performed
poorly and some even deteriorated (p. 7):
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„…[T]he Council?s performance has improved since the last Progress
Assessment but not adequately. The Council has clarified its priorities and
has moved on from the financial difficulties by which it had been
dominated but progress towards improved service delivery has been slow.
The performance of some services has deteriorated and the poor quality of
its information systems is reducing the Council?s ability to make informed
decisions about the action which is needed to secure improvement.
Political stability has increased and the capacity of the Council has been
enhanced by the contribution of several new officers. Staff at all levels in
the organisation have a clearer understanding of what the Council is trying
to achieve… But the Council still faces significant challenges.
Over the last twelve months, the Council has delivered key projects… but
improvements in a number of areas are not being secured at a sufficient
pace and in a number of areas such as asset and risk management standards
have slipped. The pace of change over the broad range of services that the
Council provides is not sufficient to meet the needs of the local
community. Project management skills across the Council are limited and
some projects are not being implemented in a structured and timely
manner. Interim management and external consultancy have helped the
Council to deliver some of its major projects but the need to develop in
house skills has not been addressed.'
The situation during 2005 did not change much. Articles published in 2005
by the media revealed improvements alongside stagnation and deteriorations, which
in turn, resulted in mistrustfulness of governmental agencies:
? 'Council 'put on road to recovery'. The Audit Commission will continue
to monitor progress in 2005. A Lincolnshire authority once branded
poor is now "on the road to recovery", according to government
inspectors… a new report, it says leadership has improved and the
council's finances are looking healthier…But it added that progress had
been slow and the council faced "significant challenges in modernising
its culture"… Steps had been taken to improve the quality of the public
sector housing stock and to drive the council's approach to regeneration
but these were not yet making "a tangible difference to local people".
Financial management was better although the council had failed to
produce an accurate set of accounts for the second year running. Deputy
council leader Keith Brookes said: "Many will remember my words
describing the situation like turning round a battleship. It will take many
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years" ' (BBC, 2005g).
? 'Doubts raised on council accounts. The authority was heavily criticised
in its last report. North East Lincolnshire Council is again under fire
from government inspectors over its finances. The Audit Commission
has refused to sign off the authority's accounts for two financial years
because of doubts about their accuracy. This is despite the council being
given time to sort out a "major breakdown" in financial controls
revealed in a report last year, the watchdog said… The Audit
Commission issued a Public Interest Report (PIR) in March 2004
highlighting poor financial controls at the council which had left it with
a £9m deficit' (BBC, 2005f).
Unfortunately, even at the end of the year, on December 2005, the
performance assessment was likely to be not significantly far from reports
published four years before (see Table 10): 'Council declared worst in country.
North East Lincolnshire has been rated as the worst council in the country, the only
authority to be awarded no stars in a national survey. The annual Audit
Commission review can give up to four stars. It gave the council none, saying it
was performing "well below minimum requirements" ' (BBC, 2005h).
While the case of North East Lincolnshire Council provided an example for
unsuccessful recovery attempts, the case of Sunderland Council provides an
example of a well performing LA, which a recovery process was not required.
Accordingly, the central-local relations, the Audit Commission reports, and the
media coverage tend to be more positive.
Sunderland is a new city (since 1992 situated on the north-east coast of
England and comprises three main elements: a metropolitan area on both sides of
the River Wear; the large new town of Washington; and a number of smaller,
former coal mining settlements separated by countryside. The city has good
transport links, a recently opened Metro, local rail service, and a modern broadband
cable network. The city has a population of 290,000 of whom only 1.1 per cent are
from ethnic minority communities. According to the Audit Commission corporate
assessment 2002, the average gross domestic product is the lowest for any city in
the UK. Sunderland is ranked as the 15th most deprived district in England out of
354 districts and has a relatively low proportion of residents working in managerial
and professional occupations.
205
Table 10: CPA Scores for North East Lincolnshire (2002-2006)
Source: Audit Commission Annual Reports (2002-2006)
Unemployment, whilst falling, remains higher than the national average at 5.6 per
cent. The city has a history of poor health and in some local communities,
educational attainment is low.
The city has undergone major changes with the loss of its traditional
shipbuilding, mining and heavy engineering industries. Within the last ten years
there has been a renaissance, with significant inward investment and a major shift
towards the automotive manufacturing, telecom service based sectors, the new
National Glass Centre, the establishment of Sunderland University, the Stadium of
Light, home of Sunderland football club, and a new business park housing a
number of call centers and high-tech businesses.
The city has ambitious plans involving the arts, culture, heritage,
development and leisure. Major plans are underway to modernise the city centre,
including developing an evening economy. It has recently achieved Beacon status
for its efforts to regenerate tourism and culture and also in respect of libraries as a
community resource.
The council has 75 members, 62 Labour, 11 Conservative and 2 Liberal
Democrat Members. The political organisation is based on a cabinet plus six policy
and review committees. In addition, there are six area committees. The council has
Service Score (1 to 4 scale where 4 is best)
2002 2003 2004 2005 2006
Education 3 3 3 2 2
Social care (adults) 2 2 2 2 2
Social care (children) 1 2 2 1 2
Environment 2 2 3 2 2
Housing 1 1 1 1 2
Libraries and leisure 2 2 2 2 2
Benefits 1 3 3 3 3
Use of resources 2 3 2 1 2
Overall Performance Poor Week Week Poor Fair
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a gross annual expenditure of £535m. The council is based on a Chief Executive?s
Department and five directorates: corporate services, education; social services;
community and cultural services; and development and regeneration.
The Audit Commission corporate assessment in 2002 rated Sunderland
Council as an excellent performed and revealed that the Council has a clear and
ambitious vision for the city, shared and owned by partners, stakeholders, and the
community. These ambitious are set together with partners priorities. The council
provides clear and visible leadership to its community. It has successfully engaged
with partners, area committees, and area regeneration frameworks that ensure that
the council can respond to local needs. As the Council proved abilities to leads it
local community and supply its needs, the central government supplied more lax
treatment. According to the BBC (2002e) reports Sundwell is 'one of the top
performers, 22 councils that have been promised new freedoms from government
control'.
According to the Audit Commission corporate assessment 2002
performance management, which is a key stone in the Best Value regime, is
encouraging (p. 4):
'The council manages performance well and is clear about what it has
achieved against its priority areas. Planning processes are robust and
ensure a clear focus on priorities and that resources are in place to deliver.
The council is developing and strengthening its approach to measuring and
monitoring performance both internally and in its partnership working and
is moving towards a more outcome driven approach… The council has a
record of significant achievement against its key priorities, most notably
regeneration. Development of the city centre, success in attracting inward
investment, the development of new social and cultural facilities, re-
development of former colliery sites and falling levels of crime have
resulted in recognisable and positive change to the quality of life for local
people. Social and health services have improved and the city now has a
highly performing social services department, although many deep seated
health problems remain.'
Alongside these impressive statements, The Audit Commission corporate
assessment 2002 stated the council recognises that it needs to develop its
engagement with some sections of the community and increase their effectiveness
in providing civic leadership. There is evidence this area was at least partly
improved.
'Plans for city's future unveiled. People living in Sunderland are coming
together on Monday to debate the future of their city. Residents will join
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business, retail and industry leaders and MPs for the third state of the city
debate. The aim of the open forum is to attract interest from city residents,
generate new ideas and involve more people in the city's future. Sunderland
City Council leader Bob Symonds said: "We have been encouraged by the
success of the previous open forums and the debate is now a regular feature
of Sunderland's calendar. We would like as many people as possible from
all who live and work in Sunderland to take part in this exchange of ideas.
This is a chance for everyone to come and join in to hear the debate first
hand and have their say" ' (BBC, 2004l).
In conjunction with these strengths, the most significant area where the
council had to improve its performance was education where results were
substantially below national averages. Yet, the council was self aware, and its self-
assessment included an improvement plan that addressed many of the key actions
that the council and its partners intended to implement.
Interestingly, though the general assessment of Sunderland is impressive
and positive, central policies still created pressures for retrenchment:
'Threatened schools 'will close'. The children will have to transfer to new
nursery schools. Campaigners battling to save three Wearside schools from
closure have received mixed news in their long-running fight. Councillors in
Sunderland decided on Wednesday afternoon to close Usworth
Comprehensive School, in Washington, along with Cork Street Nursery in
Sunderland… Education bosses said the closures were needed as part of a
wide-ranging review of services. Usworth Comprehensive faces the axe
because of the need to cut thousands of surplus school places' (BBC,
2003g).
'Council staff face £4,500 pay cut. Angry union leaders on Wearside are
warning of a "winter of discontent" over plans which could see some city
council salaries cut by £4,500 a year. Sunderland City Council is amending
pay scales following a nationally-agreed job evaluation exercise. But while
some will see a boost in their pay packets, others will face a staggered pay
cut of up to 33%. Unions are balloting on the city council's proposals, but
union leaders are warning of possible strike action. Along with other local
authorities, Sunderland council has spent months carrying out job
evaluations, designed to ensure staff receive equal pay for work of equal
value' (2005i).
The Annual Audit and inspection Letter 2004-2005 under the CPA
framework (see Table 11), declared the Council to be four-stars, to be improving
well, and performing well in its use of resources.
208
Table 11: CPA Scores for Sunderland (2002-2006)
Source: Audit Commission Annual Reports (2002-2006)
The Council has a good track record of improving its priority services and in
providing value for money.
This is supported by a robust strategic framework to ensure that sufficient
future progress capacity exists and to sustain improvement.
For example, the media reflected the satisfying performance in the social
care area (BBC, 2004m):
'Councils awarded top star ratings. Newcastle, Sunderland and Gateshead
councils have been rated among the top 20 in the country for social care. A
report by the Commission for Social Care Inspection awarded them a three-
star rating for their social care provision for adults and children…
Sunderland was one of the first authorities to be given the coveted three
stars when the performance tables were introduced three years ago. Cllr Eric
Timmins, cabinet member with responsibility for social services said: "The
Government has taken a rounded view of social services based on all areas
of performance, and we have come out in the top 20 again" '.
The Annual Audit and inspection Letter 2004-2005 revealed that financial
management arrangements remained sound and the Council recognised the need to
maintain its prudent approach to managing its finances given future financial
pressures, including single status, increasing pension costs and the costs of social
services' modernisation.
Service Score (1 to 4 scale where 4 is best)
2002 2003 2004 2005 2006
Education 3 3 3 3 3
Social care (adults) 3 3 3 3 3
Social care (children) 3 3 3 3 3
Environment 3 2 3 2 2
Housing 3 3 3 3 4
Libraries and leisure 4 4 4 4 3
Benefits 4 4 4 4 4
Use of resources 4 4 4 3 4
Overall Performance Excellent Excellent Excellent Excellent Excellent
209
Overall, corporate governance arrangements remain sound, with some
scope for improvement in certain areas. In particular, the Council recognises the
need to develop its approach to project management, respond to recent guidance,
and undertake a robust assessment of ethical performance across the Council. Next
to these strengths, 'recycling and planning continue to represent recognised areas
for improvement and plans are in place to address these. There is a need to review
how targets are set to ensure they are stretching but achievable' (p. 19).
4.3. Summary
In sum, the cases of Swindon and Walsall reflect narratives of recovery
processes. In both cases, the LAs faced organisational failure and their poor
performance damaged internal and external areas of activity. In both LAs, the
senior management was put under pressure by consumers and official governmental
auditors to bring about a recovery, which stimulated organisational diagnosis and
formulation of comprehensive recovery plan. The narratives used for the
description of North East Lincolnshire though somehow similar, illustrate a more
pessimistic view. In this case, despite efforts were made to recover the council, the
performance remained poor demonstrating that recovery is not a trivial outcome
and implementation of change strategies does not necessarily lead to recovery.
Despite the differences between the cases and the council?s level of
performance, all four LAs implemented change strategies directed towards
achieving significant improvements. Interestingly, even when a recovery processes
was not required, planed or implemented retrenchment strategies were in use. As a
consequence, protest and tensions between the councils, consumers and employees
emerged in all four cases. In addition, in all the cases in which low performance
was perceived tensions aroused also between councils and the central government,
and within the council?s leadership. Nevertheless, despite the tensions, from all
cases we can learn that cooperation between central and local government existed.
In addition, the conflict between the government and County Council
highlights the intractable problem of who in a democracy should have the final say
on local issues. Handing over experts the political problems, decisions, and
210
priorities renders the results somewhat dry and leaves a series of logistical
requirements. Elected members, as political representatives of the people, have an
unqualified right to decide on services within their jurisdiction (Guilfoyle, 2004).
"A core principle of local government is that local councillors, 'members', are
accountable to the local electorate for the decisions made by the council. As a
result, within councils a complex committee structure existed through which
members made decisions based on the advice provided by professional officers"
(Murray, 2007).
This argument leads us back to the simple question: who should/does lead
the recovery process? According to the Best Value principles, both leading
politicians and managers are responsible for reconstructing the whole nature of
state/civil society relationships. Yet, responsiveness to electorate desires and
commitment to users cannot be left to professionals or managers. Users have a
distinctive stake in service quality and bring an important voice to it judgment.
Thus, services need to be evaluated with a direct input from users and then changed
according to this input, subject to the political direction of elected representatives
(Murray, 2007). In a broader sense, Gordon suggests officers should define
outcomes, determine plans, map strategies, and evaluate/review delivery options. In
parallel, executives should challenge desired outcomes, issue authority for plans,
and approve strategies.
Within our case studies, the analysis has not distilled the role definition and
division of labor between elected members and officials since we were mostly
interested in the LA as a unified unit of research. Overall, all four LAs showed
cooperation within the senior management, meaning, between politicians and
professionals. Nevertheless, cooperation was not free of conflicts. As was
mentioned earlier, since professionals are a parameter of policy formulation
alongside policy implementation (Laffin, 1986), naturally, they have been also part
of organisational conflicts. The evidence has not revealed these conflicts are rooted
in professional matters. Accordingly, the narratives did not point out a role conflict
or dual orientation of professionals, to their professional and to their organisational
position, as was suggested by (Dunleavy, 1980). In contrast, the four narratives
followed the British traditional system, whereas officers' responsibility is to the
whole council, not to particular party, no matter who has the majority control
211
(Wilson et al., 2006). In accordance to this view, the four cases of LAs
demonstrated professionals who stood behind the politicians as one team and even
sometime in front of governmental agents.
Governmental intervention was presence in all cases described. However,
the level of intervention changed according to the level of performance. The better
performance the council showed, the less governmental intervention was imposed
and greater flexibility characterised the relationship.
In the cases of Swindon and Walsall recovery plans were formulated.
According to these plans, wide recovery attempts were made while various TMS
were employed, including retrenchment, repositioning and reorganisation strategies.
Yet, though improvements were made, comprehensive, full recoveries in
performance were yet to be completed. Additionally, the extent to which TMS
contributed to these improvements is not yet clear. Hence, these questions remain
open. Nevertheless, employing further and different tools may provide answers to
these questions. Therefore, the next chapter would make the attempt to answer
these questions while employing a survey and quantitative tool distributed among
senior leaders.
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CHAPTER 5: RESULTS AND DISCUSSION
The following chapter aims at presenting the main arguments developed in
this thesis while relying on the survey conducted by senior managers in conjunction
with the Audit Commission's data, reports, and interviews. This study was designed
to discover the practical managerial route taken by the leadership of public
organisations that were faced with organisational failure and went through a
recovery process. According to this view, and as demonstrated by the case studies,
this managerial route is based on the implementation of TMS. The analysis of the
cases showed that TMS were employed by senior managements, and that although
this was not carried out conclusively, they were effective in making important steps
toward recovery. Yet, in order to draw a more general picture, a more
representative sample was required. Thus, the survey was conducted. The
quantitative empirical results, which are based on the survey, provide an extra
insight into the managerial actions taken in turnaround situations. These insights
cover three main fields that will follow a subsequent order. First, the way TMS
should be measured and the construction act of TMS measurement tool. Second, an
evaluation of the popularity of TMS within LAs. Third, an evaluation of the
relationship between TMS and recovery.
5.1. Measuring Turnaround Management Strategies in the Public Sector
5.1.1. TMSLA Construction
This chapter is an important part in the development of this thesis. While the
literature review and case studies contributed to the conceptualisation and content
of the variable 'Extent of Implementation of TMS', this chapter will construct and
validate a new scale, which will be used later in various tests directed to evaluate
the extent TMS were in use and their relationship with recovery. As previously
discussed (see Chapter 2.6.) the tool for measuring TMS in the public sector used
by Boyne and Meier (2007) was found to be inappropriate and biased. Therefore,
since the theoretical roots of TMS lie in the private sector, the discussion goes
through the private literature to find the basis for a new measurement tool. As far as
known, there is one existing scale designed to measure TMS that has been
213
developed by Barker and Duhaime (1997). According to them, most of the large-
scale studies on corporate Turnaround Management (e.g., Arogyaswamy, 1992;
Kasimoglu, 2006; Schendel and Paton, 1976; Hambrick and Schecter 1983;
Ramanujan, 1984; Robbins and Pearse, 1992; Thietart, 1988) did not measure the
strategic change made by the management, but most of them relied on restricted
changes in macro financial ratios (e.g., cost/sale ratio, investments/assets ratio,
inventory/sales ratio, assets/cost reductions ratio, and employees/sales ratio). It is
understandable that the research on TMS mostly uses methods based on financial
ratios since those are published and easy to access (Grinyer and Spender, 1979).
However, Barker and Duhaime (1997) suggested the use of field data rather than
secondary/archive data such as annual financial reports. According to them, field
data would better uncover the actual managerial acts conducted to achieve an
organisational recovery.
Barker and Duhaime (1997) recognised a gap between recovery theory and
empirical measurement tools. According to the authors, measuring the management
response to a failure through changes in financial ratios obscures the ability to
determine what actions the managers actually took during recovery attempts. The
ability to follow management strategies is limited because financial ratios capture
only what financial statements can reflect: changes in the amount or productivity of
funds expended for some activity. Nevertheless, successful recoveries may include
qualitative changes in policy and strategies that may affect performance but may
not be reflected in financial ratios (e.g., reshaping the organisational climate,
training employees). Thus, they conclude that even in the private sector financial
ratios alone are not appropriate measures for the exploration of a managerial
process.
As a consequence, Barker and Duhaime (1997) developed a scale named
„Extent of Strategic Change?, based on field data concerning the actual actions
taken by the management (see Table 12). The authors described the „Extent of
Strategic Change? as a "list of management actions commonly taken by firms
during their turnaround efforts", or as a "broad base measure of the actions that
managers actually undertook during their recoveries…in order to measure
accurately…whether managers initiated a large number of actions and policy
changes during their firm turnaround." The scale covers two main areas:
214
Table 12: The ‘Extent of Strategic Change’ Scale (Barker and Duhaime, 1997)
A Acquiring firms or units of other firms competing outside historical lines of business
B Acquiring firms or units of other firms competing within historical lines of business
C Divesting organisational units intact (e.g., selling them as going entities)
D Harvesting or liquidating the assets of units not divested
E Establishing of new internal ventures or start-ups
F Entering into joint ventures outside traditional lines of business
G Contracting, expanding or simultaneously contracting and expanding (by region) the scope of the
corporation?s domestic operations
H Contracting, expanding or simultaneously contracting and expanding (by region) the scope of the
corporation?s foreign operations
I Changing priorities among the corporation?s traditional set of businesses
J Eliminating entire product or service lines from continuing businesses
K Eliminating particular product or service from within the remaining lines
L Introducing completely new products or services (outside those created by acquisitions or joint
ventures)
M Expanding marketing efforts to new segments of customers, eliminating certain segments of
customers, or both
N Increasing the average prices of the company?s products in conjunction with increasing customer
service and sales-related expenditures
O Increasing the average prices of the company?s products in conjunction with decreasing customer
service and sales-related expenditures
P Expanding the average scope of product distribution to a greater number of outlets
Q Selling or closing inefficient or underutilized plants
R Relocating existing manufacturing capacity to geographic regions where production would be less
costly
S Centralisation or decentralisation the corporation?s manufacturing capacity
T Modernizing manufacturing capacity with equipment utilizing new technologies
U Contracting for components, subassemblies, and products that were previously manufactured by the
corporation
V Beginning to manufacture components, subassemblies, and products that were previously purchased
W Spreading the purchases of materials, components, and subassemblies across a greater number of
suppliers
X Increasing or decreasing (as compared to historic levels) the capital available for research on new
products or manufacturing processes
Y Increasing or decreasing (as compared to historic levels) the capital available for the commercial
development of new products
Z Filing a bankruptcy petition for reorganisation purposes
AA Liquidating major assets other than plants and production equipment such as office buildings, land
holdings, and blocks of securities in order to raise capital
AB Suspending capital expenditures for (what the respondent judged to be) a significant period of time
1. Corporate-level management actions- domain-changing actions (A to I).
2. Business level management actions- changes in competitive decisions at the
product market level (J to AB).
The „Extent of Strategic Change? scale measures the number and extent of strategic
215
changes, policy changes, and actions initiated by managers during a firm?s
recovery. It relies on the managerial aspects of recovery and not on financial ones.
The measurement of TMS in LAs can be based on the same concept.
Measuring managerial actions instead of basing the scale on financial ratios is
crucial, especially while dealing with the public sector that is not profit-oriented
(Scharitzer and Korunka, 2000) but performance-oriented (Baker, 1995). Therefore,
the criticism of Barker and Duhaime (1997) regarding methodological
imperfections in the measurement of TMS in previous studies will guide us in the
construction of the scale to be used in this study.
Although Barker and Duhaime?s (1997) scale would be a guideline, a start-
point, and a basic source for the construction of a measurement tool of TMS in
LAs, the content of „Extent of Strategic Change? scale is appropriate for measuring
the private sector only. Its items mostly refer to a corporate environment (e.g., item
(J): Eliminating entire product or service lines from continuing businesses); they do
not capture the performance-oriented nature of a public organisation, its everyday
activities, and its applicable terminology. Thus, adjustments are required. With the
intention to adapt Barker and Duhaime?s scale (1997) and construct an appropriate
measurement tool for TMS in LAs we employed two main sources: the relevant
literature and the qualitative data. Table 13 contains the final suggested alternative
scale appropriate for TMS measurement in LAs (Beeri, 2009a).
This measurement tool is labeled as TMSLA (Turnaround Management
Strategies in Local Authorities). The TMSLA scale was created by:
1. Twenty-three items based on the „Extent of Strategic Change? scale, which were
adjusted to reflect the public sector environment and the local authorities?
context. For example, „The local authority established new services? (item 10).
2. Eighteen additional items, which reflect the conclusions from the qualitative
data analysis. For example: „Replaced senior and middle managers? (item 30).
Some items from the „Extent of Strategic Change? scale were irrelevant to
the TMSLA scale and were left out as for example, 'Acquiring firms or units of
other firms competing outside historical lines of business? (Item A). According to
the concept of TMS and Boyne's suggestion (2004), the new 41 TMSLA items
216
were classified into three sets of strategies: retrenchment, repositioning, and
reorganisation. Note that this classification is theoretical and to some extent even
artificial, and is therefore temporary. A more accurate classification of TMSLA was
based on factor analyses procedures.
The distributed questionnaire was designed as a multiple-choice, closed,
Likert scale. The participants were asked to evaluate the extent to which their LA
had implemented (over the last four years) the strategies mentioned by scoring each
item from 1 (Hardly at all) to 5 (To a very large extent) (see Appendix 5). The
variable „Implementation of TMSLA? was created by the average score that each
manager gave to the relevant questions. It reflects the top management perspective
and evaluations regarding the actions taken in their LA over the last four years. The
variable is not dichotomous since managers could choose the extent of
implementation of TMS in their LA.
217
Table 13: The Turnaround Management Strategies in Local Authorities Scale
Over the last 4 years the Local Authority:
? Contracted activities and services? scope
R
e
t
r
e
n
c
h
m
e
n
t
? Eliminated particular services
? Decreased some services expenditures
? Partially / Temporarily exited from specific services
? Liquidated assets in order to raise capital
? Reduced / suspended capital expenditures
? Closed down public organisations
? Created stronger financial control
? Decreased financial support to other organisations
? Established new services
R
e
p
o
s
i
t
i
o
n
i
n
g
? Entered into joint activities/cooperated with other agencies
? Extended activities? and services scope
? Changed the priorities of traditional activities
? Rented / Sold /Mortgaged assets
? Extended services? availability
? Extended marketing efforts (reaching out) to new segment of consumers
? Increased services expenditures
? Modernized services capacity with equipment utilizing new technologies
? Began to give services / internal services that were previously purchased
? Loaned money / asked for subvention for reorganisation purposes
? Privatised services
? Increased average price of services / levying money
? Redefined core missions
? Ensured high quality of services
? Improved the local authority?s internal and external image
? Introduced new ways of implementation
? Rebuilt stakeholders? trust in the Local Authority
? Replaced the Chief Executive Officer
R
e
o
r
g
a
n
i
s
a
t
i
o
n
? Changed the internal local authority?s structure
? Replaced senior and middle managers
? Took centralisation steps
? Took decentralisation steps
? Increased time and efforts in researching the consumers needs
? Increased time and efforts in becoming a learning organisation
? Made changes in human resources management style
? Reshaped and improved the organisational culture and climate
? Invested in staff skills training
? Defined a common vision of the Local Authority
? Diagnosed the Local Authority?s strengths and weaknesses
? Formulated an organisational working plan
? Fought the denial and resistance of employees
? Items that were adjusted to the LAs? context based on the „Extent of Strategic Change? scale
? Items that were added, reflecting the relevant literature and the qualitative data analysis
218
The Likert scaling system is an accepted and broadly used method to gather
information in large samples since it is easily distributed to many participants and
understood. On the other hand, Likert scaling also has some limitations. Likert
scale has three potential problems (Bryman, 2004; Field, 2005; Pallant, 2001;
Neuman, 2003):
1. Misleading interpretation of items- The TMSLA items are closed
questions with limited possibilities for clarifications. Consequently,
participants may interpret strategies incorrectly, consider two strategies
as identical, or mistakenly find strategies as irrelevant. This may affect
the ability of the TMSLA scale to accurately reflect the actual actions
taken by the LA management.
2. Biased evaluations of ranks- respondents to Likert scales are exposed to
(i) central tendency bias: avoid using extreme response categories and
using a set response in order to abstain radicalism, (ii) acquiescence
bias: employing a habit to report that strategies were employed due to
the assumption that if they appear in the questionnaire they should have
been implemented, and (iii) social desirability bias: trying to portray
themselves or their organisation in a more favorable light. As a result,
participants might report they extensively implemented strategies
perceived as innovative and positive or strategies which are normatively
expected to be implemented.
3. Scaling- since all strategies have the same weight (though not
necessarily in the respondents view) and final scores are calculated by
simple mean of items evaluations, different combinations of several
items can result in the same score. Hence, final scores may not reflect
distinctions of different TMS combinations.
Overall, like in any other study in social sciences, research methods are not
perfect However, although this problem cannot be completely solved, some
methods were taken to diminish their influence. First, validity and reliability tests
were run (see Chapter 5.1.2.). Second, the contact details of the research were
supplied and participant could contact him with questions (this option was used by
some participants). And finally, the use of large samples was aimed, inter alia, at
219
reducing these biases.
Despite the potential problems, the new measurement tool enables
measuring TMSLA not only as a general set of strategies but also to gauge the
extent of implementation of internal dimensions of TMS, such as aspects of
retrenchment, repositioning, and reorganisation (this, according to clusters
determined by factor analysis). Additionally, the measurement tool enables the
measuring of separate and single strategies and their extent of implementation.
The internal dimensions and single strategies make this variable more
flexible. It allows us to test the impact of different aspects and single strategies on
recovery. Yet, before employing this tool and testing some of the research
questions, its readiness for use, which means, its validity and reliability must be
examined.
5.1.2. Testing and Evaluating the Validity and Reliability of TMSLA
5.1.2.1. Evaluating the Content Validity
With the aim of ensuring a high level of content validity of the TMSLA
scale, a three-step mechanism of judgement was applied (Beeri, 2009a). First, the
author constructed the preliminary draft of the proposed questionnaire, as detailed
in Chapter 5.1.1. This draft contained questions aimed at measuring as accurately as
possible the extent of TMS implementation in LAs. This initial draft was based on
literature and qualitative data. After the interviews had been carried out and
analysed, an input that enabled a better focus on the TMS area was achieved.
Second, the draft was presented to two experienced researchers from the public
sector field who were familiar with LAs complexity and difficulties. This panel of
experts acted as independent judges in evaluating the tool. Their comments and
suggestions were taken into account and the tool was upgraded. Third, a pilot
research project was executed, the questionnaires were sent to 30 randomly
sampled senior managers. According to their answers, responses, and comments,
the final version of the TMSLA scale (see Table 11) was slightly adjusted. The
reliability of the overall TMSLA scale and the three subscales were tested within
the pilot project as well. The results of the reliability tests are presented in Chapter
220
5.1.2.3.
The adaptations made in the above process simultaneously took into account
characteristics and the general nature of the public sector. Thus, the above
mechanism of judgment assured an adjusted tool for TMS? measurement in the LA
context. Since the new TMSLA scale reflects the actions made by a council to bring
about a recovery, the concept and the operative definitions are coordinated, and the
experts? panel reshaped and approved the scale?s content, it is possible to conclude
that the TMSLA scale has both face and content validity.
5.1.2.2. Testing the Construct Validity
Following Field (2005) and Pallant (2001) recommendations, and Vigoda-
Gadot et al. (2007) procedures, an Exploratory Factor Analysis (EFA) was
employed. This technique is applied in exploratory research for the development
and evaluation of new scales, identifying clusters of variables, understanding the
structure of a scale, and constructing a questionnaire. The items of TMSLA scale
were subjected to Principal Component Analysis (PCA) - Direct Oblique Rotation.
This method goes hand-in-hand with the assumption that the factors might be
dependent. Since all the strategies might lead to recovery, we can expect them to be
correlated linearly and positively.
The data was found as having good factorability. Kaiser-Meyer-Oklin value
was high (KMO = .810) and exceeded the recommended value of .6. Bartlett?s Test
of Sphericity reached statistical significance (p < .001), indicating relatively
compact patterns of correlations and analysis that should yield distinct and reliable
factors. The items had roughly normal distributions. An inspection of the
correlation matrix revealed the presence of significant inter-correlation coefficients
of .3 and above (p < .001 to p < .05) between the items. This supports the
assumption that the items measured the same dimensions of content. However, the
inter-correlations were not too high (e.g., r > .9) so multi-co-linearity and
singularity were avoided. Only 27% of the residuals were greater than .05,
indicating a good fit to the model.
221
Table 14 presents the EFA results. It includes the loading of factors,
Eigenvalues, percent of variance, and cumulative percent of variance (the numbers
of the items were kept the same as in Table 13). Items 3, 5, 14, 20, 22, and 28 were
excluded from the analysis due to low Measure of Sampling Adequacy (MSA < .5).
Two other items: 18 and 41 could not be classified under any of the factors due to
low loading (< .40), so these items were omitted from the final scale.
The analysis shows that generally, the proposed scale comprised three major
areas of content, as was suggested by Boyne, (2004): retrenchment, repositioning,
and reorganisation, although it revealed that they were split into eight factors,
reflecting internal dimensions of these areas. These eight factors had Eigenvalues
exceeding one, explaining in total 69.8% of the variance. The contents of the factor
are explained next.
Retrenchment Factors
? Retrenchment of Services (Factor 2) includes three items; all of them
represent reduction in the scope of Services and activities directed toward releasing
resources and enabling other activities. These items differ one from each other by
the manner and the extent of reduced services.
? Retrenchment of Expenditures (Factor 6) is the complementary
factor of retrenchment of Services (Factor 2). Originally, item 17 (Increased
services expenditures) was classified into the repositioning area. In fact, in this
retrenchment factor the items reflect a cost-effective process: cutting expenses on
one hand in order to release resources for the sake of other services. The cost-
effective process may take place according to new considerations like common
vision, newly changed priorities, research needs, and an organisational working
plan.
222
Table 14: Exploratory Factor Analysis for the Turnaround Management Strategies in Local Authorities Scale (N = 85)
Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8
Reorganisation
- Institutional
Level
Retrenchment
of Services
Repositioning
as Reaching out
Reorganisation
as Extent of
Centralisation
Repositioning as
Innovative
Services
Retrenchment
of Expenditures
Repositioning
as Renewed
Relationship
Reorganisation -
Personnel
Level
39. Diagnosed the Local Authority's strengths and weaknesses .818
37. Invested in staff skills training .796
40. Formulated an organisational working plan .751
38. Defined a common vision of the Local Authority .696
36. Reshaped and improved the organisational culture and climate .643
35. Made changes in human resources management style .641
8. Created stronger financial control .496
2. Eliminated particular services .821
1. Contracted activities and services' scope .786
4. Partially / Temporarily exited from specific services .639
19. Began to give services / internal services that were previously purchased .809
34. Increased time and efforts in becoming a learning organisation .572
33. Increased time and efforts in researching the consumers needs .565
16. Extended marketing efforts (reaching out) to new segment of consumers .545
31. Took centralisation steps .816
32. Took decentralisation steps .788
13. Changed the priorities of traditional activities .770
26. Introduced new ways of implementation .726
11. Entered into joint activities/cooperated with other agencies .725
12. Extended activities' and services scope .704
15. Extended services' availability .571
10. Established new services .438
23. Redefined core missions .401
6. Reduced / suspended capital expenditures .742
17. Increased services expenditures .621
9. Decreased financial support in other organisations .484
7. Closed down public organisations .752
21. Privatised services .613
24. Ensured high quality of services .525
27. Rebuilt stakeholders' trust in the Local Authority .464
25. Improved the local authority's internal and external image .444
30. Replaced senior and middle managers .838
29. Changed the internal local authority's structure .815
Eigenvalues 9.706 3.963 2.276 1.852 1.537 1.384 1.205 1.159
% Variance 29.410 11.920 6.890 5.610 4.650 4.190 3.650 3.510
Cumulative % 29.412 41.339 48.237 53.850 58.508 62.703 66.354 69.865
223
Repositioning Factors
? Repositioning as Reaching Out (Factor 3) includes four items that
point out repositioning strategies as an innovative act of the LA. This factor reflects
an intended organisational learning and researching that results in providing and
distributing new services. Two of the items (33, 34) were originally classified into
the reorganisation area and the other two items (16, 19) into the repositioning area.
It appears that this factor demonstrates the earlier claim that reorganisation
strategies support the implementation of repositioning strategies. Thus, in reality,
these strategies may occur simultaneously and not separately.
? Repositioning as Innovative services (Factor 5) gathered seven
items, which reflect the core aspect of repositioning. This factor reveals several
ways through them the LA could grow. For example, increasing the variety and
accessibility of services, or, reforming the services? aims, priorities, and methods of
execution.
? Repositioning as Renewed Relationship (Factor 7) includes five
items, which point a tendency to reconstruct relationships with external
stakeholders. For instance, while demanding unbending standards of performance
from public organisations operating under the council authority, the council
reconstructs new relationship with private suppliers. In addition, reconstruction of
relationship with the employees and the consumers could appear as reshaping the
organisational image in their eyes, or generally strengthening the trust of
stakeholders. The seventh factor is relatively contaminated and raises some
questions. Item 24 (Ensured high quality of services) contributes to trusting,
confident, and positive relationship with stakeholders and that might be the reason
this item loads this factor. However, theoretically it suits the fifth factor as well:
repositioning as Innovative Services. Item 7 (Closed down public organisations)
was originally part of the retrenchment subscale, as a strategy designed to avoid
inefficiency in LAs. According to the respondents, closing down public
organisation was more a statement of policy regarding the unbending performance
required from other public organisations.
224
Reorganisation Factors
? Reorganisation at the institutional level (Factor 1) includes seven
items, which refer to strategies that deal with the organisation as a whole, as a unit.
According to the interviewees, many of these strategies are very basic; they were
implemented in order to stabilise the organisation and as initial solutions for failure.
Item 8 (Created stronger financial control) was originally classified as a strategy in
the retrenchment area. Apparently, the participants considered financial control as a
reorganisation strategy that contributes to the organisational resources management
rather than a technique to decrease expenditures.
? Reorganisation at the Personnel Level (Factor 8) includes two items.
These reorganisation strategies are the complementary aspect of reorganisation at
the Institutional Level (Factor 1). Item 30 indicates a complete discharge or
encouraged resign of individuals. Item 29 focuses on changes within the
organisational structure that may result in promotion of personnel, transfer of
responsibilities from one position/department to another, and new required
accountability by key leaders.
? Reorganisation as Extent of Centralisation (Factor 4) includes two
items that measured the aspect of concentration. These two items are not
necessarily opposed to each other and might occur simultaneously, for instance, in
different departments.
Overall, the results supply strong evidence that the three major sets of
strategies: retrenchment, repositioning, and reorganisation were the base for TMS
in LAs. All the clusters were classified into one of the 3Rs and reflected internal
dimension of them. In addition, although all items were reclassified, most of them
(85%) have not leaked from their original R to another R (i.e., an item that was
originally classified under the retrenchment category stayed in one of the new
internal dimensions of retrenchment). In reality, the separation between individual
TMS is complex. Each factor reflects a blend of strategies that were implemented
as a package, which influenced each other. However, although these factors are not
as "clean" as the theoretical structure suggests, they still reflect the nature of
retrenchment, repositioning, and reorganisation.
225
To support the convergent validity (as part of the construct validity) of the
scale the internal correlations among the various factors of TMSLA were examined.
Overall TMSLA and the eight factors were created by the average score that each
respondent gave to the relevant questions (see Table 12). These final variables were
employed for the convergent validity test and all the comparisons, correlations, and
predictions that will be presented later on this chapter. As shown in Table 13, many
of the Pearson?s correlation coefficients amongst the factors were significant,
positive, and ranged between r = .23 and r = .67. Each factor is significantly
correlated with at least two and up to six other factors. The fact that these
correlations are not very high (beyond .7) also indicates the lack of multi-co-
linearity between the factors.
5.1.2.3. Testing the Reliability
With the intention of assessing the scale?s reliability, several tests were
conducted. The reliability tests were run using Cronbach?s alpha scores within two
samples: first, internal consistency was tested within the pilot project of randomly
sampled senior managers (N =30). Second, internal consistency was tested within
the final sample of senior managers (N = 126). In the pilot project, since the factor
analysis using the Principal Component Analysis (PCA) was yet to be conducted
and the eight factors were yet to be constructed, the internal consistency was tested
for the original Overall TMSLA scale (41 items) and the original three subscales:
retrenchment (9 items), repositioning (18 items), and reorganisation (14 items). The
alpha scores were found as high and above the minimum required value of .7
(Neuman, 2003) [Overall TMSLA scale ? = .93, retrenchment ? = .73,
repositioning ? = .92, and reorganisation ? = .73]. None of the results pointed out
significant higher Cronbach?s alpha score in cases of deleted items, so no changes
within the scale were required.
Within the final sample of senior managers (N = 126), the Overall TMSLA
(33 items) Cronbach?s alpha score was high (? = .89) and most of the factors had
reasonable scores, ranged between .69 and .87 (see Table 15).
226
Table 15: Correlation Matrix for TMSLA Factors (Cronbach’s alpha in parentheses) (N = 83-85)
Factor
#
Mean S.D. 1 2 3 4 5 6 7 8
1.Reorganisation at the Institutional Level (7 items) 4.08 .71 (.87)
2.Retrenchment of Services (3 items) 2.58 .89 .015 (.74)
3.Repositioning as Reaching out (4 items) 3.35 .79 .541** .018 (.82)
4.Reorganisation as Extent of Centralisation (2 items) 2.90 .63 .099 .196 .385** (.62
†
)
5.Repositioning as Innovative Services (7 items) 3.64 .73 .544** .231* .673** .356** (.86)
6.Retrenchment of Expenditures (3 items) 2.70 .61 .047 .353** .057 .047 .283** (.56
†
)
7.Repositioning as Renewing Relationship (5 items) 3.22 .58 .626** .210 .685** .257* .599** .157 (.54
†
)
8.Reorganisation at the Personnel Level (2 items) 4.00 .89 .239* .192 .155 .294** .204 .180 .189 (.69)
* p<.05, ** p<.01
† = Cronbach?s alpha was calculated after one item was reversed
227
Regarding factors 4, 6, and 7, although all the strategies constituting each factor can
coexist and be implemented simultaneously, the respondents have probably
perceived some of the strategies as conflictive and this evaluation dropped down
the Cronbach?s alpha scores. First, „Taking decentralisation steps? may have been
perceived as opposed to „Taking centralisation steps? (Factor 4), particularly if they
were implemented in the same time or unit. Second, the strategy „Increasing
services expenditures? may have been perceived as opposed to „Reducing /
suspending capital expenditures? (Factor 6), although in a recovery process one
could lead to another. Third, „Closing down public organisations? may contribute to
recovery; however, it could have been perceived as contradictory to „Rebuilding
stakeholders' trust in the Local Authority? (Factor 7).
If these items were actually perceived as contradictory to other items, we
cannot expect high levels of internal consistency for their factors. Note that the
original negative effect did not influence the EFA and contributed to the factors as
negative loadings. Yet, in reliability, they did make a difference (Field, 2005).
Thus, in order to avoid this problem we recoded items 7, 17, 32 (for internal
consistency tests only). Then, the Cronbach?s alpha scores for these factors were
more reasonable and ranged between .54 and .62 (see Table 14).
The split-half method was employed in order to test the equivalence
reliability. A consistent scale should provide large correlations between halves of
the scale, which randomly split the data into two. The split-half results (see Table
14) point out that TMSLA scale has equivalence reliability [Overall TMSLA
Spearman-Brown correlation = .88. and .45 to .87 for the factors]. In addition, to
examine the representative reliability of the TMSLA scores, we analysed its
characteristics across various demographic groups. As shown in Table 16, the
overall scale and the eight factors were compared between groups of genders, ages,
levels of education (in years), and periods of tenures in the current position (in
years). The gender was dichotomous and the groups were defined by categories.
The other continuous variables: age, education, and tenure were split into groups
based on the Medians.
228
Table 16: Equivalence Reliability and Representativeness Reliability tests
for TMSLA Factors
Equivalence
Reliability
Representative Reliability
Variable Spearman-Brown
Correlations
Category Category Mean S.D. T-test df P
Overall TMSLA .88 Gender Male
Female
3.40
3.60
.44
.46
1.515 77 N.S.
Age ? 55
> 55
3.42
3.43
.47
.47
.182 83 N.S.
Education (in years) ? 16
> 16
3.41
3.44
.44
.49
.249 83 N.S.
Tenure (in years) ? 4
> 4
3.43
3.41
.46
.48
.216 83 N.S.
Reorganisation at the
Institutional Level
.84 Gender Male
Female
4.05
4.21
.70
.59
.789 77 N.S.
Age ? 55
> 55
4.06
4.09
.68
.74
.161 83 N.S.
Education (in years) ? 16
> 16
4.05
4.10
.66
.75
.353 83 N.S.
Tenure (in years) ? 4
> 4
4.07
4.08
.72
.69
.098 83 N.S.
Retrenchment of
Services
.71 Gender Male
Female
2.50
3.16
.85
.86
2.644 77 P < .05
Age ? 55
> 55
2.49
2.66
.74
1.01
.899 83 N.S.
Education (in years) ? 16
> 16
2.73
2.43
.97
.79
1.518 83 N.S.
Tenure (in years) ? 4
> 4
2.53
2.64
.87
.92
.578 83 N.S.
Repositioning as
Reaching out
.82 Gender Male
Female
3.28
3.71
.76
.65
1.957 77 N.S.
Age ? 55
> 55
3.36
3.34
.72
.86
.122 81 N.S.
Education (in years) ? 16
> 16
3.34
3.37
.74
.84
.191 81 N.S.
Tenure (in years) ? 4
> 4
3.41
3.28
.74
.87
.726 81 N.S.
Reorganisation as
Extent of
Centralisation
.45 Gender Male
Female
2.93
2.85
.53
.69
.490 77 N.S.
Age ? 55
> 55
2.83
2.98
.55
.71
1.101 81 N.S.
Education (in years) ? 16
> 16
2.89
2.92
.61
.66
.271 81 N.S.
Tenure (in years) ? 4
> 4
2.85
3.00
.56
.73
1.046 81 N.S.
229
Equivalence
Reliability
Representative Reliability
Variable Spearman-Brown
Correlations
Category Category Mean S.D. T-test df P
Repositioning as
Innovative
Services
.87 Gender Male
Female
3.57
3.98
2.037 77 N.S. 2.037
? 55
> 55
3.62
3.67
Age ? 16
> 16
3.53
3.75
.289 81 N.S. .289
? 4
> 4
3.61
3.70
Education (in years) Male
Female
3.57
3.98
1.390 81 N.S. 1.390
? 55
> 55
3.62
3.67
Tenure (in years) ? 16
> 16
3.53
3.75
.572 81 N.S. .572
? 4
> 4
3.61
3.70
Retrenchment of
Expenditures
.49 Gender Male
Female
2.72
2.71
.52
.69
.086 77 N.S.
Age ? 55
> 55
2.69
2.72
.66
.57
.227 83 N.S.
Education (in years) ? 16
> 16
2.64
2.76
.49
.71
.933 77 N.S.
Tenure (in years) ? 4
> 4
2.77
2.60
.54
.69
1.214 83 N.S.
Repositioning as
Renewing
Relationship
.65 Gender Male
Female
3.22
3.22
.56
.50
.024 77 N.S.
Age ? 55
> 55
3.20
3.24
.54
.62
.292 83 N.S.
Education (in years) ? 16
> 16
3.26
3.19
.48
.66
.537 83 N.S.
Tenure (in years) ? 4
> 4
3.23
3.21
.55
.62
.146 83 N.S.
Reorganisation at the
Personnel Level
.69 Gender Male
Female
4.12
3.64
.78
1.18
1.451 77 N.S.
Age ? 55
> 55
4.14
3.86
.80
.96
1.418 81 N.S.
Education (in years) ? 16
> 16
4.02
3.98
.89
.90
.184 81 N.S.
Tenure (in years) ? 4
> 4
4.13
3.81
.88
.89
1.566 81 N.S.
230
T-tests showed that in 97% of the comparisons the TMSLA scale and
internal dimensions remained stable across the groups, and no significant
differences were found for them (with one exception that is a significant difference
was found between males and females regarding the factor „retrenchment of
Services?). As a whole, these findings support and confirm that TMSLA is reliable
as it has good internal consistency, equivalence reliability, and representative
reliability.
In sum, we have shown that TMSLA is an appropriate, valid, and reliable
measurement tool for TMS within the public sector. As this study attempted to
clarify the concept of TMS (i.e., definition, actual activities, classification, and the
characteristics), this concept is reflected and expressed in the newly developed
measurement tool. Overall, the new TMSLA scale suggests an operational
definition and interpretation (Beeri, 2009a) to Pandit?s TMS? definition (2000).
Additionally, the new classification keeps Boynes? theoretical structure of the 3Rs,
while suggesting a new internal classification of eight dimensions. Since the
TMSLA measurement tool was found as valid and reliable, it is ready to be used.
Thus, the new scale will be applied in the next chapter for testing and exposing two
main areas: first, the extent to which TMS were familiar, known, and in use within
LAs; second, the relationship between TMS? extent of use and recovery. In this
sense, this thesis fills the gap in this area and paves the way to future studies, which
could make use of the TMSLA scale.
5.2. The Extent of Implementation of Turnaround Management Strategies
As previously noted, the English case points out that the NPM reforms
among failing LAs created new conditions, motivations, and expectations. These
conditions and expectations along with the involvement of the Audit Commission
encouraged under-performing LAs to take managerial actions directed at bringing
about a recovery in their performance. These managerial strategies were
conceptualised and named TMS. This chapter shows that TMS is a useful way of
coceptualising the managerial action undertaken to improve LAs performance.
Moreover, as expected, while TMS were known, familiar, and employed by LAs,
they were particularly employed to a large extent within failing LAs. The following
231
part describes the extent of implementation of TMS within the whole sample
(N=126) and within failing LAs only (N=85) while presenting a general overview
of TMS tendencies. In addition, the chapter compares and tracks possible
differences in the extent of implementation of TMS in failing versus well-
performing LAs. The arguments are based on both descriptive statistics (central and
dispersion measures) and on inferential statistics (T and Mann Whitney U tests).
The results point out that within the whole sample, TMS were implemented
at various levels and ranged between low and high extents.
17
The distribution of
Overall TMSLA was skewed to the left (see Figure 18) indicating that most LAs
chose from moderately to highly implement TMS while the minority implemented
TMS to a lower extent. The results also show that reorganisation strategies tended
to be widely used while retrenchment strategies were less popular managerial
actions. The central and dispersion measures of Overall TMSLA and the eight
factors are presented in Table 17. The variables? dispersions are portrayed in the
boxplot (see Figure 19) and the mean values are portrayed in Figure 20. Next to
evaluating the extent of implementation of TMS within the whole sample of LAs,
the extent of implementation of TMS will be evaluated within failing LAs.
17
For the correlation matrix of TMSLA individual strategies, please see Appendix 7.
232
Table 17: Central and Dispersion Measures of Overall TMSLA and the Eight Factors for the Whole Sample (N = 123 – 126)
Overall
TMSLA
Retrenchment
of Services
Retrenchment
of
Expenditures
Repositioning
as Reaching
out
Repositioning
as Innovative
Services
Repositioning
as Renewed
Relationship
Reorganisation
- Institutional
Level
Reorganisation
- Personnel
Level
Reorganisation
as Extent of
Centralisation
Mean 3.39 2.56 2.68 3.34 3.64 3.20 4.00 3.84 2.81
Median 3.45 2.67 2.67 3.50 3.71 3.20 4.14 4.00 3.00
Mode 3.61 2.67 2.67 3.50 3.71 3.40 4.43 4.00 3.00
Std. Deviation .46 .91 .61 .74 .71 .61 .72 .98 .69
Range 3.09 4.00 3.33 4.00 3.86 3.20 3.71 4.00 4.00
Minimum 1.55 1.00 1.00 1.00 1.14 1.80 1.29 1.00 1.00
Maximum 4.64 5.00 3.39 2.56 2.68 3.34 3.64 3.20 4.00
233
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Overall TMSLA
Figure 18: Overall TMSLA for the Whole Sample (N = 126)
Figure 18 shows that Overall TMSLA distribution was skewed to the left.
Figure 19: Overall TMSLA and the Eight Factors
for the Whole Sample (N = 123 - 126)
Figure 19 shows that most TMSLA factors were implemented to moderate and
high extent.
234
Figure 20: Mean Values for Overall TMSLA and the Eight Factors for the
Whole Sample (N = 123 - 126)
Similar to the entire sample, within failing LAs the extent of
implementation of TMSLA and most of the factors showed a skewed to the left
distribution, that means that most of the participants lay right to the center
tapering out toward the left extreme (Figures 21 to 23). However, in this case the
range of the distribution was smaller indicating that most participants
implemented TMS to a large extent. The central and dispersion measures, which
are presented in Figure 21 and Table 16, indicate that 50% of the participants
reported they implemented Overall TMSLA above the level of 3.55 and 75%
above the level of 3.00 (i.e., the middle way of the range of the scale). In
accordance to these findings, high central measures for individual strategies
were found (see Table 18 and Figure 24). 61% of the individual strategies were
implemented to a very large extent by at least half of the participants.
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Figure 21: Mean Values for Overall TMSLA and the Eight Factors
for Failing Local Authorities (N = 83 - 85)
Figure 22: Overall TMSLA in Failing Local Authorities (N = 85)
Figure 22 shows that Overall TMSLA distribution in failing LAs was skewed to
the left.
3.43 2.57 2.70 3.37 3.65 3.24 4.08 4.01 2.92
236
Table 18: Central and Dispersion Measures of Overall TMSLA and the Eight Factors for Failing LAs (N = 83 - 85)
Overall
TMSLA
Retrenchment
of Services
Retrenchment
of
Expenditures
Repositioning
as Reaching
out
Repositioning
as Innovative
Services
Repositioning
as Renewed
Relationship
Reorganisation
- Institutional
Level
Reorganisation
- Personnel
Level
Reorganisation
as Extent of
Centralisation
Mean 3.43 2.57 2.70 3.37 3.65 3.24 4.08 4.01 2.92
Median 3.55 2.67 2.67 3.50 3.71 3.40 4.29 4.00 3.00
Mode 3.61 2.67 2.33 3.50 3.71 3.40 5.00 4.00 3.00
Std. Deviation .47 .91 .61 .82 .73 .61 .72 .90 .65
Range 2.48 4.00 3.33 4.00 3.86 3.20 2.57 4.00 4.00
Minimum 2.16 1.00 1.00 1.00 1.14 1.80 2.43 1.00 1.00
Maximum 4.64 5.00 4.33 5.00 5.00 5.00 5.00 5.00 5.00
237
Replaced senior & middle managers
Changed the internal local authority's ...
Took decentralization steps
Took centralization steps
Formulated an organizational working plan
Diagnosed the Local Authority's strength...
Defined a common vision of the Local ...
Invested in staff skills training
Reshaped and improved the organization...
Made changes in human resources ...
Created stronger financial control
Improved the local authority's internal and...
Rebuilt stakeholders' trust in the Local ...
Privatised services
Ensured high quality of services
Closed down public organizations
Redefined core missions
Extended services' availability
Introduced new ways of implementation
Changed the priorities of traditional ...
Extended activities' and services scope
Entered into joint activities/cooperated wit...
Established new services
Increased time and efforts in becoming a ...
Increased time and efforts in researching...
Began to give services / internal services...
Extended marketing efforts (reaching out...
Increased services expenditures
Decreased financial support in other ...
Reduced / suspended capital expenditures
Partially / Temporarily exited from specific...
Eliminated particular services
Contracted activities and services' scope
0 1 2 3 4 5
Median
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Figure 23: Overall TMSLA and the Eight Factors
in Failing Local Authorities (N = 83 - 85)
Figure 23 shows that most TMSLA factors were implemented to
moderate and high extent in failing LAs.
Figure 24: Medians of Individual Strategies for
Failing Local Authorities (N = 81 - 85)
238
Table 19: Central and Dispersion Measures of Individual TMSLA Strategies for Failing LAs (N = 81 - 85)
Factor Strategy Mode Median Range Min Max
Retrenchment
of
Services
2. Eliminated particular services 2 2 4 1 5
1. Contracted activities and services' scope 4 3 4 1 5
4. Partially / Temporarily exited from specific services 3 2 4 1 5
Retrenchment of
Expenditures
6. Reduced / suspended capital expenditures 1 2 4 1 5
17. Increased services expenditures 3 3 4 1 5
9. Decreased financial support in other organisations 2 3 4 1 5
Repositioning
as
Reaching
Out
19. Began to give services/internal services that were previously purchased 1 2 4 1 5
34. Increased time and efforts in becoming a learning organisation 4 4 4 1 5
33. Increased time and efforts in researching the consumers needs 4 4 4 1 5
16.Extended marketing efforts (reaching out) to new segment of consumers 4 4 4 1 5
Repositioning
As
Innovative
Services
13. Changed the priorities of traditional activities 4 4 4 1 5
26. Introduced new ways of implementation 4 4 4 1 5
11. Entered into joint activities/cooperated with other agencies 4 4 4 1 5
12. Extended activities' and services scope 3 3 4 1 5
15. Extended services' availability 4 4 4 1 5
10. Established new services 3 3 4 1 5
23. Redefined core missions 4 4 4 1 5
Repositioning
as
Renewed
Relationship
7. Closed down public organisations 1 2 4 1 5
21. Privatised services 1 2 4 1 5
24. Ensured high quality of services 4 4 4 1 5
27. Rebuilt stakeholders' trust in the Local Authority 4 4 4 1 5
25. Improved the local authority's internal and external image 4 4 4 1 5
Reorganisation
at the
Institutional
Level
39. Diagnosed the Local Authority's strengths and weaknesses 5 4 3 2 5
37. Invested in staff skills training 4 4 4 1 5
40. Formulated an organisational working plan 4 4 3 2 5
38. Defined a common vision of the Local Authority 5 4 4 1 5
36. Reshaped and improved the organisational culture and climate 4 4 4 1 5
35. Made changes in human resources management style 4 4 4 1 5
8. Created stronger financial control 5 4 4 1 5
Reorganisation as Extent of
Centralisation
31. Took centralisation steps 3 3 4 1 5
32. Took decentralisation steps 3 3 4 1 5
Reorganisation at the
Personnel Level
30. Replaced senior and middle managers 4 4 4 1 5
29. Changed the internal local authority's structure 5 4 4 1 5
239
While the above described the extent of implementation within a defined
group of LAs (all LAs/failing LAs only), the next chapter goes one step ahead
and provides a comparison between two groups of LAs. The second set of
analyses compared mean scores of factors of TMS for failing versus well-
performing LAs using Independent Samples T-tests. Comparisons of individual
strategies based on median scores employed Mann-Whitney U tests. The main
tendency points to a greater extent of implementation of TMS within failing
LAs. Two reorganisation factors (i.e., at the Personnel Level and as Extent of
Centralisation) and eight reorganisation and repositioning individual strategies
were significantly implemented to a larger extent in failing LAs (see Tables 20,
21, and Figures 25, 26). Accordingly, a similar pattern was found for Overall
TMSLA, for an additional reorganisation factor (i.e., at the institutional level),
and for three reorganisation and repositioning individual strategies, which were
marginally significantly (p < .10) implemented to a larger extent in failing LAs.
On the other hand, two individual strategies (i.e., „Contracted activities and
services' scope? and „Ensured high quality of services' scope?) pointed to the
opposite pattern.
These results confirm patterns already identified in the case studies cases.
As described in the case studies, the results indicate that TMS were widely used
in change situations. One possible explanation for their extensive use in failing
LAs may be rooted in their characteristics. As described in Chapter 2.6.3, TMS
are strategies used in radical situations, which require a quick, urgent, and short
response. Hence, LAs, which experience failure and suffer from poor to weak
performance, are more likely candidates for the implementation of such
strategies. In contrast, in cases that a crisis was not an issue and recovery was
irrelevant, TMS were used to lower extent. Furthermore, an additional
characteristic of TMS is that the strategies are usually implemented by a new
management. The results confirm this assumption by showing that
reorganisation at the Personnel Level, which includes replacement of senior and
middle managers, was implemented to a larger extent within poor performers.
240
Table 20: T-Tests for TMSLA Scores for Failing and
Well-Performing Local Authorities
The findings also support Boyne's model (2006). According to the
model, after a declining public organisation pronounces a turnaround situation,
searches, and selects new strategies, the management implements TMS.
Similarly, according to our findings, organisations with low CPA ranking,
implemented TMS to a larger extent. It may be argued in this context, that the
CPA rank triggered the recovery process by accelerating the recognition of the
failure, the search, selection, and then the use of TMS.
Dependent Variable Comparison
Group (N)
Mean S.D. T (Sig) D.F. Eta
Squared
Overall TMSLA
F. LAs (85) 3.43 .47 1.662
(.099)
123
.02
W.P. LAs (40) 3.29 .43
Retrenchment
of Services
F. LAs (85) 2.57 .91 .199
(.842)
123
.0003
W.P. LAs (40) 2.54 .94
Retrenchment of
Expenditures
F. LAs (85) 2.70 .61 .673
(.502)
123
.004
W.P. LAs (40) 2.62 .60
Repositioning as
Reaching out
F. LAs (83) 3.37 .82 .720
(.473)
106.88 .004
W.P. LAs (40) 3.28 .56
Repositioning as
Innovative Services
F. LAs (83) 3.65 .73 .261
(.795)
121
.0006
W.P. LAs (40) 3.61 .67
Repositioning as
Renewed Relationship
F. LAs (85) 3.24 .61 1.130
(.261)
123
.01
W.P. LAs (40) 3.11 .60
Reorganisation at the
Institutional Level
F. LAs (85) 4.08 .72 1.820
(.071)
123
.03
W.P. LAs (40) 3.83 .71
Reorganisation at the
Personnel Level
F. LAs (83) 4.01 .90 2.767
(.007)**
121
.06
W.P. LAs (40) 3.50 1.06
Reorganisation as
Extent of Centralisation
F. LAs (83) 2.92 .65 2.410
(.017)*
121 .05
W.P. LAs (40) 2.60 .74
F. LAs= Failing Local Authorities, W.P. LAs= Well Performing Local Authorities,
*p < .05 , ** p < .01
241
Figure 25: Mean Values of TMSLA Scores for Failing versus
Well-Performing Local Authorities (N = 123 - 126)
The extensive use of these strategies within LAs generally, and within
poor performing LAs especially, may reject the arguments made by scholars
(Cornforth and Paton, 2004; Mellahi, Jackson, and Sparks, 2002; Melahi and
Wilkinson, 2004; Paton, 2003) regarding the existence of a lacuna in the
knowledge and experience of managers in situations of failure. However, the
findings do not necessarily support this argument.
To this point, the results only describe the extent of use of the strategies
where the knowledge and experience of managers dealing with failing
organisations should be assessed according to qualitative parameters. In other
words, the fact that managers did apply the strategies to a large extent does not
necessarily points to the quality of their implementation. Strategies could have
been implemented in an ineffective or inappropriate way. Such implementation
would support the arguments presented by scholars.
242
F. LAs = Failing Local Authorities WP. LAs = Well-Performing Local Authorities
* = p < 0.05 ** = p < 0.01
Table 21: Mann-Whitney U Tests for Individual TMSLA Scores for Failing versus Well-Performing Local Authorities
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Retrenchment
of
Services
2. Eliminated particular services F. LAs (84) 2 1457.0 -1.034
.301
.09
W.P. LAs (39) 2
1. Contracted activities and services' scope F. LAs (83) 3 1267.5 -1.986 .047* .18
W.P. LAs (39) 4
4. Partially / Temporarily exited from specific services F. LAs (84) 3 1407.5 -1.506
.132
.14
W.P. LAs (40) 2
Retrenchment
of
Expenditures
6. Reduced / suspended capital expenditures F. LAs (85) 2 1646.5 -.293 .769 .03
W.P. LAs (40) 2
17. Increased services expenditures F. LAs (83) 3 1593.0 -.374
.709
.03
W.P. LAs (40) 3
9. Decreased financial support in other organisations F. LAs (84) 3 1514.5 -.920 .357 .08
W.P. LAs (40) 3
Repositioning
as
Reaching
out
19. Began to give services/internal services that were previously
purchased
F. LAs (81) 2 1127.0 -2.835
.005**
.26
W.P. LAs (40) 2
34. Increased time and efforts in becoming a learning organisation F. LAs (83) 4 1495.0 -.880
.379 .08
W.P. LAs (40) 4
33. Increased time and efforts in researching the consumers needs F. LAs (84) 4 1435.5 -.984 .325 .09
W.P. LAs (40) 4
16.Extended marketing efforts (reaching out) to new segment of
consumers
F. LAs (85) 4 1535.5 -.712
.477 .06
W.P. LAs (40) 4
243
Table 21: Mann-Whitney U tests for Individual TMSLA Scores for Failing versus Well-Performing Local Authorities (continuance)
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Repositioning
As
Innovative
Services
13. Changed the priorities of traditional activities F. LAs (83) 4 1486.0 -1.003
.316
.09
W.P. LAs (40) 4
26. Introduced new ways of implementation F. LAs (83) 4 1574.5 -.501 .616 .05
W.P. LAs (40) 4
11. Entered into joint activities/cooperated with other agencies F. LAs (83) 4 1562.5 -.578
.564
.05
W.P. LAs (40) 4
12. Extended activities' and services scope F. LAs (83) 3 1488.0 -.970 .332 .09
W.P. LAs (40) 3.5
15. Extended services' availability F. LAs (83) 4 1233.5 -2.226
.026*
.20
W.P. LAs (39) 3
10. Established new services F. LAs (82) 3 1327.5 -1.772 .076
.16
W.P. LAs (40) 3.5
23. Redefined core missions F. LAs (83) 4 1056.5 -3.387
.001** .31
W.P. LAs (40) 3
Repositioning
as
Renewed
Relationship
7. Closed down public organisations F. LAs (82) 2 1419.5 -1.076 .282
.10
W.P. LAs (39) 1
21. Privatised services F. LAs (81) 2 1357.5 -1.288
.198 .12
W.P. LAs (39) 2
24. Ensured high quality of services F. LAs (83) 4 1206.0 -2.442 .015*
.22
W.P. LAs (39) 5
27. Rebuilt stakeholders' trust in the Local Authority F. LAs (82) 4 127.0 -1.697
.090 .15
W.P. LAs (38) 4
25. Improved the local authority's internal and external image F. LA. (81) 4 1393.5 -1.328 .184 .12
W.P. LA. (40) 4
F. LAs = Failing Local Authorities WP. LAs = Well-Performing Local Authorities
* = p < 0.05 ** = p < 0.01
244
F. LAs = Failing Local Authorities WP. LAs = Well-Performing Local Authorities
* = p < 0.05 ** = p < 0.01
Table 21: Mann-Whitney U tests for Individual TMSLA Scores for Failing and Well-Performing Local Authorities (continuance)
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Reorganisation
at the
Institutional
Level
39. Diagnosed the Local Authority's strengths and weaknesses F. LAs (81) 4 1616.5 -.021
.983
.00
W.P. LAs (40) 4
37. Invested in staff skills training F. LAs (83) 4 1474.0 -1.106
.269 .10
W.P. LAs (40) 4
40. Formulated an organisational working plan F. LAs (82) 4 1634.0 -.035 .972
.00
W.P. LAs (40) 4
38. Defined a common vision of the Local Authority F. LAs (83) 5 1242.0 -2.460
.014* .22
W.P. LAs (40) 4
36. Reshaped and improved the organisational culture and climate F. LAs (83) 4 1173.5 -2.775 .006**
.25
W.P. LAs (40) 4
35. Made changes in human resources management style F. LAs (82) 4 1361.0 -1.401
.161 .13
W.P. LAs (39) 4
8. Created stronger financial control F. LAs (85) 5 1403.0 -1.680 .093
.15
W.P. LAs (40) 4
Reorganisation
as Extent of
Centralisation
31. Took centralisation steps F. LAs (83) 3 1132.5 -2.949
.003**
.27
W.P. LAs (40) 2
32. Took decentralisation steps F. LAs (81) 3 1569.5 -.288 .773 .03
W.P. LAs (40) 3
Reorganisation
at the
Personnel Level
30. Replaced senior and middle managers F. LAs (83) 4 1192.5 -2.620 .009** .24
W.P. LAs (40) 3
29. Changed the internal local authority's structure F. LAs (83) 4 1301.0 -2.071 .003**
.19
W.P. LA. (40) 4
245
Figure 26: Medians of Individual TMSLA Strategies Scores for Failing
versus Well-Performing Local Authorities (N = 121 - 126)
The next point intends to clarify whether within failing LAs particular
TMS were more popular than others. To do that, one-way repeated measures
ANOVA tests and a series of Post-hoc tests, which tracked significant
differences between the mean scores of the factors, were conducted. The test
revealed that although TMS were generally implemented in failing LAs to a
large extent; not all the different strategies were implemented to the same extent.
For instance, reorganisation strategies (except „reorganisation as extent of
centralisation?) were the most employed strategies while retrenchment strategies
were the least employed [Wilks? Lambada = .182, F
(7, 76)
= 48.882, p < .001, Eta
Squared = .82].
The rationale for the relatively small use of retrenchment strategies may
be rooted in several reasons. First, NPM and the Best Value policies that
emphasised the 3Es: Economy, Efficiency, and Effectiveness (Stewart, 2003)
246
resulted in massive budget reductions (Martin, 2002). These reductions
consequently, damaged the ability of LAs to supply minimal standards of
services. Thus, further retrenchments might have been perceived by managers as
impossible or as the least desirable solution. Furthermore, NPM imposed a
standard of continuous adaption to customers? needs (Skelcher, 1992) and
consequently customers increased their expectations regarding the level of
services they expected to receive. Given the cutbacks made in LAs budgets, the
higher expectations of customers created a gap between the supplied and
expected service levels. Hence, further retrenching services may impose on
managers a political price. In other words, retrenchment strategies involve
cutbacks in public services and expenditures. Thus, benefits are taken from
consumers. Taking previously supplied benefits creates a negative image among
citizens and a negative political impact within potential voters. Refraining from
the implementation of strategies that might trigger resistance from external
stakeholders was also noted during the interviews. In the case of Walsall, the
leaders reported they favoured strategies that were expected to result in low
resistance of external stakeholders. According to Boyne?s model (2006), the
selection of new strategies is a political process (Boyne, 2002), which may
require internal democratic procedures and external-system actors? support.
Since retrenchment may contradict some interest groups, external support might
be hard to find. Moreover, retrenchment of services might damage managers'
political capital and popularity, thus, LAs? senior managers might avoid it.
On the other hand, reorganisation strategies mostly affect internal
stakeholders and policy issues, which do not necessarily require formal approval
procedures (e.g., increasing time and efforts in becoming a learning organisation
and investing in staff training can be implemented internally by the cabinet).
Consequently, the outcomes of reorganisation strategies influence internal
members, who formally do not take part in the political game (e.g., changing the
internal LA?s structure and reshaping the organisational climate is mostly
directed towards non-elected managers and employees). Therefore, LAs? senior
managers may prefer reorganisation strategies that are more controlled, less
complex, less difficult, and involve a lower political price. Hence, reorganisation
strategies scored the highest levels of execution.
247
Similar outcomes were obtained in previous research. Boyne?s review
(2006) indicated that reorganisation was the only R implemented in all eight
cases of success stories. According to him, the wide use of reorganisation
mirrors the public sector limitations in quitting areas (i.e., implementing
retrenchment strategies) or entering new areas (i.e., implementing repositioning
strategies), which makes reorganisation the default strategy.
The interviews and reports may provide two further explanations for the
popularity of reorganisation strategies. First, the LAs' formal self-evaluations
and interviewees mostly pointed out decreased internal resources as causes of
failure (e.g., poor leadership, internal conflicts, inadequate financial control, and
deficient organisational learning process). The perception of failure as an
outcome of internal procedures might lead the management to employ strategies
applied internally. Second, the timing of the survey might have influenced the
results. Both Walsall and Swindon?s interviewees reported the use of internal
reorganisation strategies (e.g., replacement of senior and middle managers,
improving internal work relations) as preliminary steps, which were essential for
the implementation of later strategies. Since the survey was conducted in a
specific time and we have no evidence regarding the recovery stage at which the
surveyed LAs had arrived, it may be argued that LAs had not yet reached
advanced stages of the recovery process. Therefore, reorganisation strategies
were commonly used.
In sum, the evidence presented above portrayed an interesting view. TMS
were found to be employed to a large extent within all LAs and particularly
within failing LAs. In addition, within TMS, reorganisation strategies were the
most popular implemented strategies. While these findings involved one main
variable, extent of implementation of TMS, the next chapter will employ two
variables: extent of implementation of TMS and extent of recovery. Therefore,
the next chapter intends to follow and test whether there is a relationship
between the two phenomena and whether one of them impacts the other.
248
5.3. The Relationship between Turnaround Management Strategies and
Recovery
Given the theory of cycles of Turnaround (Boyne, 2006; McKiernan,
2003), and the analysis of the qualitative data, it could be expected that an
implementation of TMS would contribute to organisational recovery. This
chapter shows that, surprisingly, a greater extent of employment of TMS did not
result in recovery; most TMS were implemented to the same extent in
persistently failing and recovered LAs. Nevertheless, a moderate use of some
TMS may be more effective for achieving recovery. This chapter tested the
relationship between TMS and recovery within failing LAs while employing
three sets of analyses and two operational measures of recovery: 1. Recovery as
a Dichotomous Variable and 2. Extent of Recovery (ordinal level of
measurement) (see Chapter 3.3.5.2.). Tests that were based on comparison
perceived persistently failing LAs as LAs that had been rated as poor or weak
performers in 2002 and in 2005 (see Table 4). Recovered LAs were perceived as
so if they had been rated as poor or weak performers in 2002 and two to three
categories higher in 2005 (e.g., from poor to fair, from poor to good) (see
Chapter 3.4.1.).
The first set of analyses compared mean scores of factors of TMS within
persistently failing and recovered LAs, which employed Independent Samples T-
tests. Comparisons of individual strategies, which were based on median scores
employed Mann-Whitney U tests. The analysis revealed mixed results. Most
TMS were implemented to the same extent in persistently failing and recovered
LAs. Yet, reorganisation at the personnel level and four more individual
strategies were significantly implemented to a higher extent in persistently
failing than in recovered LAs (see Tables 22, 23 and Figures 27, 28).
18
Overall
TMSLA, retrenchment of expenditures, and four more individual strategies
followed the same trend and were marginally significantly (p < .10)
18
For further central and dispersion measures of individual strategies according to level of
performance please see Appendix 8.
249
implemented to higher degrees in persistently failing LAs.
19
While the first set of tests were based on comparisons between groups of
LAs, the next set of tests correlates extent of implementation of TMS and extent
of recovery. The correlation analyses examine whether there is a common trend
within these phenomena (i.e., positive relationship), opposite trend (i.e., negative
relationship), or no trend (i.e., no relationship).
19
In order to uncover whether persistently failing, recovered, or both groups differed from well-
performing LAs and in order to explore whether there is a linear trend in the extent of
implementation of TMS, further analyses were conducted. One-Way ANOVA tests including
Tukey Post-Hoc tests (when appropriate) and trend analysis were employed. Individual strategies
were compared using Kruskal-Wallis tests and Mann Whitney U tests as Post-Hoc tests. The
results indicated similar tendencies to those found previously. The rank of performance of LAs
was not found as a significant factor that influenced the extent of implementation of most TMS.
Additionally, no linear trends were found. Within TMS that were significantly different (mostly
reorganisation strategies), the highest extent of implementation was found within persistently
failing LAs. For the detailed results see Appendix 9.
250
Table 22: T-Tests for TMSLA Scores for Persistently Failing and
Recovered Local Authorities
Dependent Variable Comparison
Group (N)
Mean S.D. T (Sig) D.F. Eta
Squared
Overall TMSLA
P.F. LAs (48) 3.52 .38 1.774
(.081)
60 .04
R. LAs (37) 3.33 .56
Retrenchment of Services P.F. LAs (48) 2.63 .84 .604
(.547)
83 .00
R. LAs (37) 2.50 1.00
Retrenchment of Expenditures P.F. LAs (48) 2.81 .57 1.822
(.072)
83 .04
R. LAs (37) 2.57 .65
Repositioning as Reaching out P.F. LAs (47) 3.45 .65 1.005
(.319)
57 .01
R. LAs (36) 3.26 .99
Repositioning as Innovative
Services
P.F. LAs (47) 3.72 .63 .973
(.334)
62 .01
R. LAs (36) 3.56 .84
Repositioning as Renewed
Relationship
P.F. LAs (48) 3.28 .47 .610
(.544)
56 .00
R. LAs (37) 3.19 .76
Reorganisation at the
Institutional Level
P.F. LAs (48) 4.17 .66 1.340
(.184)
83 .02
R. LAs (37) 3.96 .77
Reorganisation at the
Personnel Level
P.F. LAs (47) 4.21 .66 2.328
(.024)*
81 .06
R. LAs (36) 3.74 1.09
Reorganisation as Extent of
Centralisation
P.F. LAs (47) 2.95 .53 .498
(.620)
81 .00
R. LAs (36) 2.88 .78
P.F. LAs= Persistently Failing LAs, R. LAs= Recovered LAs,
* p < .05
251
Figure 27: Mean Values of TMSLA Scores for Persistently Failing versus
Recovered Local Authorities (N = 83 - 85)
Figure 27 shows that most TMS were implemented to the same extent in
persistently failing and recovered LAs.
252
Table 23: Mann-Whitney U Tests for Individual TMSLA Scores for Persistently Failing and Recovered Local Authorities
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Retrenchment
of
Services
2. Eliminated particular services P. F. LAs (47) 2 816.5
-.500
.617
.05
R. LAs (37) 2
1. Contracted activities and services' scope P. F. LAs (47) 3 837.5 -.081 .936 .01
R. LAs (36) 3
4. Partially / Temporarily exited from specific services P. F. LAs (47) 3 762
-1.002
.317
.11
R. LAs (37) 2
Retrenchment
of
Expenditures
6. Reduced / suspended capital expenditures P. F. LAs (48) 2 884.5 -.032 .974 .00
R. LAs (37) 2
17. Increased services expenditures P. F. LAs (47) 3 623.50
-2.107
.035*
.23
R. LAs (36) 2
9. Decreased financial support in other organisations P. F. LAs (47) 3 706.5 -1.529 .126 .17
R. LAs (37) 2
Repositioning
as
Reaching
out
19. Began to give services/internal services that were previously purchased P. F. LAs (46) 2 748.5
-.562
.574
.06
R. LAs (35) 2
34. Increased time and efforts in becoming a learning organisation P. F. LAs (46) 4 805.5 -.228 .819 .03
R. LAs (36) 4
33. Increased time and efforts in researching the consumers needs P. F. LAs (47) 4 657.5
-1.649 .099 .18
R. LAs (35) 4
16.Extended marketing efforts (reaching out) to new segment of consumers P. F. LA. (47) 3 817.5 -.274 .784 .03
R. LAs (36) 4
P. F. LAs = Persistently Failing Local Authorities R. LAs = Recovered Local Authorities * = p < 0.05
253
Table 23: Mann-Whitney U tests for Individual TMSLA Scores for Persistently Failing and Recovered Local Authorities (continuance)
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Repositioning
As
Innovative
Services
13. Changed the priorities of traditional activities P. F. LAs (47) 4 817
-.282
.778
.03
R. LAs (36) 4
26. Introduced new ways of implementation P. F. LAs (47) 4 794
-.515
.606
.06
R. LAs (36) 4
11. Entered into joint activities/cooperated with other agencies P. F. LAs (47) 4 83.5
-.155
.877
.02
R. LAs (36) 4
12. Extended activities' and services scope P. F. LAs (47) 4 675
-1.644
.100
.18
R. LAs (36) 3
15. Extended services' availability P. F. LAs (47) 4 776
-.679
.497
.07
R. LAs (36) 4
10. Established new services P. F. LAs (46) 3 785.5
-.412
.680
.05
R. LAs (36) 3
23. Redefined core missions P. F. LAs (47) 4 757
-.855
.392
.09
R. LAs (36) 4
Repositioning
as
Renewed
Relationship
7. Closed down public organisations P. F. LAs (47) 2 626
-1.972
.049*
.22
R. LAs (35) 1
21. Privatised services P. F. LAs (45) 2 706
-1.023
.306
.11
R. LAs (36) 2
24. Ensured high quality of services P. F. LAs (47) 4 817.5
-.286
.775
.03
R. LAs (36) 4
27. Rebuilt stakeholders' trust in the Local Authority P. F. LAs (47) 4 764
-.573
.567
.06
R. LAs (35) 4
25. Improved the local authority's internal and external image P. F. LAs (47) 4 755 -.448 .654 .05
R. LAs (34) 4
P. F. LAs = Persistently Failing Local Authorities R. LAs = Recovered Local Authorities * = p < 0.05
254
Table 23: Mann-Whitney U tests for Individual TMSLA Scores for Persistently Failing and Recovered Local Authorities (continuance)
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Reorganisation
at the
Institutional
Level
39. Diagnosed the Local Authority's strengths and weaknesses P. F. LAs (45) 5 744.5
-.671
.502
.07
R. LAs (36) 4
37. Invested in staff skills training P. F. LAs (47) 4 795
-.506
.613
.06
R. LAs (36) 4
40. Formulated an organisational working plan P. F. LAs (47) 4 820
-.025
.980
.00
R. LAs (35) 4
38. Defined a common vision of the Local Authority P. F. LAs (47) 5 758
-.901
.368
.10
R. LAs (36) 5
36. Reshaped and improved the organisational culture and climate P. F. LAs (84) 4 647
-1.943
.052
.21
R. LAs (39) 4
35. Made changes in human resources management style P. F. LAs (47) 4 59.5
-2.291
.022*
.25
R. LAs (35) 3
8. Created stronger financial control P. F. LAs (48) 5 712.5
-1.691
.091
.18
R. LAs (37) 4
Reorganisation
as Extent of
Centralisation
31. Took centralisation steps P. F. LAs (47) 3 789
-.544
.587
.06
R. LAs (36) 3
32. Took decentralisation steps P. F. LAs (46) 3 686.5
-1.168
.243
.13
R. LAs (35) 3
Reorganisation at
the
Personnel Level
30. Replaced senior and middle managers P. F. LAs (47) 4 614
-2.236
.025*
.25
R. LAs (36) 4
29. Changed the internal local authority's structure P. F. LAs (37) 5 752 -.941 .347 .10
R. LAs (36) 4
P. F. LAs = Persistently Failing Local Authorities R. LAs = Recovered Local Authorities * = p < 0.05
255
Persistently Failing LAs Recovered LAs
group
1
2
3
4
5
M
e
d
i
a
n
Increased services expenditures
Closed down public organizations
Reshaped and improved the
organizational culture and climate
Made changes in human
resources management style
Replaced senior & middle
managers
Figure 28: Medians of Individual TMSLA Strategies Scores for Persistently
Failing versus Recovered Local Authorities (N = 81 - 85)
The second set of analyses tested the linear relationship between extent of
implementation of TMS and extent of recovery. In this case, TMS were perceived as
the independent variables and extent of recovery as the dependent variable.
Spearman? correlation coefficient was used to calculate the strength of relationships
between Overall TMSLA, the eight factors, individual strategies, and extent of
recovery (see Tables 24, 25 and Figures 29, 30). The analyses revealed again mixed
results. The extent of implementation of TMS was not related in most cases to the
extent of recovery. However, a significant moderate negative correlation was found
between reorganisation at the Personnel Level and extent of recovery [r
s
= -.286, p <
.01]; the greater extent to which a LA implemented reorganisation at the Personnel
level the less it recovered. Five individual strategies (mostly under reorganisation
factors) were significantly negatively related to extent of recovery. Similarly, Overall
TMSLA, reorganisation at the institutional level, and further one individual strategy
had a marginal significantly (p<0.1) negative relationship with extent of recovery.
The second set of tests correlated the main two variables, TMS and recovery,
while assuming these variables lie on the same level. Yet, the next test assumes there
256
could be causality where TMS are the cause and recovery is the effect. Thus, this
possible causality is tested.
257
Table 24: Spearman Rho Correlation Matrix for the Relationship
between TMSLA Scores and Extent of Recovery (N = 83 – 85)
Extent of
Recovery
Overall TMSLA Spearman -.206
Sig (two tails) .059
Retrenchment of Services Spearman -.040
Sig (two tails) .720
Retrenchment of Expenditures Spearman -.150
Sig (two tails) .171
Repositioning as Reaching out Spearman -.045
Sig (two tails) .686
Repositioning as Innovative Services Spearman -.093
Sig (two tails) .402
Repositioning as Renewed Relationship Spearman -.100
Sig (two tails) .363
Reorganisation - Institutional Level Spearman -.204
Sig (two tails) .061
Reorganisation - Personnel Level Spearman -.286 *
Sig (two tails) .009
Reorganisation as Extent of Centralisation Spearman -.174
Sig (two tails) .116
* p < .01,
258
Figure 29: Matrix Scatter Plot for the Relationships of TMS and Extent of
Recovery (N = 83 - 85)
259
Table 25: Spearman Rho Correlation Matrix for the Relationship between
Individual Strategies and Extent of Recovery (N = 83 – 85)
Extent of
Recovery
Retrenchment
of
Services
2. Eliminated particular services
Spearman -.068
Sig (two tails) .537
1. Contracted activities and services' scope Spearman .003
Sig (two tails) .976
4. Partially / Temporarily exited from specific services Spearman -.066
Sig (two tails) .550
Retrenchment
of
Expenditures
6. Reduced / suspended capital expenditures Spearman .005
Sig (two tails) .962
17. Increased services expenditures
Spearman -.249 *
Sig (two tails) .023
9. Decreased financial support in other organisations Spearman -.117
Sig (two tails) .289
Repositioning
as
Reaching
Out
19. Began to give services/internal services that were
previously purchased
Spearman -.023
Sig (two tails) .836
34. Increased time and efforts in becoming a learning
organisation
Spearman -.044
Sig (two tails) .691
33. Increased time and efforts in researching the
consumers needs
Spearman -.192
Sig (two tails) .084
16.Extended marketing efforts (reaching out) to new
segment of consumers
Spearman .029
Sig (two tails) .793
Repositioning
as Innovative
Services
13. Changed the priorities of traditional activities Spearman -.033
Sig (two tails) .769
26. Introduced new ways of implementation
Spearman -.090
Sig (two tails) .420
11. Entered into joint activities/cooperated with other
agencies
Spearman -.026
Sig (two tails) .813
12. Extended activities' and services scope Spearman -.148
Sig (two tails) .182
15. Extended services' availability
Spearman -.119
Sig (two tails) .284
10. Established new services Spearman -.071
Sig (two tails) .529
23. Redefined core missions Spearman -.105
Sig (two tails) .345
* p < .01
260
Table 25: Spearman Rho Correlation Matrix for the Relationship between
Individual Strategies and Extent of Recovery (N = 83 – 85) (continuous)
Extent of
Recovery
Repositioning
as Renewed
Relationship
7. Closed down public organisations
Spearman -.117
Sig (two tails) .293
21. Privatised services Spearman -.057
Sig (two tails) .614
24. Ensured high quality of services
Spearman -.051
Sig (two tails) .647
27. Rebuilt stakeholders' trust in the Local Authority Spearman -.128
Sig (two tails) .252
25. Improved the local authority's internal and external
image
Spearman .001
Sig (two tails) .991
Reorganisation
at the
Institutional
Level
39. Diagnosed the Local Authority's strengths and
weaknesses
Spearman -.167
Sig (two tails) .137
37. Invested in staff skills training Spearman -.133
Sig (two tails) .230
40. Formulated an organisational working plan Spearman -.040
Sig (two tails) .722
38. Defined a common vision of the Local Authority
Spearman .016
Sig (two tails) .886
36. Reshaped and improved the organisational culture
and climate
Spearman -.299 *
Sig (two tails) .006
35. Made changes in human resources management style Spearman -.279 *
Sig (two tails) .011
8. Created stronger financial control Spearman -.243 *
Sig (two tails) .025
Reorganisation
as Extent of
Centralisation
31. Took centralisation steps
Spearman -.024
Sig (two tails) .830
32. Took decentralisation steps Spearman -.087
Sig (two tails) .439
Reorganisation
at the
Personnel
Level
30. Replaced senior and middle managers Spearman -.342 *
Sig (two tails) .002
29. Changed the internal local authority's structure
Spearman -.135
Sig (two tails) .224
* p < .01
261
Extent of
Recovery
Increased
services
expenditures
Reshaped and
improved the
organizational
culture and
climate
Made changes
in human
resources
management
style
Created
stronger
financial control
Replaced
senior & middle
managers
R
e
p
l
a
c
e
d
s
e
n
i
o
r
&
m
i
d
d
.
.
.
C
r
e
a
t
e
d
s
t
r
o
n
g
e
r
f
i
n
a
n
c
i
.
.
. M
a
d
e
c
h
a
n
g
e
s
i
n
h
u
m
a
.
.
. R
e
s
h
a
p
e
d
a
n
d
i
m
p
r
o
v
e
.
.
.
I
n
c
r
e
a
s
e
d
s
e
r
v
i
c
e
s
.
.
.
E
x
t
e
n
t
o
f
R
e
c
o
v
e
r
y
Figure 30: Matrix Scatter Plot for the Relationships of Individual Strategies and
Extent of Recovery (N = 83 - 85)
262
The revealed significant negative relationships between (i) Extent of recovery
and Reorganisation at the personnel level, (ii) Extent of recovery and Reorganisation
at the institutional level, and (iii) Extent of recovery and Overall TMSLA supplied a
base for testing the ability of TMS implementation to predict recovery. The third set
of analyses included Binary Logistic regression while the eight TMS factors were
employed as predictors and recovery was employed as the predicted variable (see
Table 26).
20
The model indicates that the extent of reorganisation at the personnel
level can significantly predict 5% to 9% of the chances to recover a LA (? = -.638, p
< .05). In statistical terms, according to the regression line, a LA which increases the
extent of implementation of reorganisation at the Personnel Level in one degree (on a
scale of 1 to 5) has a greater chance of .6 to recover. Other TMS were excluded from
the model since they were not found as significant contributors for prediction.
Overall, the findings expose an interesting relationship between TMS and
recovery in failing LAs. TMS were in a wide use and were implemented to a large
extent in failing LAs. Some of these failing LAs recovered and others kept failing
persistently. LAs, which recovered, implemented most TMS to a similar extent as
those who kept failing. Alongside this similarity, recovered LAs implemented
reorganisation at the personnel level to a smaller extent than persistently failing LAs.
Nonetheless, it will not be accurate to claim that the less a LA employed TMS the
better chances it had to recover. Recovered LAs implemented lower levels of TMS;
yet, they had not avoided their implementation. Within recovered LAs, the mean
scores of TMS? factors ranged between 2.50 and 3.96 and (in a 1 to 5 scale, where 5
represented a very large extent) (see Tables 21 and 22).
20
There was no fear of multicollinearity and biasing the results since the correlations between the
eight factors did not exceed the level of .7 (see Table 12 and Chapter 3.6.2.) with r = .9 being the
lowest boundary for multicollinearity (Field, 2005; Pallant, 2001); Overall TMSLA was completely
omitted to prevent singularity; and, outliers were taken into consideration. An explorative approach
required to follow Field (2005) recommendation and use the stepwise Forward Wald method, which
automatically excludes the variables not explaining the dependent variable and presents the best
possible predicted model.
263
Table 26: Logistic Regression Report for Recovery (as dichotomy)
Predicted by TMSLA in Failing LAs (N = 85)
Outcome Predictors
Included Predictors 95% CI for exp ?
? (SE) Lower Exp ? Upper
Recovery
as
Dichotomy
Reorganisation at the Personnel Level -.638 (.276) * .308 .528 .908
Constant 2.283 (1.130) * 9.804
Excluded Predictors
Retrenchment of Services .013
Retrenchment of Expenditures 1.807
Repositioning as Reaching out .409
Repositioning as Innovative Services .290
Repositioning as Renewed Relationship .383
Reorganisation at the Institutional Level .790
Reorganisation as Extent of Centralisation .051
R
2
= 0.05 (Hosmer & Lemeshow), 0.07 (Cox & Snell), 0.09 (Nagelkerke). Model Chi
2
(1)
= 5.981*
* = p < 0.05
In sum, according to the results, a significant positive relationship between
extent of implementation of TMS and recovery was not found; hence, extreme
employment of TMS had not led to recovery. There are numerous theoretical and
methodological possible explanations for such results. While reviewing all the
possible intra-organisational factors (e.g., the size of the LA, the causes and
symptoms of the failure, the available human resources in the LA, the leadership
qualities of management) and ex-organisational factors (e.g., eligibility for national
grants and plans, regional labour market, the socio- economic status of residents in
the LA geographical area, and pressure of stakeholders) that might differentiate
persistently failing and recovered LAs, is beyond of the scope of this study, the next
paragraphs may supply some theoretical and methodological explanation for the
results.
Theoretically, although TMS were implemented in persistently failing LAs to
a large extent, it might be argued that they might have been inappropriately
implemented and consequently had not led to the expected outcomes. Inappropriate
264
implementation of TMS might be caused by three types of mismanagement.
First, persistently failing LAs might have implemented TMS that were
unsuitable for the particular failures it wished to tackle, or alternatively, the strategies
were implemented to an inappropriate degree (i.e., too radically). Such
mismanagement may be a result of omitting the diagnosis stage, a stage regarded as
critical for the recovery process (see Figure 2) (McKiernan, 2003). This active
analytical tool helps in identifying suitable strategies to deal with failure. Even
though the repertoire of TMS is wide and management might be familiar with it, a
recovery process should not be based on a random eclectic collection of the entire
available strategies. Extreme TMS, which are not related to a recognised cause of a
failure and are not directed to fulfill a recognised need, would not necessarily lead to
recovery and they may even damage the process. For instance, increasing the budget
of a department that suffers from an unproductive climate, lack of managerial skills,
enthusiasm, or cooperation from subordinates, would probably not lead to its
recovery. In addition, since resources are limited, increasing the budget for an
inefficient department might prevent other areas from being effectively recovered.
As suggested by Arogyaswamy, Barker, and Yasai-Ardekani (1995), difficulties in
diagnosing the causes of a failure, recognising their symptoms, and spotting the
differences between the two, may cause recovery attempts to fail. Boyne and Meier
(2007), who received similar results (i.e., in some cases increased implementation of
TMS was not effective and prevented recovery), suggested that better matching
between causes and TMS were required to deal with different dimensions of failure.
Therefore, it might be suggested that, despite the importance of an accurate
diagnosis, this tool was not employed by persistently failing LAs.
Second, persistently failing LAs might have implemented TMS in the wrong
timing or wrong order. These problems might originate in the lack of an appropriate
comprehensive recovery plan, which should coordinate, balance, and prevent
accidental implementation of strategies. According to Boyne (2006), the planning
process (i.e., the fourth and the fifth stages: search for new strategies and selection of
new strategies) is essential for recovery (see Figure 3). When generating a recovery
plan the relevant strategies are transformed into operative actions (McKiernan, 2003)
and positively correlated with performance (Pearce, Robbins, and Robinson, 1987).
Thus, implementing TMS without prior formulation of a recovery plan decreases the
265
chances to execute them in a gradual, well-ordered, and balanced manner. For
instance, increasing marketing efforts for a new service to new consumers before the
recruitment and training of staff would probably result in poor outcomes.
Third, a large extent of TMS implementation does not ensure that strategies
are implemented by ideal or, at least, satisfactory personnel. TMS might have been
implemented in persistently failing LAs by unskilled, new, or inexperienced
management and staff. According to results explained in the former chapter,
reorganisation strategies and especially „reorganisation at the personnel level? (i.e.,
replaced senior and middle managers and changed internal organisational structure)
were broadly used within failing LAs. Implementation of „reorganisation at the
personnel level? is especially important due to the broader accountability and high
performance public managers are expected to demonstrate under NPM reforms
(Denhardt and Denhardt, 2000; Hall and Holt, 2002; Nutley, 2000; Sanjay and
Bradley, 2006). However, despite the fact that new managers often bring a new spirit
and they are freer to introduce radical changes (Schendel et al, 1978), and that
replacement of the leadership is regarded as a precondition for successful recoveries
(Hofer, 1980), this replacement should be executed in a proper and balanced way.
Implementation of TMS following too wide, too quick, too often, or unsuccessful
changes within the personnel might supply a possible explanation for low extent of
recovery. Thus, in order to successfully implement TMS, personnel changes should
be balanced with other reorganisation tactics. While doing so, the management
should make efforts to create and maintain a stable productive organisational climate,
in which new roles and authorities are internalised and assimilated, and new
managers earned the trust of their subordinates.
Overall, the results suggest that the extent of TMS implementation has no
significant influence on the extent of recovery. As noted by scholars, recovery is not
a granted outcome and intra-organisational dysfunction might damage recovery
prospects (see Figure 3). While the extent of implementation of TMS only gives a
quantitative guideline to the existent and use of TMS, it seems that the quality of the
process in which strategies are implemented might have a broader effect on recovery.
The quality of the process might be affected by the suitability of the strategies used,
their degree, timing, or order of implementation, and the skills, experience, and
motivation of management, which employs them. These results further enhance the
266
previous claim for further research on failing organisations, since they strengthen the
need to fill the existing lacuna in management knowledge and experience in turning
around failing public organisations, (Mellahi, Jackson, and Sparks, 2002; Melahi and
Wilkinson, 2004; Paton, 2003).
However, intra-organisational dysfunction supplies only one possible
explanation for the results. A second set of theoretical explanations lies in the extra-
organisational field. These explanations include possible independent intervening
variables, which might affect the extent of recovery. These environmental elements
provide further explanations for the ineffective deployment of high levels of TMS,
which the management is less capable of controlling. One of the main interventional
bodies is The Audit Commission. The official role of the Audit Commission includes
inspection, auditing, and supervision of the LA and its senior management (Audit
Commission, 2005). Nevertheless, some scholars (e.g., Cornforth and Paton, 2004;
Stewart, 2003) attribute a much more invasive role to it. According to them,
supervisory and audit regimes stimulate the growth of unnecessary organisational
measurement, stimulate artificial reporting practices that are misleading, obligate a
wasteful use of resources, and largely transfer attention from task execution to focus
on figures and reports. However, whether the Audit Commission has a contributory
role or just imposes additional burdens on LA management, its official role places it
under continuous conflicts of interest. On one hand, as a quasi-governmental body
(Jas and Skelcher, 2005) and as a non-interested party, the Audit Commission
measures and reports LAs performance. On the other hand, it inspects and advises
failing LAs (Stewart, 2003; Turner et al., 2004) and thus, it is partially and indirectly
in charge of their recovery. This double role might bias the CPA reports since they
might be motivated to report improvements in performance of LAs acting according
to their guidance. These motivations might influence the reliability of the CPA
ranking and, therefore, influence our results.
The reliability of the rankings might be further influenced by the personal
differences and variety of the Audit Commission staff. As a broad based national
authority, the Audit Commission consists of a CEO, managing directors, county and
district auditors, and lower level employees that comprise a workforce of around
2,500 staff (Audit Commission, 2005). Since this national body consists of a diverse
personnel profile that suffers from incomplete knowledge and experience (Boyne,
267
2004; Cornforth and Paton, 2004), and has yet formed a systematic doctrine to deal
with failing LAs, it can be argued that individual auditors interpret data and judge
circumstances differently. Variance in the interpretation of LAs performance directly
influences the reliability of the CPA ranking, since what can be seen as a minor
improvement to one evaluator might be seen as a major improvement to other.
The duality in the role of the Audit Commission might affect not only the
reliability of the ranking but might also influence the way strategies are implemented
within LAs. As noted during the interviews, the Audit Commission takes on different
roles in different situations. When Swindon?s interviewees were asked to describe
their relationship with the Audit Commission they reported that "[The Audit
Commission representatives] approved or disapproved our plans… they did not
recommend or suggest specific strategies… they were advising, not deciding for us."
By contrast, Walsall?s leaders reported that "[The Audit Commission representatives]
threatened to take the power, replace the management and the politicians…" These
different roles might lead to different ways to act. While LAs for which the Audit
Commission acted as an advising body could operate in a planned way using the
support of the Audit Commission, LAs that felt threatened by the Audit Commission
might have applied TMS in a rushed or radical way which did not contribute to their
recovery.
Alongside those theoretical explanations, some methodological decisions,
which were taken in this study, might explain the results as well. Due to limitations
in resources and in available time, the research was conducted based on three
underlying methodological assumptions: first, that recovery could be achieved within
a timeframe of four years; second, that LAs began their recovery process right after
the first CPA report publication in 2003, and finally that TMS could impact the level
of performance right after their implementation. Obviously, challenging each one of
these assumptions may supply a valid explanation of the results. First, since
organisational change in large public organisations might be continuous with no
accurate borders, the starting point and the endpoint of a recovery process in a
specific LA is difficult to recognise and measure. However, scholars suggest that
recovery processes last for several years (Schendel, Patton, and Riggs, 1976).
However, since participants were asked to report in July 2006 strategies taken from
mid 2002 to mid 2006, the timeframe available for this study was limited to four
268
years. It might be suggested that the timeframe required for a successful recovery
exceeded the period of time that passed from the first CPA report to the current
survey. Thus, the results might illustrate an intermediary stage in which recovery had
not yet been completely achieved. Second, it might be suggested that LAs did not
enter into a recovery process right after the publication of the CPA report. LAs might
have ignored the report or might have launched their recovery process a few years
later. Therefore, even though they reported the execution of TMS, they may only be
taking their first steps toward complete recovery. And finally, it may be argued that
even in cases in which TMS were implemented right after the publication of the CPA
report, they did not have an instant impact on performance in all cases, and recovery
should not be expected. Thus, in order to verify the validity of this assumption,
further research in the coming years is required.
In sum, this chapter shows that no significant relationship between the extent
of TMS implementation and recovery exists. Nevertheless, a moderate use of
reorganisation at a personal level may be effective as it initiates, leads, and predicts
successful recoveries. The data shows that extreme extent and greater extent of
implementation of TMS do not lead to recovery. There are theoretical and
methodological possible explanations for these results. Theoretically, intra-
organisational dysfunction and extra-organisational factors may influence the
recovery ability of a LA. Thus, it is not the extent but the quality of the strategies
employed that influences the ability of an organisation to recover. Methodologically,
limitations in time and resources caused the research to be conducted according to
presumptions that concern the length of recovery and its start point. Challenging
these presumptions could supply alternative explanations for the results (see further
discussion on this point in the Conclusion chapter). Thus, further research in the area
is required to better illustrate the characteristics of the recovery process.
269
CHAPTER 6: CONCLUSIONS
This research deals with the linkage between public performance, public
management, and public failure in the context of English local government. In this
sense, it makes a significant step towards a better understanding of failing public
organisations and the processes they undergo to improve their performance. This
study has been designed as an exploratory research that moves the discussion from
the commercial recovery area, which was widely investigated, to the public failure
and recovery area, which was rarely explored and for which information is still
largely unavailable. The scope of this research was limited to LAs due to a special
interest in investigating organisations with a unique composition of leadership,
elected members and officers, which creates further complexities when dealing with
performance failure and recovery. Additionally, the scope was limited to the British
context and to a conflicted central local relationship in a centralised political system.
The research reflects on the social, economic and political background that
may have influence the perception of failure. The research reviews the evolvement of
the local government in England from the 18
th
century to present days while pointing
out the different ideologies which influences its development. Similarly, the research
focuses on the influence of ideological streams on the development of public
administration and the perception of performance.
Public performance has changed its face during the last three decades. In
response to demands placed on the traditional public sector to supply basic services
to all citizens, based on Neoliberal views, NPM reforms and the Best Value regime
encouraged efficiency, effectiveness, and economy while importing managerial
methods and values from the private sector. Within this environment, LAs have been
subjected to repeated efforts designed to improve their performance. Nonetheless,
these efforts have not accomplished the expected ideal results and LAs kept
struggling with the increasing gap between customer expectations created by the
NPM environment and cutbacks in services caused by budget reductions imposed by
the central government. Alongside financial pressures, increased roles and functions
of LAs were followed in some cases by massive control and restrictions of powers.
These gaps resulted in the failure of several LAs to supply minimal services. This
research characterises these organisations and investigates TMS as an optional
managerial tool to deal with failing LAs.
270
The two followed case studies of failing LAs, the analysed reports and
documents, and the face-to-face interviews, supported by the description of two
additional cases of a consistently failing LA and a consistently well performing LA,
served as a basis of knowledge to develop the concept of TMS appropriate to the
public sector. While the evidence revealed that up to 2005 the two case studies of
failing LAs, Walsall and Swindon, had not accomplished full or perfect recoveries,
significant shifts in performance were recognised. Since these cases reflect public
recovery processes and TMS were employed by their leadership, the concept of TMS
was observable and carefully built up. Though this was initial empirical work it
emerged that the concept of TMS could be useful for clarifying the tasks,
complexities, considerations, and organisational environment that leaders face during
a recovery process. This work expands the existing work done on TMS in two ways.
First, the existing general classification of TMS into the 3Rs is supplemented by
eight sub-areas. The sub-areas do not contrast the 3Rs but give a more precise
understanding regarding TMS. The specification and division of TMS into groups
and sub-groups make observations, analyses, and, selections of TMS for
implementation purposes more available. Second, this study takes the existing work
one step ahead as it highlights the characteristics of TMS and emphasises six of their
nuances: 1. The aim, scope, and proportionality, 2. Timing and Time restriction, 3.
Urgency, 4. Inspection and examination, 5. Management, and 6. Organisational
climate. Doing so makes the task of matching strategies to causes of failure more
accessible for managers.
The conceptualization of TMS was very useful for constructing the new
measurement tool. Since the literature in this field is limited, and given that this
study was designed as exploratory research, the creation of such a tool was required.
Accordingly, a measurement tool for TMS was created and validated. This tool is
more accurate and much more comprehensive than the existing tools. The new tool
enables researchers, for the first time, to comprehensively explore whether TMS
were used in LAs, their extent of implementation, and their relationship with
recovery.
While using this tool a preliminary investigation was conducted, which
explored whether TMS were used in LAs, their extent of implementation, and their
relationship with recovery. The results challenge assumptions concerning the linear
271
relationship between TMS and recovery. The results show that TMS were
extensively employed by LAs. Nonetheless, surprisingly, such strategies were
executed by both persistently failing and recovered LAs and no significant
relationship between extent of implementation of TMS and recovery was found.
21
While the extent of implementation of TMS does not determine whether a recovery
will be achieved or not, other alternative possible explanations like the match
between TMS and causes of failure, the order and timing TMS were employed, the
degree of suitableness, and the staff involved in their implementation might better
distinguish between persistently failing and recovered cases. These alternatives
should be examined within the public sector. Yet there is evidence to show that in the
private sector, strategic choices of particular strategies, timing, and intensity of
implementation determine whether a turnaround may be successful (Sudarsanam and
Lai, 2001).
Given these results, it may be suggested that it is not the quantity but the
quality of the strategies used that influences recovery. Accordingly, in practical
terms, it can be concluded that while dealing with failing organisations, senior
managers should pay attention not only to the kind of strategies implemented but also
to the way in which these strategies are employed. In other words, this study argues
that TMS should be applied while taking into account not only their extent of
implementation, but also their suitability, timing, order, and the personnel that
employ them.
Based on the combination of the case studies with the quantitative results, it
can be concluded that TMS should be used after conducting a reliable diagnosis of
organisational strengths, weaknesses, opportunities, and threats, and a fair ranking of
the causes of the failure. Such a diagnosis would provide an accurate picture of the
reality in which the organisation is performing and supply the basis for matching the
required TMS to the specific causes of failure. Choosing the adequate strategies
should be done after considering whether the set of strategies has the best chances to
solve the organisation's problems after coordination of their order, time, and extent of
implementation. While doing so, special attention should be given to the
21
With the exception of 'Reorganisation at the personnel level'. For a more extensive explanation see
Chapter 5.
272
implementation of reorganisation strategies. Since statistically significant negative
correlations between extent of implementation of reorganisation strategies and
recovery were found, replacements of staff and organisational restructuring should be
done wisely. Radical changes in the structure of an organisation may lead to a
negative organisational climate, lack of stability, mistrustfulness, and insecurity of
positions. Nevertheless, it should be noted that the negative relationships found do
not necessarily indicate that reorganisation strategies should be avoided.
Reorganisation was broadly used within successfully recovered LAs as well. Thus, in
our view, gradual implementation of reorganisation combined with complementary
strategies might avoid their negative effect and contribute to the recovery process.
However, as in any other research, this study is not free from limitations and
weaknesses. First, since this is an exploratory study, it comprehensively measured
TMS for the first time. Thus, it may be argued that the developed measurement tool
has limited validity, or, in other words, does not accurately measure implementation
of TMS. In this context, further research using this tool, in different samples,
countries, and public agencies might increase the credibility of this tool, make
adjustments, and eliminate imperfections.
Second, since the research resources available to this study were limited, the
study relied on the annually published Audit Commission CPA test and league table
of performance ratings in its classification of LAs. The Audit Commission data
supplied the basis for the identification of suitable LAs for the case studies, for the
categorization of the different LAs according to levels of performers, and for tracing
the extent of recovery. However, scholars have continuously criticised the concept of
performance measurement in the public sector. These arguments may weaken the
ability of the CPA to reflect the actual performance and recovery levels of LAs, and
consequently weaken the findings of this study. However, even if some managers
invest efforts in improving their ranking, such improvement cannot be done without
improving performance to some extent. Thus, the influence of such bias on the
results will not be significant.
To conclude, this study makes a step towards dealing with the existing lacuna
of knowledge and experience in the management of a failing public organisation.
This research pointed out the characteristics of a failing LA, supplied a better
273
understanding of TMS, adapting their content to the public sector environment so
that a measurement tool could be developed, and the relationship between TMS and
recovery could be explored. However, as was previously suggested, borrowing
managerial practices is not always appropriate and helpful (McNulty and Ferlie,
2004). Nonetheless, in our view interdisciplinary research has the potential to supply,
or at least test, innovative solutions to known problem. Thus, using practices and
ideas originating in one discipline, while sensitively adjusting them to another
discipline, may enrich the available arsenal of solutions. As recognised by Robertson
and Seneviratne (1995) there is a growing recognition of the fact that distinctions
between the two sectors are becoming blurred, and organizational change
interventions are just as successful in both sectors.
Given that, we have ensured that TMS would be adaptable to the public
sector context in a nuanced manner: the conceptualisation of TMS was subject to
careful examination, while political, democratic, and public issues were considered;
the applicability of each of the 3Rs was discussed while being evaluated according to
public managers' perspective; the measurement tool items were subject to careful
examination of relevant experts; and statistical procedures were aimed at ensuring
that the measurement tool is reliable and valid. These cautious steps promised a sane
use of ideas borrowed from the private sector.
These cautious adaptations enable this study to effectively deal with
questions regarding public failure and make a contribution to the area in various
aspects. Firstly, this study highlights the ongoing conflict between increased
demands and decreased resources that characterises NPM. Secondly, it highlights the
phenomenon of public failure and persistent failure of some LAs, the efforts made by
the English government and the Audit Commission to recover them, and the partial
success of these efforts. Thirdly, this study makes a preliminary, systematic attempt
to evaluate the causality of managerial change strategies used in failing LAs and
recovery. Fourthly, the contributions portrayed are the point of departure for
continuing development of theory in this area.
Overall, in contrast to the predominant ethos that emphasises excellence, this
study opens the door for further investigation of cases of failure. As this study shows,
further research in this area is required. While this study focused on the extent of
274
TMS implementation, future studies should search further for the factors that may
influence recovery processes by comparing successful and unsuccessful recovery
attempts. In order to explore these possible factors, future research could deal with
questions as to whether a professional diagnosis was conducted; it could investigate
the extent to which strategies were matched and directed to overcome specific causes
of failure; it may evaluate whether a recovery plan was formulated, how TMS were
planned to be executed, and how they were implemented in practice. In addition, it
would be important to figure out how recovered cases dealt with the possible
disadvantages and difficulties that were caused by reorganisation strategies.
Exploring and testing these future directions of research may pave the way for a
deeper and improved understanding of the strategies public managers should employ
in turnaround situations.
275
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CHAPTER 8: APPENDICES
Appendix 1: Local Government Act, 1999
Note: the following table includes parts of the Local Government Act, 1999. (For the
full version please see http://www.opsi.gov.uk/acts/acts1999/199900 27.htm#4)
PART I
BEST VALUE
Best value authorities
Best value
authorities.
1. - (1) For the purposes of this Part each of these is a best value authority-
(a) a local authority;
(2) In relation to England "local authority" in subsection (1)(a) means-
(a) a county council, a district council, a London borough council, a parish council
or a parish meeting of a parish which does not have a separate parish council;
Duties
The general
duty.
3. - (1) A best value authority must make arrangements to secure continuous
improvement in the way in which its functions are exercised, having regard to a
combination of economy, efficiency and effectiveness.
(2) For the purpose of deciding how to fulfil the duty arising under subsection (1)
an authority must consult-
(a) representatives of persons liable to pay any tax, precept or levy to or in respect
of the authority,
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(b) representatives of persons liable to pay non-domestic rates in respect of any
area within which the authority carries out functions,
(c) representatives of persons who use or are likely to use services provided by the
authority, and
(d) representatives of persons appearing to the authority to have an interest in any
area within which the authority carries out functions.
(3) For the purposes of subsection (2) "representatives" in relation to a group of
persons means persons who appear to the authority to be representative of that
group.
Performance
indicators and
standards.
4. - (1) The Secretary of State may by order specify-
(a) factors ("performance indicators") by reference to which a best value
authority's performance in exercising functions can be measured;
(b) standards ("performance standards") to be met by best value authorities in
relation to performance indicators specified under paragraph (a).
(4) In specifying performance indicators and standards, and in deciding whether to
do so, the Secretary of State-
(a) shall aim to promote improvement of the way in which the functions of best
value authorities are exercised, having regard to a combination of economy,
efficiency and effectiveness, and
(b) shall have regard to any recommendations made to him by the Audit
Commission.
(5) In exercising a function a best value authority must meet any applicable
performance standard specified under subsection (1)(b).
Best value
reviews.
5. - (1) A best value authority must conduct best value reviews of its functions in
accordance with the provisions of any order made under this section.
(2) The Secretary of State may by order specify a period within which an authority
is to review all its functions, and an order may-
(a) apply to one authority or more;
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(b) make different provision in relation to different authorities;
(c) require specified functions to be reviewed in specified financial years.
(3) In conducting a review an authority-
(a) shall aim to improve the way in which its functions are exercised, having
regard to a combination of economy, efficiency and effectiveness, and
(b) shall have regard to any guidance issued by the Secretary of State under this
section.
(4) The Secretary of State may by order specify matters which an authority must
include in a review of a function under this section; and in particular an order may
require an authority-
(a) to consider whether it should be exercising the function;
(b) to consider the level at which and the way in which it should be exercising the
function;
(c) to consider its objectives in relation to the exercise of the function;
(d) to assess its performance in exercising the function by reference to any
performance indicator specified for the function under section 4 or under
subsection (6)(a) below;
(e) to assess the competitiveness of its performance in exercising the function by
reference to the exercise of the same function, or similar functions, by other best
value authorities and by commercial and other businesses;
(f) to consult other best value authorities and commercial and other businesses
about the exercise of the function;
(g) to assess its success in meeting any performance standard which applies in
relation to the function;
(h) to assess its progress towards meeting any relevant performance standard
which has been specified but which does not yet apply;
(i) to assess its progress towards meeting any relevant performance target set under
subsection (6)(b).
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(5) The Secretary of State may issue guidance on-
(a) the timetable for a review;
(b) the procedure for a review;
(c) the form in which a review should be recorded;
(d) the content of a review.
(6) In particular, guidance may state that an authority should-
(a) specify performance indicators in relation to functions;
(b) set targets for the performance of functions ("performance targets") by
reference to performance indicators specified under section 4 or under paragraph
(a);
(c) set a plan of action to be taken for the purposes of meeting a performance
target.
(7) Guidance may state the matters which should be taken into account in setting
performance targets; and these may include the range of performances expected to
be attained by best value authorities.
Best value
performance
plans.
6. - (1) A best value authority must prepare a best value performance plan for each
financial year in accordance with any order made or guidance issued under this
section.
(2) The Secretary of State may by order specify matters which an authority must
include in a plan for a financial year; and in particular an order may require an
authority-
(a) to summarise the authority's objectives in relation to the exercise of its
functions;
(b) to summarise any assessment made by the authority of the level at which and
the way in which it exercises its functions;
(c) to state any period within which the authority is required to review its functions
under section 5;
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(d) to state the timetable the authority proposes to follow in conducting a review;
(e) to state any performance indicators, standards and targets specified or set in
relation to the authority's functions;
(f) to summarise the authority's assessment of its performance in the previous
financial year with regard to performance indicators;
(g) to compare that performance with the authority's performance in previous
financial years or with the performance of other best value authorities;
(h) to summarise its assessment of its success in meeting any performance standard
which applied at any time in the previous financial year;
(i) to summarise its assessment of its progress towards meeting any performance
standard which has been specified but which does not yet apply;
(j) to summarise its assessment of its progress towards meeting any performance
target;
(k) to summarise any plan of action to be taken in the financial year to which the
plan relates for the purposes of meeting a performance target;
(l) to summarise the basis on which any performance target was set, and any plan
of action was determined, in relation to a function reviewed under section 5 in the
previous financial year.
(3) An authority must publish its plan for a financial year before-
(a) 31st March of the previous financial year, or
(b) such other date as the Secretary of State may specify by order.
(4) The Secretary of State may issue guidance on the form and content of plans and
the manner in which they should be published.
Audit of best value performance plans
Audit.
7. - (1) A performance plan published by a best value authority for a financial year
under section 6 shall be audited by the authority's auditor.
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(2) An audit of a performance plan is an inspection for the purpose of establishing
whether the plan was prepared and published in accordance with section 6 and any
order or guidance under that section.
(3) Subsections (1), (2) and (4) to (7) of section 6 of the Audit Commission Act
1998 (auditor's right to documents and information) shall have effect in relation to
an auditor's functions under this Part as they have effect in relation to his functions
under that Act.
(4) In relation to an authority's performance plan the auditor shall issue a report-
(a) certifying that he has audited the plan,
(b) stating whether he believes that it was prepared and published in accordance
with section 6 and any order or guidance under that section,
(c) if appropriate, recommending how it should be amended so as to accord with
section 6 and any order or guidance under that section,
(d) if appropriate, recommending procedures to be followed by the authority in
relation to the plan,
(e) recommending whether the Audit Commission should carry out a best value
inspection of the authority under section 10, and
(f) recommending whether the Secretary of State should give a direction under
section 15.
Response to
audit.
9. - (1) A best value authority shall publish any report received in accordance with
section 7(5)(a).
Best value inspections
Inspections.
10. - (1) The Audit Commission may carry out an inspection of a best value
authority's compliance with the requirements of this Part.
Inspectors'
powers and
duties.
11. - (1) An inspector has a right of access at all reasonable times-
Reports.
13. - (1) Where the Audit Commission has carried out an inspection of an authority
under section 10 it shall issue a report.
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Inspections:
housing benefit
and council tax
benefit.
14. - (1) The following shall be substituted for section 139A(1) and (2) of the
Social Security Administration Act 1992 (reports on administration of housing
benefit and council tax benefit)-
Secretary of
State's powers.
15. - (1) This section applies in relation to a best value authority if the Secretary of
State is satisfied that it is failing to comply with the requirements of this Part.
(2) Where this section applies in relation to an authority the Secretary of State may
direct it-
(a) to prepare or amend a performance plan;
(b) to follow specified procedures in relation to a performance plan;
(c) to carry out a review of its exercise of specified functions.
Exercise of functions by best value authorities
Power to modify
enactments and
confer new
powers.
16. - (1) If the Secretary of State thinks that an enactment prevents or obstructs
compliance by best value authorities with the requirements of this Part he may by
order make provision modifying or excluding the application of the enactment in
relation to those authorities.
(2) The Secretary of State may by order make provision conferring on best value
authorities any power which he considers necessary or expedient to permit or
facilitate compliance with the requirements of this Part.
(3) An order under this section may-
(a) impose conditions on the exercise of any power conferred by the order
(including conditions about consultation or approval);
(b) amend an enactment;
(c) include consequential, incidental and transitional provision;
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(d) make different provision for different cases.
Audit
Commission.
22. - (1) In this Act a reference to the Audit Commission is a reference to the Audit
Commission for Local Authorities and the National Health Service in England and
Wales.
(2) The Audit Commission may delegate any of its functions under this Part to-
(a) a committee or sub-committee established by the Commission (including a
committee or sub-committee including persons who are not members of the
Commission), or
(b) an officer or servant of the Commission.
(3) The Audit Commission Act 1998 shall be amended as follows.
(4) In section 33 (studies by Commission)-
(a) in subsection (1)(a), for "the provision of local authority services and of other
services provided by bodies subject to audit" substitute "the exercise of the
functions of best value authorities and the provision of services provided by other
bodies subject to audit".
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Appendix 2: The White Paper - Strong Local Leadership – Quality Public
Services
Note: the following table includes parts of the White Paper - Strong Local
Leadership – Quality Public Services. (For the full version please see
http://212.100.250.130/pub/215/StronglocalleadershipQualitypublicservicesDTLR20
01PartOne_id1165215.pdf)
Presented to Parliament by the Secretary of State for Transport, Local
Government, and the Regions, by Command of Her Majesty
This white paper sets out a new vision for local government at the beginning of the
21st Century. It seeks to establish a partnership between central and local
government, reflecting the critical importance of local authorities as a tier of
democratic government, delivering high quality public services to local people.
Democratically elected councils are part of the fabric of our communities. The
services they provide have a vital part to play in sustaining and enhancing the social
and economic prospects and environmental quality of our towns, cities and
countryside. They can have a profound effect on the opportunities and quality of life
of the people who live and work there. People want good standards of education, safe
communities, efficient transport systems and high quality are for the vulnerable in
our society. They want clean streets, decent housing, good leisure and cultural
facilities, and well planned neighborhoods. They want their voices to be heard when
decisions are made about how these services are delivered, and they want someone
looking after and speaking up for the interests of their communities. People therefore
expect a great deal from their council. And those expectations are rising. To meet
them, councils have constantly to seek new and more effective ways to deliver
customer-focused services and lead their communities. The proposals in this white
paper will provide a framework in which all can do so, through the application of the
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Government?s four principles of public services reform: Establishing a national
framework of standards and accountability for the delivery of high quality services
and effective community leadership. Within this framework, devolution to local
councils to encourage diversity and creativity, giving them the freedom they need to
respond to and meet their communities? needs. Building local capacity in recognition
of the need for flexibility at the front-line to exploit the opportunities we are opening
up, and deliver the improved services and effective leadership we all want to see.
And more choice for customers, with access to an alternative supplier where
performance falls below acceptable standards. The implementation of this white
paper will see greater freedoms for high performing councils, incentives to support
the achievement of stretching targets, focused attention where councils are
struggling, and effective intervention to tackle failure. These proposals form part of
the Government?s agenda for modernisation and reform. For many, they will be
challenging. They are meant to be. We propose these changes not for their own sake,
but because local people will benefit. From the requirement that all services should
be delivered to an acceptable standard. From the fact that the changes we all really
want to see – better schools and social care, improved local environments, better
transport and other vital local services – will get the priority they deserve. And from
effective community leadership by councils in touch with local people and working
to meet their aspirations. I want to see central and local government working together
in a constructive partnership to deliver high the quality public services that local
people have the right to expect. In a practical way this white paper shows how we
can do so.
Strengthening local Government
We want a vibrant local democracy in which councils deliver high quality and
improving local services and provide strong and confident leadership. We will work
with local government to achieve this and remove unnecessary controls, which stifle
local innovation. The proposals we set out in this white paper mark a radical change
in the relationship between central and local government.
1.1. The Government wants to see strong, vibrant, innovative, and responsive local
government delivering the quality of local leadership and public services that
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their communities need. Councils are run by people elected by the local
community. That gives them a unique role and responsibility to respond to local
needs and circumstances, and to provide the leadership that helps to create and
support thriving communities.
1.2. The proof that they can do so is all around us. In the magnificent municipal
achievements of the nineteenth century. In the contribution that councils made
to the establishment of our welfare system and economic prosperity in the last
century. And it is there today in the things which councils up and down the
country do day in and day out to help make peoples? lives better.
1.3. Four years ago councils were not well placed to respond to the Government?s
vision of successful local government. The resources they needed for essential
investment were not in place. An effective, constructive partnership between
central and local government did not exist. Universal capping and CCT were the
order of the day, focusing on inputs and relegating the achievement of outcomes
that matter, such as improvements in education, social care, housing and
transport, and the creation of a clean and safe local environment.
1.4. Since 1997 the Government has introduced a wide range of measures designed
to develop better local leadership and focus on service delivery. Financial
support for councils? revenue and capital expenditure has risen in real terms in
each of the last four years (in stark contrast to the 4 years before that), alongside
financial reforms including the end of universal capping.
1.5. A major public service reform programme has begun. The bureaucracy of CCT
has gone. In its place, councils strive for continuous improvement through the
achievement of best value. This means balancing costs and quality in
consultation with local people, and identifying the most appropriate method of
service delivery, be it public, private, voluntary, or in partnership. Local Public
Service Agreements (PSAs) encourage councils to stretch their performance
still further, in return for additional finance and the freedoms and flexibilities
needed to do so.
1.6. The new constitutions that councils are introducing following consultation with
local people will improve the efficiency, transparency and accountability of
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local leadership and decision-making. The introduction of statutory community
strategies and the broad new enabling power to promote community well-being
encourage councils to face outwards and work alongside public, private and
voluntary partners to develop and deliver their communities? vision for their
locality.
1.7. We need to build on these reforms to ensure effective service delivery and
community leadership across the whole of local government. Further reform is
needed so that councils have the tools they need to make the improvements
local people want to see. In particular, we need to get rid of regulations where
these impede councils in finding innovative ways of tackling local problems,
and to modernise local government finance.
1.8. Reform is needed because Government has a responsibility to ensure that
wherever people live in this country, they have access to good quality public
services. Where local government is responsible for providing these services, it
must be held to account for achieving appropriate standards across the country.
That means tackling the current variability in service quality, especially in
critical areas like education and social services.
1.9. Reform is needed to lay the foundations for local government?s future. A future
in which councils enjoy the confidence of all the partners they work with and all
the people they serve, and which sees local government return to the very centre
of life in their communities.
1.10. The proposals we set out here will mark a new and lasting basis for effective
local government – by celebrating councils as a significant and vital sphere of
government and by enhancing their ability to make a real difference to peoples?
lives.
1.11. Summary of proposals: We will support councils to make a success of their
unique role as democratically elected leaders of their local communities. We
will help them to develop the democratic legitimacy and sound governance
needed to underpin community leadership and effective service delivery
building on the new well-being powers and local strategic partnerships. We will
encourage other public sector partners to work effectively with councils to
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tackle local problems and exploit local opportunities. We will promote closer
engagement between councils and their communities, and give councils further
powers to serve local people and improve the local environment and public
spaces. We will allow councils to introduce Business Improvement Districts to
promote partnership with local businesses. Significant deregulation will
increase councils? freedom of action.
1.12. In line with our principles for public service reform, we will shift our focus to
the assured delivery of outcomes through a national framework of standards and
accountability, and away from controls over inputs, processes and local
decisions. This white paper sets out a comprehensive performance framework
for improvement, accompanied by a substantial package of deregulation.
1.13. The framework (which will be complemented by the new performance rating
system for social services) comprises:
– Clearly defined priorities and exacting performance standards, developed
with local government through the Central Local Partnership;
– Regular comprehensive performance assessments for all councils,
identifying how they are performing against these standards;
– Co-ordinated incentives, rewards and tools which address the results of the
comprehensive assessments and drive service improvement including: –
clear and concise public information about councils? performance;
– Integrated inspection programmes tailored to councils? strengths,
weaknesses and needs;
– Additional freedoms, powers and flexibility over resources for councils with
the track-record and capacity to use them;
– Tough action to tackle failing councils and services;
– Stretching targets and rewards for service improvement, through local
PSAs; and a streamlined, proportionate and integrated best value regime.
1.14. With this framework in place there will be an increased emphasis on delivery,
responsibility and accountability. By removing restrictions and requirements on
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planning, spending and decision-making and providing new powers to trade and
charge, we will free up councils to innovate and deliver tangible improvements
in the quality of services and effective community leadership. Unnecessary
bureaucracy, red-tape and regulation will be removed for all councils. We will
adopt a more co-ordinated and proportionate approach to the demands we make
of councils, focusing on the delivery of priorities and outcomes. There will be
more financial freedom within a basic framework underpinned by sound
financial management and prudent decision-making.
1.15. Specifically, for all councils we will:
– Abolish the council tax benefit subsidy limitation scheme;
– Shift control over council borrowing decisions to the local level;
– Significantly reduce the numbers of plans and strategies that councils are
required to produce;
– Scale back on area-based initiatives and give greater scope to rationalise
partnerships;
– Remove unnecessary red tape and bureaucracy including many
requirements for councils to obtain Government consent before acting;
– Provide councils with wider powers to provide services to others; and
– Allow councils to charge for the discretionary services they provide.
1.16. Additional freedoms will be available for high performers, with less ring
fencing, fewer planning requirements and greater freedom to use income from
fines. These councils will also have more discretion over best value reviews, a
much lighter touch inspection regime and the widest freedom to trade across
their services. We will not use reserve powers to cap the council tax increases of
high performing councils. Other councils will also be able to agree additional
freedoms, depending on their performance profile. Freedoms will also be
negotiable through local PSAs, to accelerate progress on key national and local
priorities.
1.17. This package of reforms demonstrates Government?s commitment to bring
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about vibrant, innovative and responsive local government. Local authorities
will have more freedom and responsibility to improve their performance and
serve their communities. This will enhance local democracy, with local
authorities being more clearly accountable to their electorate for service
delivery and council tax levels. In return, Government will expect local
authorities to rise to the challenge and bring about significant improvements in
performance and overall efficiency.
1.18. Police authorities are a special type of local authority, whose national standards
and priorities are the responsibility of the Home Secretary. They will retain their
own separate performance framework and will benefit from elements of the
wider local authority proposals, such as the new freedom to borrow.
1.19. We will draw together support, on a crossdepartmental basis, for: • building
councils? capacity to deliver; and • improving the skills of councillors and
council staff.
1.20. The emphasis will be on targeting resources where they are needed most and on
enabling councils themselves to tackle their weaknesses and develop their
strengths. Chapter 5 seeks views on our proposals to do this. We will help
councils to exploit the potential that new technologies offer to restructure
services, speed up transactions, provide a single point of contact for people?s
needs and join up delivery by local authorities and other agencies.
1.21. We will promote sound financial management in local government including
requiring councils to maintain adequate reserves and keep finances under
review. We will reform the single capital pot to reduce the proportion of ring-
fencing of Government support for capital investment for high performing and
striving councils.
1.22. Chapter 6 outlines our proposals for reform of the local government finance
system including reforms for parish and town councils. Part II of this
publication describes our local government finance proposals in detail.
1.23. We will clarify accountability for financial decisions. In providing greater
responsibility to councils for decisions on borrowing, fees and charges and
council tax, we will also strengthen the scrutiny role of councillors and
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reinforce the need for local consultation. Council tax bills will be clearer. They
will show the annual percentage change in council tax for different authorities
up front, not hidden away in a leaflet.
1.24. We will design new grant formulae that are more intelligible and transparent to
all stakeholders.
1.25. The Government?s goals of bringing decisions closer to the people they affect,
increasing democratic participation and improving the efficiency and
effectiveness of service delivery are also being addressed at a regional level.
The Government is committed to publishing a white paper setting out proposals
for giving people in the English regions a better say in how they are governed.
These proposals will be based on the drawing down of powers from central
government, as part of our wider commitment to devolution. This will have
close links with the ways in which we are strengthening the role of local
government and improving the working relationships between different levels
of governance.
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Appendix 3: The Audit Commission Methodology for the Core Services
Performance Rank
Source: Andrews, Boyne, and Walker (2006)
"The core service performance (CSP) score embraces all the main areas of
local government activity-education, social care, planning, waste management,
housing, library and leisure, and benefits, together with the "management of
resources." The Audit Commission gives each service a score from 1 (lowest) to 4
(highest). These scores are derived from a mixture of performance indicators, the
results of inspection of services, and service plans and standards. All the data used by
the Commission are in the public domain.
For three of the services (benefits, education, and social services), the
methodology for obtaining the CSP score relied on existing measurement systems,
which were converted to Audit Commission categories. Education scores were
translated from the Office for Standards in Education's performance profile star
system (0 stars =1, 1 star = 2, 2 stars = 3, and 3 stars = 4). For social services, the
Social Service Inspectorates performance ranks, which are based on the average
score for the judgments of services for children and adults, were converted thus: not
serving people well = 1, serving some people well = 2, serving most people well = 3,
yes-serving people well = 4. The Benefits Fraud Inspectorate uses a combination of
self-assessment, inspection judgments, and evidence from performance indicators to
assess local authorities' performance against their key performance standards. The
Commission translated these scores thus: up to 39 percent = 1, 40 percent-59 percent
= 2, 60 percent-79 percent = 3, and 80 percent and above = 4.
The score for the remaining three service areas and management of resources
was calculated by the Audit Commission from Best Value Performance Indicators
from 2000-01 and 2001-02, inspection reports, and service plans and standards data.
The performance indicators were taken from the Best Value Performance Indicators,
which every authority is obliged to provide to central government on an annual basis
(ODPM 1999, 2000b). These indicators cover key dimensions of performance
(Boyne 2002): quantity of outputs (e.g., number of exclusions from primary school,
number of home helps for the elderly), quality of outputs, (e.g., number of cyclists
killed, serious injuries on highways), formal effectiveness, (e.g., average school
317
passes at 16, percentage of rent collected from council housing tenants), efficiency
(e.g., cost per benefit claimed), and consumer satisfaction (e.g., satisfaction with
waste collection, users satisfied with theaters and concert halls). These data were
audited prior to publication.
Local government services are inspected by the Audit Commission. The
Commission makes judgments on the performance of the service and the likelihood
that the service can make improvements. The CSP draws on the performance
judgment. Inspectors use a scale of 1 (lowest) to 4 (highest) to judge the performance
of a service based on performance indicators, internal improvement plans, field
visits, and other documentation (these inspection reports are published on the Audit
Commission's Web site, www.audit-commission.gov.uk). The final piece of evidence
used by the Commission to derive the CSP score are statutory plans, which are
assessed against the criteria of the service's relevant central government department.
Weighting systems were used by the Commission to derive the CSP score.
These are sometimes complex because they have to compensate for the absence of
data in some services for some councils. The notable example here is inspection
reports. Environmental services, which include transport, waste, and planning, can be
used to illustrate the process. Best Value Performance Indicators, inspection reports,
and service plans are used to judge how good the service is. When no inspection had
taken place prior to the CPA process, the authority was inspected during 2002 on one
of the three subservice areas. When inspection had taken place in transport, for
example, the inspection result accounted for 50 percent of the evidence, Best Value
Performance Indicators 30 percent, and the Local Transport Plan 20 percent. Where
more than one inspection had taken place in a subservice area, the average inspection
score was taken. When there was no inspection, Best Value Performance Indicators
account for 60 percent and the Local Transport Plan 40 percent. Different weightings
were used in waste and planning. The three subservices carry different weights in
counties, metropolitan boroughs, unitary authorities, and London boroughs,
reflecting the varying responsibility of each organizational type. The weighted data
are then converted to the 1-4 scoring system.
Following the calculation of the CSP score for each service, the Audit
Commission weighted services when deriving the overall authority score. The
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weights used at this stage reflected the relative importance and budget of each
service. On average, education and social services account for two-thirds of a
council's budget and are the most visible services. They were given the highest
weighting of 4. For environment and housing, the weight was 2, and for libraries and
leisure, benefits, and management of resources, the weight was 1. The Commission
then combined these weights with the performance score (1-4) for each service to
calculate the CSP. The CSP ranges from a minimum score of 15 (12 in the case of
county councils that do not provide either housing or benefits) to a maximum of 60
(48 for county councils)."
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Appendix 4: The Qualitative Tool - a Semi-Structured Face-to-Face Interview
Section 1: Introduction
Dear Mr./Mrs. _____________
It is nice to meet you and thank you for your time. My name is Itai Beeri. I
am a Ph.D. Student in UCC, Department of Government and Department of
Management & Marketing. Our research deals with turnaround management
in (failing) LAs. The aim of the study is to enrich both the managerial and
academic areas, about the causes and circumstances that led the local
authority into difficulties (a crisis, a failing situation). We would like to
explore the actions and decisions that the management took in order to
recover the local authority. We want to thank you about your cooperation and
to promise you that your personal identification details and the LA details
will be kept confidentially. The information you will share with us is very
important, and therefore, we would like to record this conversation. Do we
have your permission to do so?
Section 2: Demographic Questions
1. What is your current position?
2. What is your tenure in this position?
3. What was your previous position?
4. What was your tenure of previous position?
5. How many employees are employed in this local authority?
6. How many employees are employed in your department?
7. How many employees do you directly manage?
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Section 3: Core Questions
1. How would you define the severity of local authority?s failure?
2. Could you describe the level of failure in your local authority in 2002?
3. Why do you think it happened? What were the causes that led to the local
authority deterioration? Please give examples
4. What was the balance between internal and external causes to the
deterioration? How much factors in the local authority?s environment or
inside the local authority contributed to the deterioration?
5. What was the management responsibility for the deterioration?
6. Were there any financial/demand/political causes that led to difficulties?
Please give examples
7. Were the organisational learning skills a factor in the deterioration?
8. How did you know? What were the symptoms of the deterioration?
9. Who of the stakeholders recognised the symptoms? How severe was the
situation was to recognise the symptoms and react? Please give examples
10. Were there any managerial/financial/behavioural/physical symptoms to the
causes you have mentioned? Please give examples
11. Why do you think in that stage things have not been changed? What actually
triggered a change in the local authority? What stimulated an action?
12. What were the reactions to internal and external triggers like elections,
governmental involvement, consumers? demands, and the media?
13. Could you please specify the timing of these occurrences? For how long the
causes continued? For how long the symptoms continued? How much time
has past before the triggers appeared and when for the first time something
has been changed?
14. Has the local authority declared about a failure or preferred to deny it? Why?
What were the considerations and dynamic of that decision?
321
15. Has the local authority carried out a diagnosis of its difficulties/ barriers/
constrains/ causes, symptoms of the failure?s level and the triggers for
change? In what way? Who did it? To whom it was sent? According to what
guidance?
16. Has the local authority formulated a recovery plan? A formal one? Why?
Who were the partners to create the plan? How decisions have made? Who
proof it? What was the consumers/government/managers involvement?
17. Has the local authority asked for funding? From whom? Have you gotten any
funding?
18. What was the plan for recovering the local authority?
19. What were the actions that have been taken, in practice, in order to recover
the local authority?
20. Have you taken actions of Retrenchment (like for example, reducing of
services or reducing their quality, to some customers, in some areas, for some
time)? Please give examples
21. What were these actions? contributions to the recovery? What problems did
they cause?
22. Have you taken actions of Repositioning, improving or even innovativeness
(like for example, new investments, improving services, efforts to make
queues shorter, change charges for services, privatisation)? Please give
examples
23. What were these actions? contributions to the recovery? What problems did
they cause?
24. Have you taken actions of Reorganisation (like for example, replacement of
management or leaders, centralisation/decentralisation, changing financial
control, changing the organisational structure, changing the organisational
culture)? Please give examples
25. What were these actions? contributions to the recovery? What problems did
they cause?
322
26. Which actions mostly contributed to stability of the local authority after the
deterioration?
27. Which actions mostly contributed to recovery and back to growth of the local
authority, up to the levels of performance it enjoyed before the crisis?
28. Which actions mostly contributed to renewal of the local authority and to
level of performance that is higher than prior to the crisis?
29. Are they any other comments, suggestion you would like to state or questions
you would like to ask?
Thank you very much for your cooperation and kindness, I do appreciate your
efforts. I am sure you have contributed significantly to this research.
323
Appendix 5: The Quantitative Tool - a Questionnaire
Local Authorities’ Management Strategies -
Important Survey
Dear «TITLENAME»,
«POSITION»,
This questionnaire is part of a research project that focuses on Local Authorities’
Management Strategies. You have been chosen to represent your Local Authority?s
senior leadership. To gain insight about Management Strategies that were
implemented in your local authority during the past 4 years, we ask you, as a
representative of your Local Authority leadership, to complete this questionnaire.
(The contact details were gathered from the Council's website. Cabinet members,
chair committees, and executive directors were chosen).
The information you are asked to provide is of great value for Governments,
Local Authorities, and Citizens and will be kept confidential. The time needed
for completing the questionnaire is 7 to 10 minutes. Please answer all questions.
There are no “right” or “wrong” answers; we are only interested in your personal
opinions.
? Within the Respondents, A SHARP Personal Electronic Organiser will be drawn
? Respondents will receive the survey results
Much effort has been invested in this project and your personal participation is most
appreciated. We thank you in advance and trust we shall have the benefit of your
cooperation, which is invaluable for research purposes and for the general
improvement of Local Authorities.
Regards,
Itai Beeri, Ph.D. Student
Supervised by: Dr. Carol Linehan and Dr. Aodh Quinlivan, University College Cork.
For any further information, please contact Mr. Itai Beeri: [email protected] , +353-(0)21-4677649, +353-(0)85-7116301
Dear PA,
If you have received this mail, please transfer it to the addressee so he/she could decide whether or not take part in
the survey. Many thanks for your cooperation.
324
Implemented Strategies
The following statements represent strategies that might have been implemented in
your Local Authority. To what extent these strategies were implemented in your Local
Authority?
Please circle the number from 1 to 5 that best reflects your evaluation.
A. Retrenchment Strategies
Over the last 4 years the Local Authority: Hardly
at All
To a Very
Large Extent
Contracted activities and services? scope 1 2 3 4 5
Eliminated particular services 1 2 3 4 5
Decreased some services expenditures 1 2 3 4 5
Partially / Temporarily exited from specific services 1 2 3 4 5
Liquidated assets in order to raise capital 1 2 3 4 5
Reduced / suspended capital expenditures 1 2 3 4 5
Created stronger financial control 1 2 3 4 5
Closed down public organisations 1 2 3 4 5
Decreased financial support to other organisations 1 2 3 4 5
B. Repositioning Strategies
Over the last 4 years the Local Authority: Hardly
at All
To a Very
Large Extent
Established new services 1 2 3 4 5
Entered into joint activities/cooperated with other agencies 1 2 3 4 5
Extended activities? and services scope 1 2 3 4 5
Changed the priorities of traditional activities 1 2 3 4 5
Introduced new ways of implementation 1 2 3 4 5
Extended services? availability 1 2 3 4 5
Extended marketing efforts (reaching out) to new segment of
consumers
1 2 3 4 5
Increased services expenditures 1 2 3 4 5
Modernized services capacity with equipment utilizing new
technologies
1 2 3 4 5
Began to give services / internal services that were previously
purchased
1 2 3 4 5
325
Over the last 4 years the Local Authority: Hardly
at All
To a Very
Large Extent
Loaned money / asked for subvention for reorganisation
purposes
1 2 3 4 5
Redefined core missions 1 2 3 4 5
Ensured high quality of services 1 2 3 4 5
Privatised services 1 2 3 4 5
Rebuilt stakeholders? trust in the Local Authority 1 2 3 4 5
Improved the local authority?s internal and external image 1 2 3 4 5
Rented / Sold /Mortgaged assets 1 2 3 4 5
Increased average price of services / levying money 1 2 3 4 5
C. Reorganisation Strategies
Over the last 4 years the Local Authority: Hardly
at All
To a Very
Large Extent
Replaced the Chief Executive Officer 1 2 3 4 5
Changed the internal local authority?s structure 1 2 3 4 5
Replaced senior and middle managers 1 2 3 4 5
Took centralisation steps 1 2 3 4 5
Took decentralisation steps 1 2 3 4 5
Increased time and efforts in researching the consumers
needs
1 2 3 4 5
Increased time and efforts in becoming a learning
organisation
1 2 3 4 5
Made changes in human resources management style 1 2 3 4 5
Reshaped and improved the organisational culture and
climate
1 2 3 4 5
Invested in staff skills training 1 2 3 4 5
Defined a common vision of the Local Authority 1 2 3 4 5
Diagnosed the Local Authority?s strengths and
weaknesses
1 2 3 4 5
Formulated an organisational working plan 1 2 3 4 5
Fought the denial and resistance of employees 1 2 3 4 5
326
General Information
Finally, your personal details will be kept confidential. Please tick your answer or print
where necessary.
1. Gender: ? Male ? Female
2. Age: What is your age? ___
3. Years of Education: ________ (including elementary school, high school, and higher education)
4. Position ? Elected Member / Councillor ? Non-Elected Member / Executive Officer
5. Title in the Local Authority ? Cabinet Leader ? Cabinet Member
? Committee Chairman ? Chief Executive ? Executive Director ? Other: ___________
6. Tenure in the present position __________ years
7. If you have any comments or suggestions, please specify
Thank you very much for your cooperation
327
Appendix 6: The Quantitative Tool - a Questionnaire – On Line Version
328
Appendix 7: Table 27: Correlation Matrix for TMSLA Individual Strategies (N = 118 - 126)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
1. Eliminated particular services
2.Contracted activities and services' scope .485 **
3.Partially / Temporarily exited from
specific services
.616 ** .387 **
4.Reduced / suspended capital expenditures .226 * 0.058 .333 **
5.Increased services expenditures -0.100 -0.084 -0.111 -.371 **
6.Decreased financial support in other
organizations
.343 ** .269 ** .502 ** .380 ** -.242 **
7.Began to give services / internal
services that were previously purchased
0.013 -0.086 0.097 -.183 * .241 ** -.198 *
8.Increased time and efforts in becoming
a learning organization
0.045 -0.025 0.108 -0.058 .179 * -0.038 .427 **
9.Increased time and efforts in
researching the consumers needs
0.083 0.095 0.120 0.020 0.173 -0.077 .318 ** .749 **
10.Extended marketing efforts reaching
out to new segment of consumers
-0.013 -0.018 0.074 0.095 .271 ** -0.017 .323 ** .448 ** .446 **
11.Changed the priorities of traditional
activities
.274 ** .275 ** .407 ** 0.146 .233 ** .207 * 0.094 .282 ** .318 ** .388 **
12.Introduced new ways of
implementation
.184 * 0.105 .241 ** 0.077 .226 * 0.098 .303 ** .522 ** .544 ** .482 ** .683 **
13.Entered into joint activities/
cooperated with other agencies
.200 * .260 ** 0.168 0.007 .246 ** 0.005 0.123 .375 ** .429 ** .314 ** .571 ** .635 **
14.Extended activities' and services scope -0.113 0.041 0.081 -.195 * .442 ** -0.078 .215 * .418 ** .419 ** .429 ** .416 ** .461 ** .490 **
15.Extended services' availability 0.036 -0.051 .212 * 0.014 .349 ** -0.073 .359 ** .549 ** .492 ** .573 ** .482 ** .642 ** .543 ** .579 **
16.Established new services -0.044 0.153 0.065 -.195 * .302 ** -0.091 0.174 .404 ** .316 ** .379 ** .340 ** .377 ** .499 ** .579 ** .505 **
17.Redefined core missions .229 * 0.101 .331 ** 0.107 0.129 0.139 .295 ** .298 ** .345 ** .327 ** .345 ** .410 ** .285 ** 0.174 .374 ** 0.157
18.Closed down public organizations .252 ** .228 * .347 ** .259 ** -0.169 .411 ** -0.039 -0.145 -0.091 -0.034 -0.007 -0.073 -0.126 -0.159 -0.119 0.007 0.028
19.Privatised services .309 ** .461 ** .313 ** 0.167 -0.002 .324 ** 0.133 0.046 0.062 0.149 .251 ** 0.163 0.145 0.012 0.001 -0.012 0.165 .354 **
20.Ensured high quality of services 0.000 0.052 0.019 -0.136 .196 * -0.161 0.174 .553 ** .520 ** .377 ** .265 ** .414 ** .379 ** .393 ** .445 ** .381 ** .302 ** -.325 ** -0.121
21.Rebuilt stakeholders' trust in the
Local Authority
0.039 -0.008 -0.005 -0.097 .187 * -0.120 .300 ** .515 ** .437 ** .357 ** .240 ** .367 ** .321 ** .207 * .452 ** .287 ** .305 ** -.269 ** -0.024 .614 **
22.Improved the local authority's internal
and external image
-0.022 -0.024 -0.035 -0.131 0.130 -0.178 .272 ** .541 ** .489 ** .426 ** .182 * .295 ** .268 ** .291 ** .429 ** .272 ** .323 ** -.336 ** -0.047 .643 ** .796 **
23.Diagnosed the Local Authority's
strengths and weaknesses
-0.008 0.009 -0.075 -0.149 0.168 -0.164 0.112 .511 ** .465 ** .264 ** .273 ** .433 ** .334 ** .226 * .393 ** .285 ** .326 ** -.312 ** -0.047 .595 ** .531 ** .589 **
24.Invested in staff skills training 0.047 0.056 -0.007 -0.111 .264 ** -.180 * .297 ** .536 ** .453 ** .352 ** 0.170 .391 ** .387 ** .284 ** .456 ** .332 ** .377 ** -0.177 0.072 .473 ** .526 ** .527 ** .623 **
25.Formulated an organizational working
plan
0.051 0.081 0.026 -0.117 .214 * -0.136 0.140 .593 ** .488 ** .257 ** .274 ** .456 ** .342 ** .305 ** .349 ** .245 ** .294 ** -.219 * 0.013 .490 ** .404 ** .485 ** .748 ** .599 **
26.Defined a common vision of the Local
Authority
0.030 0.011 0.048 -0.019 0.047 0.006 0.043 .391 ** .376 ** .183 * .191 * .261 ** .325 ** 0.096 .332 ** .192 * .352 ** -0.171 -0.075 .377 ** .413 ** .456 ** .586 ** .492 ** .515 **
27.Reshaped and improved the
organizational culture and climate
-0.006 -0.088 -0.011 -0.119 .231 * -0.171 .311 ** .522 ** .432 ** .296 ** 0.165 .374 ** .291 ** .183 * .500 ** .260 ** .369 ** -.249 ** -0.079 .437 ** .510 ** .545 ** .577 ** .623 ** .495 ** .470 **
28.Made changes in human resources
management style
0.023 0.005 0.012 -0.072 .279 ** -0.095 .227 * .405 ** .429 ** .394 ** .245 ** .412 ** .309 ** .276 ** .449 ** .208 * .353 ** -0.141 0.125 .332 ** .348 ** .386 ** .431 ** .585 ** .417 ** .330 ** .696 **
29.Created stronger financial control 0.095 0.121 0.096 0.063 -0.006 0.075 0.091 .395 ** .400 ** .317 ** .346 ** .439 ** .453 ** .244 ** .367 ** .199 * .448 ** -0.102 0.024 .504 ** .398 ** .483 ** .529 ** .400 ** .429 ** .346 ** .395 ** .406 **
30.Took centralization steps .190 * -0.037 .245 ** 0.151 -0.106 0.039 0.097 -0.133 -0.091 -0.010 0.041 0.070 0.022 -0.088 0.021 -.192 * 0.146 0.132 .247 ** -0.108 -0.143 -0.151 -0.134 -0.048 -0.121 -0.148 -0.087 -0.032 -0.005
31.Took decentralization steps -0.034 0.035 0.008 -.217 * 0.147 0.001 .251 ** .312 ** .286 ** .236 ** .181 * .247 ** 0.140 .247 ** .289 ** .384 ** 0.119 0.074 0.022 .201 * .283 ** .269 ** .183 * 0.091 .185 * 0.071 .215 * .229 * 0.066 -.354 **
32.Replaced senior &middle managers 0.035 -.194 * 0.044 0.054 .207 * -0.050 0.118 0.103 0.135 0.051 0.041 .265 ** .189 * 0.127 .261 ** 0.052 .225 * -0.102 -0.106 0.045 0.055 0.005 0.133 0.104 0.170 0.063 .289 ** .203 * 0.105 .281 ** 0.039
33.Changed the internal local authority's
Structure
0.134 -0.056 0.135 0.121 0.080 -0.053 0.117 0.120 .190 * 0.079 0.048 0.148 0.080 0.018 .235 ** -0.015 .336 ** -0.014 -0.029 0.065 -0.001 -0.004 0.067 0.168 0.173 .230 * .346 ** .288 ** 0.044 .219 * 0.066 .546 **
* = p < .05, ** = p < .01
329
Appendix 8: Table 28: Descriptive Statistics of Individual TMSLA Strategies for LAs According to Performance (N = 126)
Factor Strategy Persistently failing LAs Recovered LAs Well-performing LAs
M
e
a
n
M
e
d
i
a
n
M
o
d
e
S
.
D
.
M
e
a
n
M
e
d
i
a
n
M
o
d
e
S
.
D
.
M
e
a
n
M
e
d
i
a
n
M
o
d
e
S
.
D
.
Retrenchment
of
Services
2. Eliminated particular services 2 1.03 2.14 2 2 1.06 1.97 2 2 .93 2 1.03
1. Contracted activities and services' scope 3 1.15 3.00 3 4 1.20 3.44 4 4 1.29 3 1.15
4. Partially / Temporarily exited from specific services 3 1.09 2.43 2 1 1.19 2.23 2 2 1.05 3 1.09
Retrenchment
of
Expenditures
6. Reduced / suspended capital expenditures 1 1.14 2.38 2 1 1.34 2.43 2 1 1.26 1 1.14
17. Increased services expenditures 3 1.05 2.58 2 2 1.27 2.78 3 3 1.05 3 1.05
9. Decreased financial support in other organisations 3 .93 2.73 2 2 1.17 2.68 3 2 1.07 3 .93
Repositioning
as
Reaching
out
19. Began to give services/internal services that were previously purchased 3 1.05 2.31 2 3 1.08 1.85 2 1 .98 3 1.05
34. Increased time and efforts in becoming a learning organisation 4 .68 3.78 4 4 1.17 3.80 4 4 .76 4 .68
33. Increased time and efforts in researching the consumers needs 4 .64 3.49 4 4 1.25 3.97 4 4 .74 4 .64
16.Extended marketing efforts (reaching out) to new segment of consumers 4 .95 3.39 4 4 1.13 3.50 4 4 .93 4 .95
Repositioning
As
Innovative
Services
13. Changed the priorities of traditional activities 4 1.01 3.61 4 4 1.05 3.78 4 4 1.03 4 1.01
26. Introduced new ways of implementation 4 .76 3.86 4 4 1.07 3.88 4 4 .97 4 .76
11. Entered into joint activities/cooperated with other agencies 4 .76 4.14 4 4 .93 4.28 4 4 .68 4 .76
12. Extended activities' and services scope 4 .92 3.08 3 3 1.08 3.45 3.5 4 1.01 4 .92
15. Extended services' availability 4 .85 3.56 4 3 1.16 3.28 3 3 .92 4 .85
1 . Established new services 4 1.01 3.06 3 3 1.24 3.53 3.5 3 .96 4 1.01
23. Redefined core missions 4 .88 3.58 4 5 1.25 3.08 3 3 .97 4 .88
Repositioning
as
Renewed
Relationship
7. Closed down public organisations 2 .91 1.69 1 1 1.02 1.77 1 1 1.13 2 .91
21. Privatised services 2 .97 2.33 2 1 1.39 2.13 2 1 1.20 2 .97
24. Ensured high quality of services 4 .78 4.00 4 4 1.04 4.33 5 5 1.01 4 .78
27. Rebuilt stakeholders' trust in the Local Authority 4 1.03 3.66 4 4 1.26 3.47 4 4 1.03 4 1.03
25. Improved the local authority's internal and external image 4 .96 4.06 4 5 1.04 3.80 4 4 .99 4 .96
Reorganisation
at the
Institutional
Level
39. Diagnosed the Local Authority's strengths and weaknesses 5 .86 4.14 4 5 .90 4.15 4 4 1.05 5 .86
37. Invested in staff skills training 4 .72 3.81 4 4 1.06 3.78 4 4 .73 4 .72
4 . Formulated an organisational working plan 4 .80 4.06 4 4 .87 4.00 4 4 1.01 4 .80
38. Defined a common vision of the Local Authority 5 .97 4.47 5 5 .74 4.03 4 4 .83 5 .97
36. Reshaped and improved the organisational culture and climate 5 .82 3.81 4 4 1.06 3.58 4 4 .96 5 .82
35. Made changes in human resources management style 4 .91 3.34 3 4 1.14 3.41 4 4 .94 4 .91
8. Created stronger financial control 5 .97 3.95 4 5 1.18 3.88 4 4 1.11 5 .97
Reorganisation as
Extent of Centralisation
31. Took centralisation steps 3 1.19 3.00 3 3 1.31 2.23 2 1 1.12 3 1.19
32. Took decentralisation steps 3 1.24 2.71 3 3 1.20 2.98 3 3 1.12 3 1.24
Reorganisation at the
Personnel Level
3 . Replaced senior and middle managers 4 .86 3.50 4 4 1.13 3.23 3 3 1.21 4 .86
29. Changed the internal local authority's structure 5 .71 3.97 4 5 1.32 3.78 4 4 1.21 5 .71
330
Appendix 9: Comparing Persistently Failing, Recovered, and Well-
performing Local Authorities
Table 29: One-Way ANOVA Tests for TMSLA Scores for Well-performing,
Persistently Failing, and Recovered Local Authorities
W.P. LAs = Well Performing Local Authorities, P. F. LAs = Persistently Failing
Local Authorities, R. LAs = Recovered Local Authorities
Overall Effect: * = p < 0.05, ** = P < 0.01
Quadratic Trend: # = p < 0.05, # # = P < 0.01
Post-Hoc, Tukey: ? = p < 0.05 (Higher mean value), ? = p < 0.05 (Lower mean
value)
Dependent Variable Comparison
Group (N)
Mean S.D. F (Sig) D.F. Eta
Squared
Overall TMSLA
W.P. LAs (40) 3.29? 0.43 3.904
(0.024) * #
2, 74 0.147
P.F. LAs (48) 3.52? 0.38
R. LAs (37) 3.33 0.56
Retrenchment
of Services
W.P. LAs (40) 2.54 0.94 0.199
(0.820)
2, 122 0.003
P.F. LAs (48) 2.63 0.84
R. LAs (37) 2.50 1.00
Retrenchment of
Expenditures
W.P. LAs (40) 2.62 0.60 1.892
(0.155)
2, 122 0.030
P.F. LAs (48) 2.81 0.57
R. LAs (37) 2.57 0.65
Repositioning as
Reaching out
W.P. LAs (40) 3.28 0.56 1.003
(0.361)
2, 72 0.015
P.F. LAs (48) 3.45 0.65
R. LAs (37) 3.26 0.99
Repositioning as
Innovative
Services
W.P. LAs (40) 3.61 0.67 0.571
(0.566)
2, 120 0.009
P.F. LAs (48) 3.72 0.63
R. LAs (37) 3.56 0.84
Repositioning as
Renewed
Relationship
W.P. LAs (40) 3.11 0.60 1.067
(0.349)
2, 72 0.023
P.F. LAs (48) 3.28 0.47
R. LAs (37) 3.19 0.76
Reorganisation
- Institutional
Level
W.P. LAs (40) 3.83 0.71 2.564
(0.081) #
2, 122 0.040
P.F. LAs (48) 4.17 0.66
R. LAs (37) 3.96 0.77
Reorganisation
- Personnel
Level
W.P. LAs (40) 3.50? 1.06 7.909
(0.001) ** ##
2, 68
0.068
P.F. LAs (48) 4.21? 0.66
R. LAs (37) 3.74 1.09
Reorganisation as
Extent of
Centralisation
W.P. LAs (40) 2.60? 0.74 2.999
(0.054) *
2, 120 0.048
P.F. LAs (48) 2.95? 0.53
R. LAs (37) 2.88 0.78
331
332
doc_875832991.pdf
Turnaround Management Strategies And Recovery In Local Authorities
1
TURNAROUND MANAGEMENT
STRATEGIES AND RECOVERY
IN LOCAL AUTHORITIES
ITAI BEERI
2
National University of Ireland, Cork
Faculty of Commerce
Department of Government
Department of Management and Marketing
TURNAROUND MANAGEMENT
STRATEGIES AND RECOVERY
IN LOCAL AUTHORITIES
PH.D. THESIS SUBMITTED BY ITAI BEERI
March 2009
Head of the Department of Government: Prof. Neil Collins
Head of the Department of Management and Marketing: Prof. Sebastian Green
Supervisors: Dr. Aodh Quinlivan and Dr. Carol Linehan
3
Contents
List of illustrations 6
Acknowledgements 9
Abbreviations 11
1. INTRODUCTION
12
2. LITERATURE REVIEW
20
2.1. The Evolution of English Local Government - Social, Civil, and
Ideological Historical Background of England
20
2.1.1. Historical Developments from Saxon Times 22
2.1.2. The Impact of the Industrial Revolution 25
2.1.3. The Post World War Periods (1920s to 1970s) 29
2.1.4. The Welfare State and Traditional Public Sector 31
2.1.5. New Public Management Reforms 37
2.1.5.1. The Political Ideological Perspective
37
2.1.5.2. The Political Perspective - Local Government under
the New Right
39
2.1.5.3. The Managerial Perspective
43
2.1.5.4. New Public Management and Local Government
under the Third Way
49
2.1.5.5. Summary
55
2.2. Best Value Regime: Recent Efforts to Improve the Performance of
Local Authorities
56
2.3. Organisational Cycles of Failure and Recovery in Local Authorities 64
2.3.1. Failure in Local Authorities 64
2.3.1.1. Definitions and Perceptions of Failure
64
2.3.1.2. Causes of Failure in Local Authorities
68
2.3.2. A Six Stage Theory for Cycles of Failure and Recovery 77
2.3.3. Cycles of Failure and Recovery in the English Context 88
2.4. Turnaround Management Strategies in Local Authorities 93
2.4.1. Turnaround Management Strategies 93
2.4.2. Classification of Turnaround Management Strategies 97
2.4.2.1. Retrenchment
98
2.4.2.2. Repositioning
99
2.4.2.3. Reorganisation
99
2.4.3. Turnaround Management Strategies: Characteristics and
Suitability for Recovery Situations
102
2.4.4.Stages of Organisational Turnaround - a Managerial
Perspective
106
2.4.5. Turnaround Management Strategies? Current state of Research 111
4
3. METHODOLOGY
121
3.1. The Study Population and Sample of LAs 123
3.2. Collecting Qualitative Data 126
3.3. Collecting Quantitative Data 130
3.3.1. Sampling of Participants 130
3.3.2. Descriptive Statistics of the Local Authorities 131
3.3.3. Distributing the TMSLA Questionnaire 135
3.3.4. Descriptive Statistics of Participants 136
3.3.5. Study Variables 145
3.3.5.1. Extent of Implementation of Turnaround Management
Strategies
145
3.3.5.2. Recovery of Performance
146
3.3.5.3. Demographic Variables
147
3.3.6. Analyses and Statistical Procedures +describing and justifying 147
4. CASE STUDIES
152
4.1. Walsall and Swindon Turnaround 152
4.1.1. General Description of the Councils 152
4.1.2. Poor Performance 155
4.1.3. A Comprehensive Recovery Plan and General
Improvements
163
4.1.4. Recovery 176
4.1.5. The 'Black Box' - Turnaround Management Strategies 184
4.2. North East Lincolnshire and Sunderland
197
4.3. Summary
209
5. RESULTS AND DISCUSSION
212
5.1. Measuring Turnaround Management Strategies in the Public
Sector
212
5.1.1. TMSLA Construction 212
5.1.2. Testing and Evaluating the Validity and Reliability of
TMSLA
219
5.1.2.1. Evaluating the Content Validity
219
5.1.2.2. Testing the Construct Validity
220
5.1.2.3. Testing the Reliability
225
5.2. The Extent of Implementation of Turnaround Management
Strategies
230
5.3. The Relationship between Turnaround Management Strategies
and Recovery
248
5
6. CONCLUSIONS
269
7. BIBLIOGRAPHY
275
8. APPENDICES
296
Appendix 1: Local Government Act, 1999 300
Appendix 2: The White Paper - Strong Local Leadership – Quality
Public Services
308
Appendix 3: The Audit Commission Methodology for the Core
Services Performance Rank
316
Appendix 4: The Qualitative Tool - a Semi-Structured Face-to-Face
Interview
319
Appendix 5: The Quantitative Tool - a Questionnaire 323
Appendix 6: The Quantitative Tool - a Questionnaire – On Line Version 327
Appendix 7: Table 27: Correlation Matrix for TMSLA Individual
Strategies (N = 118 - 126)
Appendix 8: Table 28: Descriptive Statistics of Individual TMSLA
Strategies for LAs According to Performance (N = 126)
328
329
Appendix 9: Comparing Persistently Failing, Recovered, and Well
Performing Local Authorities.
330
6
List of illustrations
Tables
Table 1: Local Authorities? Comprehensive Performance Assessment Over 2002
and 2005 - N (%)
62
Table 2: Studies used in public service turnaround success stories reviewed by
Boyne (2006)
113
Table 3: Studies that Use the Language of Turnaround 115
Table 4: Three Groups of Local Authorities According to the Secondary Data 125
Table 5: Descriptive Statistics of the Local Authorities? Sample (N = 43) 132
Table 6: Descriptive Statistics of the Participants (N = 114-126) 137
Table 7: Descriptive Statistics of the Participants? Local Authority?s Performance
N=126)
142
Table 8: CPA Scores for Walsall (2002-2006) 180
Table 9: CPA Scores for Swindon (2002-2006) 181
Table 10: CPA Scores for North East Lincolnshire (2002-2006) 205
Table 11: CPA Scores for Sunderland (2002-2006) 208
Table 12: The „Extent of Strategic Change? Scale (Barker and Duhaime, 1997) 214
Table 13: The Turnaround Management Strategies in Local Authorities Scale 217
Table 14: Exploratory Factor Analysis for the Turnaround Management
Strategies in Local Authorities Scale
222
Table 15: Correlation Matrix for TMSLA Factors (Cronbach?s alpha in
parentheses)
226
Table 16: Equivalence Reliability and Representativeness Reliability tests for
TMSLA Factors
228
Table 17: Central and Dispersion Measures of Overall TMSLA and the Eight
Factors for the Whole Sample (N = 123 – 126)
232
Table 18: Central and Dispersion Measures of Overall TMSLA and the Eight
Factors for Failing LAs (N = 83 - 85)
Table 19: Central and Dispersion Measures of Individual TMSLA Strategies for
Failing LAs (N = 81 - 85)
Table 20: T-Tests for TMSLA Scores for Failing and Well-Performing Local
Authorities
Table 21: Mann-Whitney U Tests for Individual TMSLA Scores for Failing
versus Well-Performing Local Authorities
Table 22: T-Tests for TMSLA Scores for Persistently Failing and Recovered
Local Authorities
236
238
240
242
250
7
Table 23: Mann-Whitney U tests for Individual TMSLA Scores for Persistently
Failing and Recovered Local Authorities
Table 24: Spearman Rho Correlation Matrix for the Relationship between
TMSLA Scores and Extent of Recovery (N = 83 – 85)
Table 25: Spearman Rho Correlation Matrix for the Relationship between
Individual Strategies and Extent of Recovery (N = 83 – 85)
Table 26: Logistic Regression Report for Recovery (as dichotomy) Predicted by
TMSLA in Failing LAs (N = 85)
Table 27: Correlation Matrix for TMSLA Individual Strategies (N = 118 - 126)
Table 28: Descriptive Statistics of Individual TMSLA Strategies for LAs
According to Performance (N = 126)
Table 29: One-Way ANOVA Tests for TMSLA Scores for Well-performing,
Persistently Failing, and Recovered Local Authorities
252
257
259
263
324
325
326
Figures
Figure 1: The Comprehensive Performance Assessment (CPA) Framework 61
Figure 2: Stages in Turnaround Management (McKiernan, 2003) 79
Figure 3: Stages of Organisational Turnaround- A Managerial Perspective 106
Figure 4: CPA Rates in 2002 for Local Authorities (%) (N = 43) 133
Figure 5: CPA Rates in 2005 for Local Authorities (%) (N = 43) 133
Figure 6: Recovery (Dichotomy) of Local Authorities (%) (N = 43) 134
Figure 7: Extent of Recovery within Failing Local Authorities (%) (N = 30) 134
Figure 8: Gender of Participants (%) (N = 126) 138
Figure 9: Age (in years) of Participants (N = 118) 138
Figure 10: Education (in years) of Participants (N = 117) 139
Figure 11: Tenure (in years) of Participants (N = 118) 139
Figure 12: Position of Participants (%) (N = 126) 140
Figure 13: Title of Participants (%) (N = 126) 140
Figure 14: Participants? Local Authority?s CPA Rates in 2002 (%) (N = 126) 143
Figure 15: Participants? Local Authority?s CPA Rates in 2005 (%) (N = 126) 143
Figure 16: Participants? Local Authority?s Recovery (Dichotomy) (%) (N = 126) 144
Figure 17: Participants? Local Authority?s Extent of Recovery (%) (N = 86) 144
Figure 18: Overall TMSLA for the Whole Sample (N = 126) 233
Figure 19: Overall TMSLA and the Eight Factors in the Whole Sample
(N=123-126)
233
Figure 20: Mean Values for Overall TMSLA and the Eight Factors for the Whole
Sample (N = 123 - 126)
234
8
Figure 21: Mean Values for Overall TMSLA and the Eight Factors for Failing
Local Authorities (N = 83 - 85)
235
Figure 22: Overall TMSLA in Failing Local Authorities (N = 85) 235
Figure 23: Overall TMSLA and the Eight Factors in Failing Local
Authorities (N = 83 - 85)
237
Figure 24: Medians of Individual Strategies in Failing Local Authorities
(N = 81 - 85)
237
Figure 25: Mean Values of TMSLA Scores for Failing versus Well-Performing
Local Authorities (N = 123 - 126)
241
Figure 26: Medians of Individual TMSLA Strategies Scores for Failing versus
Well-Performing Local Authorities (N = 121 - 126)
245
Figure 27: Mean Values of TMSLA Scores for Persistently Failing versus
Recovered Local Authorities (N = 83 - 85)
251
Figure 28: Medians of Individual TMSLA Strategies Scores for Persistently
Failing versus Recovered Local Authorities (N = 81 - 85)
255
Figure 29: Matrix Scatter Plot for the Relationships of TMS and Extent of
Recovery (N = 83 - 85)
258
Figure 30: Matrix Scatter Plot for the Relationships of Individual Strategies and
Extent of Recovery (N = 83 - 85)
261
9
Acknowledgments
The writing of a dissertation can be a lonely and isolating experience,
especially for a non-Irish student. Yet, in my experience this was not the case.
Thus, my sincere gratitude goes to my wife, parents, brothers, family members, all
my friends, colleagues and superiors in the Government Department, in the
Department of Management and Marketing at the National University of Ireland,
Cork, and in Cork.
I wish first to thank my supervisors, Dr. Carol Linehan from the Department
of Management and Marketing and Dr. Aodh Quinlivan from the Government
department for their professional, patient, and supportive teaching. Without doubt,
the way they took encouraged me to think two steps ahead and demand from myself
the most. Thanks to them, I am sure I had an excellent lesson for my future as a
scholar. I wish to thank Dr. Seamus O'Tuama from the Government Department,
who was my supervisor over the first year of my PhD, for the warm welcome to the
faculty and Ireland, for his special kindness, for the trust, and for the opportunities
he gave me.
I am grateful to the staff members of the Government Department, Prof.
Neil Collins, Head, Dr. Andrew Cottey, Dr. Theresa Reidy, and Ms. Ann McCann,
with whom I worked and had interesting and enriching conversations. Thanks to
them, I felt welcomed, productive, and required as a team member. Special warm
thanks go to my mates and partners in the Government Department, my friends,
William Pedrazzini, Monica O?Mullane, Ted Bikin-kita, and Anthony O'Halloran.
My studies and experience would not have been the same without the
support and friendship of many members of the Cork Jewish Community and Cork
Community, Tzipi and Avishay Heart, Trish and James Doherty, Fred and Claire
Rosehill, and many others, who made my stay in Ireland so enjoyable and for being
a second home and family. My thanks go to family members, friends, and
colleagues, who their long-distance support kept me warm and efficient, the Beeris,
the Rendels, the Sellas, and the Gutmans. Great and unique thanks to Prof. Eran
Vigoda-Gadot of Haifa University who significantly contributed to my efforts and
success as a scholar.
10
Finally, endless thanks and love to Silvana, the one and only, my dear wife,
for her help, inspiration, and confidence. I cannot express her huge contribution to
my decision to come to Ireland, to my dissertation, to my well-being, and to my
personality. Without her, I would have not been the same, and probably, would not
complete this dissertation. Finally, many thanks to my dear son, Ethan, who gives
me the drive to try harder, again and again, for so many years.
Itai Beeri
March, 2009
11
Abbreviations
AC- Audit Commission
CCT- Compulsory Competitive Tendering
CEO- Chief Executive Officer
CGI- Corporate Governance Inspection
CPA- Comprehensive Performance Assessment
CSCI- Commission of Social Care Inspection
DfES- Department for Education and Skills
GLC- Great London Council
JPs- Justices of the Peace
LA- Local Authority
LEAs- Local Education Authorities
NPM- New Public Management
OECD- Organisation for Economic Co-operation and Development
OFSTED- Office for Standards in Education
PIR- Public Interest Report
PIs- Performance Indicators
QGAs- Quasi-Governmental agencies
SSI- Social Services Inspectorate
TMS- Turnaround Management Strategies
TMSLA- Turnaround Management Strategies in Local Authorities
12
CHAPTER 1: INTRODUCTION
The public sector is owned and financed by society (Wamsley and Zald,
1973), thus its aim is to maximise society's welfare (Rainey, Backoff, and Levine,
1976; Revelle, Marks, and Liberman, 1970). However, this utopian ideal was
continuously and gradually disturbed from the end of World War II, as the
traditional public sector struggled to cope with huge challenges. On one hand, it
experienced increasing demands for services, both quantitatively and qualitatively.
On the other hand, the public sector suffered from a severe lack of resources, inter
alia, revenues and poor management (Bishnu and John, 2005; Grout and Stevens,
2003; Martin, 2002; Osborne and McLaughlin, 2002; Smith, 1993; Wholey, 1993).
Though both the private and the public sectors function side by side, the public
sector usually tends not to follow market forces like competition and profit
orientation, and to suffer from unproductive organisational climate (Solomon,
1986; Wimalasiri, 1993). As a result, the traditional public sector was perceived by
stakeholders as ineffective, inefficient and therefore was widely criticised.
These negative circumstances, and the struggle between political ideologies
such as Socialism and Liberalism, contributed to the rise of New Public
Management (NPM), which was supported by the OECD (Organisation for
Economic Co-operation and Development), by politicians, and by the public in
Western states (Christensen, Laegreid, and Stigen, 2004). In a nutshell, NPM
reforms encouraged public managers to modernise public agencies and promote
excellence in political and administrative systems (Carvalho et al., 2006; Mueller et
al., 2004; Talbot and Johnson, 2007) by employing competitive market strategies
(Willis, 2005). Consequently, NPM has changed the face of public administration
(Boyne, 2002) and become the normative model for the public sector, as it signalled
a profound shift in the role of public administration and its performance.
Nevertheless, NPM has not cured the ills of the entire public sector and it has been
criticised for not supplying the desired results. The reforms created an ambivalent
and tensioned governmental policy of increased expectations and demands on one
hand, and huge cuts of revenues and expenses on the other hand (Martin, 2002).
These conflicting policies resulted in a deep crisis within some areas of the public
sector (Corrigan and Joyce, 1997). Since democratic values such as equality in
public services were suppressed by NPM reforms (Dunleavy and Hood, 1994),
13
dissatisfaction was common (Carter, 2000; Cunningham, 2000; Hamilton, 2003;
Newman, 2002; Newman, 2002b). Additionally, given that NPM gave rise to
preferable standards of services, stakeholders increased their expectations and
demands from public agencies (Backoff, Wechsler, and Crew, 1993) and became
intolerant to public failures (Boyne, 2002; Christensen and Laegreid, 1999; Glynn
and Murphy, 1996). Thus the issue of organisational failure is of practical, political
and academic interest. The challenge of grasping how failure is understood, and
perhaps more importantly, recovered from, is the key driver of this thesis.
Since there is a great variety of public organisations, one research project
would not be able to cover the analysis of the problems in all kinds of public
organisations. Therefore, this research will be limited to the analysis of failing local
authorities (LAs). The decision to concentrate on underperformance and recovery
in the context of local government is not accidental. It is based on a mixture of
theoretical and methodological considerations. From a theoretical point of view,
LAs have a unique aspect that differentiates them from other public organisations.
Their top management: the council members and the cabinet members, usually
represent political parties and interests; they are elected democratically and directly
by the citizens. In parallel, though Chief Executives Officers are non-elected
members, they could be appointed according to political considerations. The unique
aspect of LAs is that its representatives are elected directly by the locals, which
results in more complex, direct, and frequent face to face interactions between
voters and elected members and between LAs and central government. The
obliging relationship creates in LAs greater accountability of the top management
and greater expectations among stakeholders. Hence, it is important and interesting
to investigate recovery processes in this context. For the sake of this study, the
definition of senior management is broad and encompasses not just traditional
administrators like the CEO and Finance Officer but also the Mayor and leading
politicians, which is effectively the group of people at the strategic apex of the
organisation, some are appointed managers and some are elected public
representatives.
From a methodological view, recent efforts made to classify and measure
the performance of LAs in England and in other states (e.g., Callanan, 2005; Israeli
Interior Ministry website; Local Government Management Services Board;
14
O?Keeffe, 2005) have made it possible to identify failing and well performing
organisations. Poor performing organisations became more visible, in part, because
of the extensive use of performance measurement system in the field (Joyce, 2004).
Over the last five years (since 2002), English LAs were almost the only public
organisations subjected to consistent auditing, supervision, and quality performance
measurement. These procedures supply a great amount of information that can be
used to empirically explore the „black box?, that is the kinds of managerial actions
that can lead to recovery, which are the core of this study.
Within the context of public failure, unprofessional, ineffective and poor
municipal services prevent citizens from having the best conditions required for
normal, secure, and fruitful life as members of their families, communities, and
society. Due to the essential function of maintaining normality, governmental
failure dramatically affects shared values, human rights, and even human lives
(Witteloostuijn, 1998).
Public intolerance towards local government failure and its severe
consequences did not spare the British political system, and governments have not
remained indifferent to this phenomenon. Local government has been subject to
continuous changes in ideologies, policies, and reforms, for example, the shift in
ideologies due to the change in central government from Tory dominance to Labour
dominance. These continuous changes have created a highly eclectic and disparate
approach to steering the local government system as it simultaneously promoted
issues of governance, joined up government, and community government. This
tendency symbolises policy makers, politicians, and managers in the UK, especially
under the Best Value regime, who were particularly concerned about
underperforming LAs that had difficulties fulfilling their core missions (Cornforth
and Paton, 2004). Consequently, underperforming LAs and recovery processes
have been an object of comprehensive intervention, which was mainly led by the
Audit Commission, an independent governmental body that inspected and
supervised LAs' senior management.
Since LAs are the main unit of research, it is vital to present the justification
for these governmental institutions. In cases in which resources are limited, conflict
of interest between the central and the local government might arise. For example,
15
while the plans of the central government might envisage that cutting down local
services is an effective way to deal with budget problems, the council will prefer to
avoid such a solution due to its political price. According to this view, the
conflicted dual levels of government have a continuous and wide influence on local
government. Consequently, this conflicted relationship would clarify the
background and circumstances that led to failure and recovery in some LAs. The
central government policy toward LAs, including expectations for quality of
services, regulations, budgeting, and auditing will draw the borders between
success and failure in those agencies.
Many of these circumstances concern the Audit Commission. In order to
assure civil rights and deal with failing LAs, a range of change strategies were
triggered by the Audit commission and adopted by top management. However,
since many of these cloning managerial practices were borrowed or taken from the
private sector, they were not always appropriate and helpful; they revealed limited
achievements in organisational transformation (McNulty and Ferlie, 2004).
According to Maddock (2002), the problem in the implementation of change
strategies derives from the English national government tendency to think radically
and act conservatively, from the belief in risk-free solutions (e.g., avoiding large
innovative investments, avoiding decision making that may involve significant
political price), and because of the poor local leadership. However, bringing about
recovery in LAs is particularly complicated, multifaceted, and difficult, since these
organisations are large, complex, diverse, and hierarchical (Boyne, 2002).
Moreover, change strategies are not only difficult to implement but
sometimes the influence of managerial actions is unclear (Brown, Waterhouse, and
Flynn, 2003). As a consequence of these massive difficulties, governmental bodies,
politicians, and particularly public managers still have no experience in dealing
with public failures and they seek professional, reliable, and practical knowledge
regarding change strategies and recovery in LAs. For instance, the appropriate tools
to predict a failure, how to prevent a crisis, and how to deal with crises after they
occurred, are yet to be understood (Mellahi, Jackson, and Sparks, 2002; Mellahi
and Wilkinson, 2004; Paton, 2003). Paton and Mordaunt (2004) argued that due to
this lack of knowledge, policy makers might be justified in their concerns about
chronic under performers.
16
The lack of knowledge within governmental bodies, politicians, and public
managers is accompanied by lack of literature and research. Despite the fact that
successful recoveries offer benefits to politicians, policy-makers, local managers,
and local stakeholders, public management researchers have given scant attention
to this topic. While the literature deals overwhelmingly with the study of
commercial recovery, according to various scholars, only a few examinations of
public failures and recoveries have been conducted (e.g., Jas and Skelcher, 2005;
Meier and Bohte, 2003; Meyer and Zucker, 1989; Paton, 1989; Walshe et al.,
2004).
The literature in the private context deals with both comparisons of large
groups of persistently failing and recovered corporations (e.g., Furman and
McGahan, 2002; Smith and Graves, 2005) and case studies that follow success
stories of recovery such as the turnaround of big companies like M&S and IBM
(e.g., M&S: Mellahi, Jackson, and Sparks, 2002; IBM: Balgobin and Pandit, 2001).
Research in the private context has developed the concept of Turnaround
Management Strategies (TMS) as a descriptor for strategies employed to bring
about recoveries. Consequently, public sector researchers called for the
investigation of how TMS might be applied to recover public organisations. As part
of this call, this study explores the question whether TMS with adequate adaptation
could yield efficient results in public sector organisations such as LAs. In addition,
scholars have recently pointed out both the general lacuna concerning public cycles
of failure and recovery, and the specific need to explore one type of organisational
change strategies, which is TMS (Jas and Skelcher, 2005).
Accordingly, the major aim of this study is to investigate whether TMS
could be a possible route for bringing a failing LA back on track. The relevance of
TMS in cases of failure in LAs, the extent to which they are implemented, as well
as their effectiveness, are observed, evaluated and tested.
TMS are defined by Pandit (2000) as „the actions taken to bring about a
recovery in performance in a failing organisation?. In accordance with this
definition, it can be assumed that the implementation of TMS may directly
contribute to recovery processes (Mellahi, Jackson, and Sparks, 2002). Thus, we
will explore TMS as a possible method of change strategies. Unfortunately, very
17
little systematic research has been conducted on the impact of TMS on the recovery
of public services (Boyne, 2004). Walshe et al. (2004) added that more research is
needed regarding the context and the process of effective recovery interventions. A
deep understanding of the process of TMS in the public sector is essential for a
theory of recovery, which is currently either non-existent (Pearce and Robbins,
1993) or inadequate (Barker and Duhaime, 1997). Cornforth and Paton (2004) have
also called for research on public TMS. They claimed that most of the present
research on performance has focused on excellence and best practice, rather than on
poorly performing cases. Additionally, the authors argued that exploring the untidy
realities of failure and recovery in a professional, managerial, and governance
domains is essential but lacking. Thus, the absence of grounded knowledge
concerning cycles of failure and recovery in public organisations and the lack of
measurement tools resulted in a call for research on TMS in the public sector
context (Boyne, 2004; Cornforth and Paton, 2004; Jas and Skelcher, 2005; Walshe
et al., 2004). Therefore, as suggested by Jas and Skelcher (2005), this research aims
at filling the gap in knowledge concerning TMS. Thus, its object is to investigate
the cycles of failure and recovery in LAs and the relationship between TMS and
recovery through available evidence and empirical examination.
In accordance with the theoretical lacuna recognised above, the crisis
experienced by the public sector, the vague results NPM supplied, and the
helplessness that public managers and policy makers face in relation to
understanding and achieving comprehensive recovery, the objective of this study is
to explore the linkage between public performance, public management, and public
failure. Consequently, this study is focused on several research questions. Firstly,
this study makes an effort to clarify what the nature of organisational failure is,
specifically in LAs, and points out internal and external aspects of organisational
failure. Secondly, this study makes a step toward understanding what the concept of
TMS is (i.e., TMS' definition, nature, and characteristics) and how TMS should be
measured (i.e., construction and validation of a measurement tool). Thirdly, this
study observes to what extent TMS are in practical use within failing LAs and
exposes an extensive use of them. In other words, this study explores the 'Black
Box', the activities led by management that may lead to recovery. Fourthly and
most important, this study examines the effectiveness of TMS in achieving
18
recovery.
In addition, the study provides some directive advice, both to (i) public
managers in reference to how TMS should be implemented in order to maximise
the value of these strategies. We conclude that LAs leadership should pay attention
to the order, the timing, and the match between the strategies and the causes of
failure. (ii) and academics in reference to future studies. Further research should
control the following variables: 'formulation of recovery plan', 'causes and
symptoms of failure', and 'match between the strategies and the causes of failure'.
Analysing these variables would supply a deeper understanding of the recovery
process.
In sum, this research is designed to accomplish the following objectives: It
aims at presenting a better understanding of cycles of failure and recovery in British
failing LAs, and of the nature of failing LAs, the causes of these failures, the
triggers leading to organisational change, and the implications of organisational
failure in LAs. At the same time, it aims at exposing the phenomenon of persistent
failure of some LAs and the partial success to recover them through the efforts
made under the NPM reforms and the Best Value Regime. As one possible option
to tackle failure in LAs we conceptualise TMS and define their characteristics.
Then, based on this conceptualisation, we construct and validate a newly adapted
measurement tool of the extent of implementation of TMS in LAs. The distribution
of this scale aims at an exploration of the extent of TMS implementation in LAs,
the differences between persistently failing and recovered LAs regarding TMS
implementation, and the relationship between implementation of TMS and
recovery. Finally, having explored the extent of TMS use and their relationship to
recovery, this thesis then reflects back to the implications for NPM practices such
as audit and inspection.
Achieving these aims required employing several methodological
procedures. First, the relevant literature was critically reviewed. Second, two case
studies of failing English LAs were qualitatively analysed based on four face-to-
face interviews with their senior leaders and documents published by the LAs and
the Audit Commission. This exploratory phase enabled the conceptualisation of
TMS, the descriptive account of a process of change, the exploration of the 'black
19
box', i.e., the managerial actions, and the construction of a measurement tool to
assess the level of implementation of TMS. Then, a survey distributed among 126
English senior councillors and executive directors, which included the adapted
developed measurement tool of TMS, enabled the researcher to test the extent to
which TMS were implemented and to compare their effectiveness in recovered
versus persistently failing LAs. This comparison was achievable due to recent
efforts and extensive use of performance measurement system in the field made by
the English Audit Commission (Joyce, 2004).
As a general guideline, the following paragraph outlines the thesis?s
structure. The next chapter, the literature review, will go deeply into the core
concepts of the research beginning with wide background information regarding the
political and ideological shifts since the 18
th
century, the evolution of local
government, the traditional public sector and NPM reforms. Next, the review will
describe the characteristics of English LAs and discuss recent efforts made in
England to improve their performance. Then, the literature review will go on
gradually to develop a concept of Turnaround Management Strategies. The third
chapter describes the methodology used in this study. The chapter details the
techniques, procedures, and tools used for collecting the qualitative and quantitative
data. The methodology chapter will define the population, explain the sampling
process, describe the samples of LAs and participants, and illustrate the statistical
procedures and data collection. The fourth chapter follows a detailed report of two
case studies of poor performing LAs. The report portrays the LAs' failures, triggers
for change, plan formulation, TMS implementation, and extent of recoveries. The
case studies will present a theoretical framework for the nature of failing LAs,
TMS, and their measurement. The quantitative results of this study will be
presented, analysed, and discussed in the fifth chapter, while attempting to develop
a theory concerning the relationship between TMS and recovery. The sixth chapter
will present the research conclusions, the practical implications of the findings, the
limitations of the study, and suggestions for further research in this area.
20
CHAPTER 2: LITERATURE REVIEW
2.1. The Evolution of English Local Government - Social, Civil, and
Ideological Historical Background of England
Since this study follows Turnaround Management Strategies (TMS) in the
public sector context and in English local government, it is essential to be familiar
with the characteristics of the system and the framework in which TMS take place.
The review follows social, civic, and ideological historical developments since the
18
th
century and especially those which influenced the evolution of public sector
and local government in England. The relevance of this review to our research
question should not be underestimated since the present perception of failing LA
and standards of recovery are rooted in the central-local relations.
The history of local government in England is a story of gradual
development. It has changed its face over the years reflecting ongoing changes in
public policy. The initial rationale for the development of British LAs is based on
two interconnected ideas. First, assimilation of democracy, which found expression
in becoming closer to locals, increasing accountability, limiting the overweening
power of the central state, encouraging pluralism, facilitating the participation of
the electorate, and providing political checks and balances. Second, enhancing
effectiveness, for instance, by emphasising decentralisation and providing services
that are more flexible, diverse, and matched to local needs (Atkinson and Wilks-
Heeg, 2000). The rationale behind this idea is based on the assumption that the
central government cannot cover on its own all the needs of citizens, especially
given the fact that these needs differ from one geographical area to another.
Accordingly, there is a justification for the will to promote local leadership in
governmental branches, which give clear direction to specific local needs. These
branches are named Local Governments, Local Authorities, or Councils and they
draw their authority and purposes from legislation at the state level (Backoff,
Wechsler, and Crew, 1993).
Given the rationale for LAs? existence, the purpose of any LA is directed
towards serving the public and its welfare (Baker, 1995). Since relative to other
public organisations LAs have wide ranging aims, various responsibilities, and
many units, their roles cannot be easily defined. Yet, Skelcher (1992) points out
21
three main roles for LAs:
(1) The democratic role- the expression and representation of collective interests
and choices of citizens.
(2) The regulatory and enforcement role- the duty to implement laws and policies.
(3) The service provision role- the provision of facilities to benefit the population.
Given these broad roles, LAs provide a wide range of services, for instance, police
and fire services, education, roads and traffic maintenance, social/welfare services,
housing, health, garbage collection, and culture. Theoretically, fulfilling these roles
would accomplish LA?s mission. Yet, the reality is much more complex, and it is
hard to define the point at which the roles can be regarded as being fulfilled.
However, a far more critical point of view suggests that local government in
Britain is largely based on the will to provide administrative efficiency or stable
democracy for the central state rather than on ethical grounds of liberty for
communities that justify local government as an independent entity in its own right
(Chandler, 2008).
The fact that local government obtains its power both from the local
population and central government creates a tensioned dual loyalty to both sources
of legitimacy. The debate around this question is based on two different perceptions
of the role of local government. On one hand, the Agency Model reflects the idea
that local government should be an agent, an extension, of the central government
with little of its own authority, justified on grounds of efficiency, property, and
stable democracy (Kingdom, 2003). Chandler (2001) called this narrow role
steward rather than the agent, with some discretion but no real independent power.
On the other hand, the Dual State, or the Partnership Model, recognises some
degree of LAs autonomy and cooperation between equal partners (Saunders, 1984),
justified on grounds of democracy, independence, quality of life, and political
participation (Kingdom, 2003). As it will be discussed next, the struggles between
these two models, which have started centuries ago, shaped the perceptions of
failure and success in LAs till today.
22
2.1.1. Historical Developments from the Saxon Times
For centuries, civilisation has been organised in families and tribes. These
families or tribes functioned as independent units, supplying for their members
protection, food and clothing. Gradually, the families and tribes settled upon land
until they created what it is seen today as a village. The development of local
institutions of government can be traced back to shires in the Saxon times (the 5
th
century). During such times, a village became a town when it was surrounded by a
fortified wall to protect the community and the common area became a place for
barter and trade. In those towns, local businesses were conducted under the King
Law (Henney, 1984). Thus, English LAs were from the beginning subordinated to
higher level of authority. This pattern characterises English LAs till these days,
therefore it has a great deal in explaining recent development in central-local
relations and perception of success and failure in these organisations.
Under the Saxon rule, boundaries of hundreds of shires were developed
(Clarke, 1955). However, gradually, towns evolved into cities. The concentration of
population required organisations able to supply local common needs and to solve
common problems. Therefore, until the end of the nineteenth century, local
governments were developed to deal with the rising needs. Over the centuries, the
powers of the monarch were delegated to powerful landlords and later on to sheriffs
(Chandler, 2007). Thus, ever since, the delegation of powers necessitated the
formulation of public policy toward local agencies. This necessity has not
disappeared and it has troubled central government till these says.
During the 16
th
century, in order to limit the power of the sheriffs, the king
nominated Justices of the Peace (JPs). Though the JPs were appointed by the king,
overtime they increasingly stood for local interests. JPs activated their own laws
and administration as there was no central control at that time. The boroughs were
in no respect democratic and charters were based on self-elected bodies. Generally,
there was very little central legislation for local government. One of the first
examples for the intervention of the central government in local affairs was the
enactment of the Elizabethan Poor Law Act 1601. JPs were required to provide
relief for the poor, in addition to foreign and military affairs. Some of the JPs
developed homes, schools, hospitals, and workplaces, but many did very little
23
(Henney, 1984).
In contrast to this policy, which saw the need to increase the powers and
responsibilities of the government towards its population at the end of the 16
th
century, the Age of Enlightenment suggested a different approach to social
problems. Philosophers like Hobbes, Locke, Montesquieu, Rousseau, Smith, and
Mill suggested a political model based on Liberalism. Liberalism is a broad array of
related ideas and theories of government that consider individual liberty to be the
most important goal. In other words, liberalism is based on Individualism
(McClelland, 1996) and freedom (Kingdom, 2003). According to Smith and Mill,
the liberty of the individual is central to political well being since every man knows
best how to handle his own affairs and he has a right to do so through local groups
that should be free to undertake actions that affect it and the community (Chandler,
2008).
While others thought the modern state should take care of social problems,
liberals were suspicious of the state. They were committed to the idea that the state
did not exist to form men's opinions but for their own views. Thus, government
should reflect the sum of opinion already formed. Accordingly, things can be
changed either by determining what went on people's mind through an authorised
agency, or independently through mechanisms of its own. Since governmental
change should come only when society is ready for it, political change had to wait
until a formed and influential enough body of public opinion clearly sees the
benefit of change and wants it to take place. This would lead to a battle for public
opinion, since nothing is worse than forcing political change on an unwilling
public. Thus, Liberalism took a negative view of the state and its intervention in the
life of its citizens. According to liberals, the state is not virtuous in itself and good
government should be minimal in scope and power (Kingdom, 2003). In other
words, according to the view of liberals, the state should watch over society but not
be its own vital spring (McClelland, 1996). The ideological gap between the liberal
view of the role of the state and the view that saw the state as an active social actor
affects the political and social dialog until today.
During the 17
th
and 18
th
century ad hoc local governments were formed in
24
an individual way. Until then boroughs had few functions, and thus a great number
of special purpose authorities such as water providers, highways, lighting, and
sewers arose. These bodies often had diverse and overlapping territorial and
authoritative boundaries which often resulted in chaotic and corrupt administration
(Henney, 1984).
While in France at the end of 18
th
century there was already a system of
local government including a municipality in each town, borough, parish, or rural
community with the same constitutional status, mayor, and assembly elected by
universal suffrage, in Britain there was no such system (Wilson et al., 2006).
However, relative to other periods, during the 18
th
century localities had
considerable autonomy since there was no need for central government interference
with local affairs. This unique privilege was ensured by JPs who controlled local
decision-making and stood up for these decisions against the central government
(Chandler, 1988). This was partly the consequence of the Civil War. In addition, at
this point the Crown understood it has to work with, rather than against, Parliament
(Chandler, 2007). The independence of the local government can be attributed to
the fact that during the mid-1800s Parliament seats were controlled by local patrons
(Chandler, 1988).
As shown, up to the end of the 18
th
century the development of local
government was slow. However, the Industrial Revolution led to significant social
change, which created new challenges for local governments. The Industrial
Revolution rapidly gathered population into industry centres creating large urban
areas. The concentration of population in urban areas required improved methods of
sanitation, disposal of refuse and sewage, prevention of diseases, provision of
hospitals, clearance of slum areas, regulation of lodging houses, prevention of
overcrowding, maintenance of highways, regulation of buildings, protection of
food, provision of water, lighting of streets and houses, relief of poor, and dealing
with unemployment. Consequently, the change in the life and social circumstances
of people created a significant need for the increased activity of the local and
central government (Clarke, 1955). Yet, as will be portrayed later, the Industrial
Revolution was not the last but one of the greatest first social changes that created
new needs and demands for services from local providers. In other words,
industrialisation was the source for the social forces that restructured the British
25
political system and the system of local government in the following centuries.
2.1.2. The Impact of the Industrial Revolution
As the social and economic problems of industrialisation and growing urban
populations became more apparent, local communities found it more difficult to
handle the problems by themselves. Therefore, the central government increased its
interest in local affairs (Henney, 1984). The laissez-fair philosophy was not
practical any longer and economic growth required intervention. Thus, central-local
relations were redesigned (Chandler, 1988).
During the 19
th
century, various attempts were made to ensure central
control over local functions and services. These attempts included massive
legislation and regulation, nominations of commissioners, and ad hoc supervised
agencies (Chandler, 1988). For instance, in order to improve police forces, the
Prison Act, 1823 that required common form of organisation and reporting, was the
first governmental legislation determining the shape and functions of local
administration. Yet, rather than extending the powers of corporations and county
justice, Parliament set up separate boards, creating a dual system of local
administration. The boards of guardians, established by Act in 1835 to administer
the Poor Law took over responsibility of parishes, and were controlled by central
commissioners. A similar process took place in the public health (1848) and
education (1876) systems (Henney, 1984).
At some point in the 19
th
century, when the English nation began to feel the
horrors of poverty and disastrous famine in Europe, murmurs of dissatisfaction
grew louder and louder. As a result, a series of English Poor Law Acts were
introduced. For instance, the Act of Settlements and the 'Bread Scale' promised the
rights of settlers and fixed wages as a scale of cost of living (the price of wheat and
the number of individuals in the family) (Clarke, 1955). From today's perspective it
can be seen that control and regulation over local government authorities have
never stopped from being relevant for national level politicians. Though these
regulations have changed their face over time, they still deal with the roles of local
government and the role of central government as an inspector promising their
accomplishment.
26
Alongside the trends of legislation and regulation, the progress of political
events demanded strong central government. Consequently, many of the powers of
local government were taken by the central government. The evolution of local
administration was influenced by the view expounded by Jeremy Bentham which
was based on the concept that the greatest happiness of the greatest number of
people will be achieved throughout an elected Parliament with unlimited powers
(Chandler, 2007). This view pushed for administrative centralisation and uniformity
based on the view that it is in the interest of the people and should not be blocked
by local interests. The power and influence of central government over local
government grew through the imposition on local government of duties,
inspectorates, and audits to ensure competence and propriety rights. The reform
included the appointment of a Central Board to control Poor Law administration, to
frame and enforce a uniform system of regulations (such as relief, accounts,
appointment and removal of officers) and to form a Union of Parishes for the
purpose of providing a common workhouse for the district. In addition, a distinct
Central Authority consisting in three commissioners and representatives elected by
direct popular vote in each union of parishes was authorised to carry out the
provisions of the Poor Law Act. The administration, orders, and regulations of the
government of workhouses and the guidance and control of guardians were subject
to the direction and control of the commissioners (Clarke, 1955). This model of
strong central control will guide the English legislator during the time to come.
Until 1835, the municipal corporations and their powers and functions
existed under local custom. Many examples for corruption and incompetence, with
absentee offices, multiple offices held by one person, ways of pocketing fees, and
disproportions of fees were part of the administration (Henney, 1984). From 1835,
the Municipal Corporation Act established, for the first time, a uniform system and
general principles for municipal corporations, in 178 incorporated towns. Political
abuses were reduced, administrative and judicial powers were separated, the
borough police force was placed under a special Watch Committee, trading
monopolies were abolished, and financial administration was reintroduced. The Act
maintained the power of the Crown and regulated the constitution and the function
of local bodies, the town councils. Though a Minister responsible to Parliament was
not appointed until 1919, the hierarchy which administrated the Poor Law from
27
1834 to 1908 was a gradual efflorescence (Clarke, 1955).
In 1871, centralisation took another step forward with the creation of the
Local Government Board, which took over the duties of the Poor Law
Commissioners along with the control and inspection of the health boards. Hence, it
promoted the role of a ministry for local government. In 1888, the Local
Government Act took administrative powers from JPs and created elected county
councils. Later, non-county borough councils, urban district councils, and rural
district councils were elected as well. Large towns were excluded from the county
areas and were made into county boroughs with complete control and
independence. Small towns shared responsibility with counties (Henney, 1984).
In addition, from 1835 a very important central control over LAs was
introduced by a significant legal change. Previously, corporations had the power to
do whatever the law did not expressly prohibit, while after 1835 they could do only
what the law allowed. In other words, the intra rather the ultra vires principle was
introduced. This important position was reinforced and affirmed in 1914 by the
Departmental Committee on Local Taxation, which stated that LAs and their
revenues are creatures of Parliament and subject to its direct and indirect control
(Clarke, 1955). Since their foundation, LAs operated under the broad doctrine of
intra vires (within the powers) and consequently, tensions arose while persistent
central attempts were made to restrict LAs that sought for a more independent role
(Atkinson and Wilks-Heeg, 2000). The intra vires principle has been a vital
element in central-local relations, which influences local government till today. The
tensions that arouse around the division of power between central and local
government will accompany the relationships between local and central
governments and will shape LAs. This point is especially outstanding in British
politics since in Britain there is no written constitution, thus the legal powers of
local government derive from the central government and not independently from a
constitution (Henney, 1984). For instance, the Secretary of State has the powers to
define Best Value authorities, and order their duties, inspection, and audit
procedures, including determent of national Performance Indicators (PIs) (Local
Government Act, 1999). These powers would influence many of the day-by-day
activities of local servants and experiences of local citizens, inter alia, within LAs
that go through a recovery process.
28
By the end of the 19
th
century, the problems resulting from the industrial
revolution and crowded cities caused significant developments in LA growth
(Atkinson and Wilks-Heeg, 2000). Yet, the industrial revolution also made the
public demand greater local activity (Clarke, 1955). Whenever it was under
pressure, the reaction of the central government to every new problem was the
creation of a new agency (e.g., boards of guardians, highways, health, port sanitary,
and schools), each having power to levy a rate to meet its expenses. According to
Henney (1984), 1890-1900 was one of the two periods of local government growth,
when expenditures increased at about 5% annually (the other one was 1955-1975).
This period was even named the golden age of local government (Kingdom, 2003).
Yet problems grew more rapidly than solutions, and the ad hoc authorities were
found to be inefficient. Consequently, since local government was perceived to be
chaotic in authorities, rates and areas of activity, Parliament had to introduce reform
in order to produce uniform administration, combination of authorities, and
consolidation of rates.
Thus, during the early 1900s three major reports were published leading to
the reconstruction of local government: the Report of the Royal Commission
(1909), the County Council Association report (1911), and the Local Government
Sub-Committee of the Ministry of Reconstruction report (1918). The reports
evaluated the entire social welfare legislation and recommended the reorganisation
of local government administration and regulation. They concluded that the
functions and areas of activity of boards of guardians overlapped those of other
authorities. Similarly, the chaos in national finance resulted in the weakest
authorities being helped least (Clarke, 1955). As will be discussed later, this pattern
of behaviour can easily be identified throughout the history of English local
government where the focus on excellence is obvious. In other words, over the
years, governments have chosen to deal with those who can be easily improved
while neglecting those who find it difficult to help themselves.
The main recommendations mentioned in these reports were the abolition of
the boards of guardians and poor law unions and the transfer of their functions to
the county and county borough councils. However, the introduction of these
recommendations was postponed by the First World War (1914-18).
29
2.1.3. The Post World Wars Periods (1920s to 1970s)
As previously shown, during the years and especially after the Second
World War, although according to the liberal model of the modern state the state
was meant to have small powers, it became one of most powerful social actors.
Alongside passions for liberty and individuality, desires for more goods and power
created widespread socio-economic gaps. In a wider view, since European countries
were cluttered with legally entrenched conflicted interests, many of them local,
liberals had to find an agency that could roll back centuries of social and economic
control. That agency could only be the state. Persistent poverty, inequality, and
unemployment weakened the liberal view that freedom and individuality could
promote common good. Liberals realised that freedom in modern society is more
complex. Consequently, the New Liberalism saw freedom not as a product of
nature but as a creation of the state and part of its role, so that the state turned out to
be a dominant social actor (Kingdom, 2003). Nationalism and everything that
emphasised governmental centrality (e.g., taxation), in contrast to local leadership,
was thus adopted (McClelland, 1996).
In terms of local-central relationships it is widely accepted that, after the
Second World War, the system moved from the partnership model to the agency
model (Rhodes, 1981). Especially when the economic situation deteriorated, central
government divested local government from several of its major functions and
increased the guidance and control over LAs by legislation, subsidies and pressure.
Although legislation entrusted LAs with new roles, the autonomy of local
government was limited.
As part of the recommendations made by the above-mentioned reports and
in accordance with New Liberal views, the Local Government Acts of 1929 and
1933 were enacted. These laws imposed considerable changes in local government
and provided the basis of widening and developing the areas of charge as
following:
? Transfer of the administration of functions of boards of guardians to the councils
and thus, improving the coordination of hospitals, public health, welfare service,
and education of children.
? Registration of births, deaths, and marriages.
30
? Roads construction, maintenance, and town planning became the responsibility
of county councils and enabled more flexible and adjusted decisions.
? Powers to promote or oppose to bills in the parliament were extended.
? Regulation of rating, grants, and financial provisions.
? Regulations related to constitution, officers and elections. For instance, the
disqualification of paid officers, and employees from being elected to the local
authority and vice versa.
? Committees and joined committees – all LAs had a general power of appointing
these bodies while at least two third of the total are members of the authority.
? Regulations concerning offices and buildings.
? Regulations related to alterations of areas and acquisition of land.
? Regulations related to expenses, borrowing, accounts, and financial returns
(Clark, 2003; Clarke, 1955).
Nevertheless, alongside newly given responsibilities, dependency on central
sources of revenues increased (Chandler, 2007). In addition, governments restricted
LAs' powers and created large regional authorities that undertook locally provided
services while leaving LAs a secondary role in the welfare state. Moreover, there
was neither a planned pattern of growth for local government nor a single
supervision unit because responsibilities were split between Commissioners,
Boards, Regional Offices, and Departments. Again, indifference characterised the
attitude of the central government toward local government and its interests
(Chandler, 1988).
However during the 1940s to the late 1970s some changes took place. On
one hand, the post war consensus and significant shifts in population led to
increased commitment to the welfare state. This, in turn, led to fundamental and
rapid growth in the role of local government, which was at the forefront of the
application of public policy (Atkinson and Wilks-Heeg, 2000). From the 1960s till
mid-1970s, the communication between central and local government improved.
The central government financed much of the increased expenditure on local
31
services (Wilson et al., 2006).
However, although spending in real terms grew massively, the number of
areas where LAs were engaged in providing services or making investment was
dramatically reduced (Dunleavy, 1984). Some functions were lost to the central
government and nationalised boards. For instance, responsibilities for
unemployment were transferred to the Unemployment Assistance Board (1934) that
later became the National Assistance Board (1948), and in turn to the
Supplementary Benefits Commission (1966). Similarly, responsibility for building
and maintaining trunk roads (1946), canals and harbours hospitals (1946),
municipal electricity and gas (1948), water and sewerage (1974) were centralised
and nationalised. The transfers were rooted in the belief that such services are
national in scope and that the artificial boundaries of LAs constrain their efficient
operation. Therefore, they would be better supplied by single-purpose organisations
(Henney, 1984).
Alongside the changes in the scope of local government authorities,
structural changes took place. In 1965, London local government was reorganised
in a two-tier system consisting of the Great London Council (GLC) and 32 London
Boroughs plus the City. As a result, the structure of local government in the rest of
Britain was increasingly criticised as being outmoded and inefficient. Thus, the
Local Government Act, 1972 introduced a two-tier structure (Henney, 1984).
While over the post World Wars period, legislation was focused on the
quantity of services provided by LAs, recently, legislation is focused on their
quality. Hence, the focus on quality of services redefines expectations in relation to
performance and then, demands from those who fail to deliver the expected quality
of services.
2.1.4. The Welfare State and Traditional Public Sector
As the welfare state grew larger, an adequate administration was required to
provide a wide scope of services. Public administration or the public sector was
traditionally defined by Wamsley and Zald (1973) as "the organisations which
[are] owned and found[ed] by the government". In more recent literature the public
32
sector has been regarded as "the government activity and its consequences", as "the
state general decision-making and its outcomes" (Jan-Erik, 2000), and as "what
government does" (Shafritz and Russell, 2005). Indirectly, the public, society, and
the political community are the owners of public organisations. Therefore, the main
objective of the public sector is to maximise the welfare of society and not to enrich
private hands (Rainey, Backoff, and Levine, 1976; Revelle, Marks, and Liberman,
1970). In accordance with this principle, Westlund (2003) mentioned that the public
sector aims are social purposes, democracy and the public good. Similarly, Blau
and Scott (1962) defined the public sector as "organisations whose prime
beneficiaries are the public in general". These principles are well rooted in the
ideological base of Socialism, which shaped the welfare state and was later
challenged by the New Right and Neoliberalism from the 1980s.
Socialism is a political movement that usually begins outside the political
system, therefore, at first, it lacks institutional bases and expects existing
institutions to be hostile (except e.g., trade unions). In the mid-19
th
century, Marx
and Engels published 'The Communist Manifesto' as a continuation to the 1789
French Revolution and as a reaction to capitalist large-scale industrialism. They
claimed that capitalist industrialism is a new generation of ancient slavery and
Feudalism, which contributes to de-humaneness. Yet, it was quite clear from the
beginning that there is no point struggling industrialisation but capitalism should be
the focus of the struggle. While revolutionist Socialists called for Humanism,
investment in human resources and satisfying human needs, they did not always
know what to change and how to change at the state level in order to promote those
principles and values (McClelland, 1996).
According to Marx's theory the state and high official personnel should stop
untruly presenting themselves as neutral and should regulate trade till the point
there is only one social class. Nevertheless, the state opted for the capitalist way
although, according to socialists, the modern world which created efficient
industrial and agricultural production could solve the false scarcity (McClelland,
1996). The contrast between capitalist views and socialist view would stand in the
middle of an ongoing struggle between high officials and the proletarians, the
central and local governments, respectively.
33
According to Marx's 'Capital- A Critique of Political Economy' (published
in 1867), this struggle takes place between the proletarian and official agents of the
state. The proletarian fight for the state to become their state, yet, the modern state
would always have more power since it has legitimately monopolised violence
(McClelland, 1996). This description once again reminds the conflictual central-
local relationship that addresses the questions 'whose is that state?' These questions
have continued to symbolise the struggle concerning the nature of modern state and
the role of public administration as it will be portrayed next.
According to the traditional public administration view, the public is not
only the beneficiary of public organisations but also finances their activities. The
resources for the activities of public agencies are largely based on taxation. Given
this, the public sector is controlled and constrained by political forces and the
political system, and is not usually driven directly by market forces (e.g.,
competition) and the economic system. Since public organisations involve the
wider public, public failures usually affect a great number of people who are liable
to suffer from it. In contrast to this, the failure of private organisations usually
affects direct owners and specific customers.
The characteristics and typical difficulties of the traditional public sector
organisations are frequently presented in comparison and in contrast to private
sector organisations. Various scholars (e.g., Johnson, Leenders, and McCue, 2003;
Lagrosen, and Lagrossen, 2003; Perry and Rainey, 1988; Rainey, Backoff, and
Levine, 1976; Ross, 1988; Stackman, Connor, and Becker, 2006) investigated and
compared the characteristics of both sectors. The authors argue that environmental
factors of public organisations, i.e., less exposure to free markets (Crawford and
Stein, 2004; Karl and Sutton, 1998), results in less incentive to cost reductions,
operation efficiency, and effective performance. On the other hand, no vacuum
exists; the absence of market forces invigorates more exposure to political forces.
Public organisations are thus subjected to more formal constraints, expectations,
scrutiny, and external control from politicians, interest groups, and public opinion.
In addition, internal factors in public organisations, i.e., structures and processes,
generate greater multiplicity, vagueness, complexity, conflicting goals, criteria, and
decisions (Chang and Turnbull, 2002; Johnson, Leenders, and McCue, 2003;
Rainey, Backoff, and Levine, 1976) that make failure more likely and recovery
34
more complex. The management of public organisations suffers from less
autonomy, fragmented authority over subordinates, greater difficulty in devising
incentives for effective and efficient performance, greater use of formal regulations,
and extra-political influence over senior managers (Harel and Tzafrir, 2001;
Lagrosen, and Lagrossen, 2003; Rainey, Backoff, and Levine, 1976).
Organisational performance tends to be weaker due to over-cautiousness, rigidity,
less innovativeness, and frequent turnover of the leadership. Finally, public
employees are more likely to be varied in personality traits and needs, have lower
valuation of pecuniary incentives, lower work satisfaction, and lower organisational
commitment (Kurland and Egan, 1999; Lyons, Duxbury, and Higgins, 2006;
Rainey, Backoff, and Levine, 1976; Stackman, Connor, and Becker, 2006). In sum,
the findings do not flatter the traditional public sector, which lags behind the private
sector in performance measures. The authors reveal that the public sector suffers
from chronic diseases, such as rigidity, waste of resources, red tape, and
anachronism. According to the authors, although both sectors operate in the same
reality, environmental and internal factors make stakeholders perceive the
traditional public sector as bureaucratic, less effective, less efficient, unresponsive,
less independent and consequently, widely criticised. Such characteristics might
appear to some extent in any public organisation, but in failing organisations they
tend to be the norm, and together with the tendency of public organisations to be
large and complex, they make it harder and longer to achieve recovery in the public
sector (Boyne, 2006; Pant, 1991).
Another characteristic of the public sector is that many decisions lie at the
core of the political process (Skelcher, 1992). In public organisations many
decisions are generally based on policy, which is often derived from political
considerations. For instance, preferences regarding which services will be funded
reflect political inclinations (Skelcher, 1992). Though political considerations are
part of democracy, there is a danger that extra-political considerations will bias the
decision-making process and hinder public interest. In other words, political
considerations might obstruct a public organisation from getting the optimal
decision for the public it serves. Though the political game also involves public
scrutiny, public intervention does not always result in a beneficial outcome. For
example, political considerations might also obstruct the implementation of
35
unpopular decision that would be beneficial in the long run since they might
influence public support in the short run. While referring particularly to LAs,
political process and public policy involve various external stakeholders and
primarily the central government. In this sense, decision making in LAs is even
more complex since it is directly influenced by central-local relations and national
policies. Moreover, in England these relations tend to be tensed and penetrating.
Thus, LAs might face additional difficulties when they come to implement recovery
strategies.
An additional major characteristic of public organisations has been
described as an unproductive organisational climate. Paton and Cornforth (1991)
claimed that the climate of public organisations is unique while Wimalasiri (1993)
and Solomon (1986) argued that public servants have low levels of satisfaction,
commitment, and motivation compared to private corporations employees. One
possible explanation for this phenomenon would be the lack of clear demands for
acceptable and favourable objectives, which cause employees to place their efforts
in achieving different or even conflicting aims (Rainey, Backoff, and Levine,
1976). An unproductive organisational climate makes it harder for management to
stimulate employees and to obtain their cooperation, and thus productivity is
harmed (Parry, 2003; Wimalasiri, 1993). In addition, public organisations were not
often interested in customer feedback. In contrast to private organisations, which
usually charge the consumer directly for services or goods supplied and therefore
depend upon their satisfaction, public organisations are indirectly financed.
Because of the use of taxes as a primary source of revenue, those who pay are not
precisely those who enjoy the services. As a result, public sector organisations are
less concerned with consumer satisfaction (Graaf, and Wal, 2008; Rainey, Backoff,
and Levine, 1976). This not only might affect the quality of services delivered but
also the ability of an organisation to recognise a failure. Since public organisations
tend to be less customer-oriented, dissatisfaction is less noticeable, and failure can
therefore be relatively ignored or denied.
In general, it seems that publicness, which is reflected in public ownership,
public funding, and public control, is the main characteristic of public service
organisations (Boyne, 2002). However, publicness involves and relates to more
than one policy or ideology, which may contrast each other and cause some typical
36
problems. While greater, better, and varied services are continuously demanded by
the public, the political decision tendency to decrease resources delivered to the
public sector, which has taken place from the mid-1970s (Butler, Travers, and
Adonis, 1997), has caused an enormous lack of resources and poor management,
and decreased the ability of public services to meet consumer demand (Bishnu and
John, 2005; Grout and Stevens, 2003; Martin, 2002; Osborne and McLaughlin,
2002; Smith, 1993; Wholey, 1993). Though these problems are common in a wide
range of situations, in radical cases the increasing demands, lack of resources, and
poor leadership, each and all together, might lead to organisational failure, delay or
prevent recovery. In contrast to private enterprises, which have as their general aim
the making of profits for shareholders, and for which any decrease in profitability is
likely to indicate that the organisation is failing (Witteloostuijn, 1998), public
enterprises might be held as failing when they suffer from deterioration of services
provided or when they ignore consumer demands, since they are established with
the rationale of supplying the needs of citizens (McKiernan, 2003). These problems
and difficulties faced by the traditional public sector, and particularly LAs, have
raised the interest of researchers, citizens, and politicians.
The rationale for the foundation or abolition of local services in the welfare
state context depends on the type of services provided. For example, the rationale
for the establishment and funding of certain local services is citizen need (e.g., local
transportation), for others, the main rationale for government intervention is based
on consumer demand (e.g., personal security), and for others, the rationale for
intervention is equity and equality (e.g., education). Since public goods, like law
enforcement, cannot possibly be charged directly to consumers, the government
finances the service on behalf of all consumers using tax revenue. Thus, services
are provided by using public funds to redistribute income and serve the whole
society at least up to a minimal standard (Grout and Stevens, 2003). Nonetheless,
some scholars take a more critical view of the rationales behind the provision of
services. In their view, the policy toward local government reflects the interests of
senior politicians rather than the community. Central government was largely
indifferent to LAs? aspirations to democratically represent local communities
(Chandler, 1988).
This may provide at least a partial explanation for the perception of public
37
services as deficient performers. Citizens and politicians considered public services
as not being responsive enough to environmental changes and to the needs of
clients. Public servants have often been committed to outdated practices; they were
influenced by staff interests, and provided costly and unaccountable services
(Cornforth and Paton, 2004). The traditional public sector and the welfare state
provided low standards of services to all the citizens (Dent, Chandler, and Barry,
2004). Therefore, within LAs for instance, low standards were the acceptable norm
and the visibility and prominence of public failures were low.
As a whole, the evolution of English local government and the emergence
of the welfare state during the 20
th
century created and shaped the expectations
from LAs to provide services and take care of the communities' quality of life.
These expectations will only increase over time (Leach, 2006). Yet, the resources
required to fulfil them would never be enough. This gap between expectations and
resources available will be one of the key reasons for failure in LAs and difficulties
in accomplishing recovery. Furthermore, the political climate and relations in which
both the English central and local governments would have to act, will be more
conflictual than cooperative. While both sides will keep trying to close the gaps
between expectations and resources, central government would try to increase
expectations and decrease resources and local government would continuously try
to increas resources. These primary conditions would shape the next generation of
public administration, the New Public Management (NPM).
2.1.5. New Public Management Reforms
2.1.5.1. The Political Ideological Perspective
Since the second half of the 20
th
century, theorists have continued to debate
about the nature, the role, and the functions of the modern state, and its relationship
with citizens. The debate was accompanied by wide political and social struggles.
Liberals favored the devolution of central power and the evolution of locality, civic
responsibility, and civic participation that contribute to a stable liberal democracy.
Yet, fears that urban government would be captured by socialists and used to
further ownership of production drove liberals to interfere in local politics
38
(Chandler, 2007). In contrast, Social Democrats feared that devolution of power
and locality would promote inequality and unacceptable values (Chandler, 2008).
For instance, the debate on taxation demonstrates the tensions between the different
views on the role of the state. Taxation is generally used as a tool for the
redistribution of wealth. Thus, ever since British were asked to tax property,
tensions between principles of capitalism, market organisation, and rights of private
property conflicted with socialist views such as collectivism and citizenship rights.
Traditionally, the two core political ideologies found expression in the two levels of
government: local and central. Central government favoured economic efficiency
and accumulation of private property while the local government became associated
with supplying the quality of life (Saunders, 1984).
According to Bevir (2001), the major ideologies in the 20
th
century:
Liberalism, Pluralism, Socialism, and Capitalism, were represented by three main
political movements: (old) Labour, the New Right (also named Thatcherism), and
the New Labour (also named The Third Way). While the Labour party, which
emphasised Socialism, mostly influenced England after the World Wars, the New
Right and the New Labour parties, which emphasised Neoliberalism (Economic
Liberalism), mostly influenced England from the 1980s to the 1990s, and from the
late 1990s to the present, respectively (Kingdom, 2003).
Old Labour generally sought to realise an ideal of socialism and fellowship
in a universal welfare and provider state characterised by a command form of
service delivery. The New Labour roots can be also found in the Socialist tradition.
Yet, although services are supplied by the state, the attitude towards citizens is less
paternalistic. New Labour conceives the state as an enabler who acts in partnership
with citizens and other organisations, delivering services through networks
characterised by relationships of trust. In other words, while Old Labour evoked the
state as a paternalistic provider of resources for individuals, which gives citizens
cash benefits, health care, education, and housing, New Labour has modified the
traditional ideas regarding welfare to promote a vision of the state as an enabler and
partner. According to Bevir (2001), New Labour?s philosophy is a development of
the socialist tradition in response to specific dilemmas, such as underclass and state
overload, conceived largely in terms associated and highlighted by both Old Labour
and the New Right. Therefore, New Labour is also termed The Third Way,
39
something in between the Old Labour and the New Right.
The New Right has challenged the vision of the welfare state on a number of
fronts. First, New Right theorists argue that high levels of public spending and state
interventions are detrimental to the economy and may drive Britain into
bankruptcy. Second, the New Right encourages Individualism and argues that the
welfare state also impedes social development because it encourages a culture of
dependency, both economically and psychologically, among welfare recipients.
According to this view, the modern welfare state offers individuals too many
benefits, and demands too little social obligations. Thus, the New Right seeks to
promote market forces and reduce government involvement in individual affairs.
The state should only supply a safety net by cutting costs and promoting self-
reliance. Thus, during the 1980s and 1990s Britain was a leading example of a
'night-watchman state' (McClelland, 1996). Whereas the New Right?s competitive
individualism promotes individual responsibility through competition, New Labour
advocates collective individualism and promotes individual responsibility through
opportunities and cooperation (Bevir, 2001; Clark, 2003).
In sum, it seems that since the 1980s, the most influential ideological
movement in the UK has been Neoliberalism (Clark, 2003). As will be portrayed
later in this study, the Neoliberalism ideology has been the engine of public policy
in the UK over the last three decades and thus has had a profound influence on the
public sector, public services, local government, central-local relations, and the
perception of failure in LAs. This ideology has focused public debate on terms such
as performance measurement and improvement, and imported techniques, values
and practices from private sector organisations into public bureaucracies. The
adoption of private sector standards drawn from principles of contestability and
competition and their implementation in public service delivery, which has been
termed New Public Management (NPM), will be broadly discussed later on in this
thesis.
2.1.5.2. The Political Perspective - Local Government under the New Right
As a whole, the role of national level politics and the extent to which it
40
influences decisions taken by local leaders is not clear-cut or steady. During the
1960s the pluralist/elitist debate tended to analyse LAs as isolated political units.
On the other hand, in the 1970s, community power studies in Britain backed the
elite theory, which argued that local government could not be considered in
isolation from the wider political system and that local government is party-based.
Consistent with this view, a narrow elite of bureaucratic officials and party
politicians at the core of local power tightly control local affairs, notwithstanding
their political inclinations. Accordingly, only a few well connected wealthy groups
were ever successful in influencing local policy (Green, 1981).
The party/group loyalty, as an approach to local democracy, favoured party
over community representation and open decision making. Councillors do not cross
party boundaries, while conducting representation in private groups meetings.
Consequently, the visibility of decision making is obscured and the electoral
legitimacy of local government impoverished. In such circumstances the
mainstream accepts the subordinate role of LAs in the British constitution and the
cut of services (Chandler, 2001). As it will be discussed next, the central tendency
to intervene in local government characterises the English politics.
From 1979 to 1997, the Conservative governments under Thatcher and
Major replaced the post-war welfare state with a coherent political doctrine based
on New Right principles. These principles, which were applied also to local
government and central-local relationship, consisted in encouraging capitalism,
entrepreneurialism, monetarism, individualism, liberalism, moralism, and
nationalism in the local field.
The New Right government held the belief that government intervention,
partly throughout local services, was a barrier to free market and social welfare.
The Thatcherism saw local government bureaucracy as inefficient and self-serving.
Welfare services provisions were regarded as unjustified, expensive, and as leading
to dependence and as self-defeating (Atkinson and Wilks-Heeg, 2000; Butler,
Travers, and Adonis, 1997). Thatcherist financial policy is based on an ideology
and political strategy directed towards rolling back the welfare state, freeing market
forces and individual private corporations, cutting taxation, and promoting
privatisation (Boddy, 1984). Consequently, the government persistently rolled back
41
social spending and slowed local growth and autonomy (Butler, Travers, and
Adonis, 1997).
The growth of the welfare state can be reflected also in economic measures.
In real financial terms, from 1900 to 1980 local government expenditure increased
from £101M to £18,669M and from 12% grants to 63% grants (Butler, Travers, and
Adonis, 1997). This increase provided one of the reasons for cutbacks. However,
cutbacks were not a new strategy. Central cutbacks in local expenditures have been
common since the mid-1970 (Boddy and Fudge, 1984; Butler, Travers, and Adonis,
1997; Saunders, 1984). Both parties, Labour and Conservatives, in order to restore
profitability of the private sector, subordinated social priorities to economic
priorities. Subordinating local government to central government was part of this
policy (Saunders, 1984). Nonetheless, for the New Right, cutting back and
controlling council spending has been a more central strategy. Since the Thatcher
government failed to deliver significant tax cuts or constrain its own expenditures,
the overall strategy seemed to be focused on privatisation in the local area (Boddy,
1984).
The shift in policy, introduced by the New Right (i.e., controlling and
restricting finances and authorities), created a considerable threat to local
government (Atkinson and Wilks-Heeg, 2000), on the working class, and on
principles of collective provision. In addition, these changes affected relations
between central and local government. Operating within a unitary state with strong
local traditions but an unwritten Constitution, changeable at will by a simple
parliamentary majority, central local relations in Britain have often been uneasy
since the New Right created a chronic tension between powerful traditions of local
government and parliamentary sovereignty. During Mrs. Thatcher term, the
relations between central and local governments were characterised by
confrontation, massive central control (Wilson et al., 2006), and decline in trust
(Chandler, 2007). Local government were expected to act as agents of the central
government and neglect their role as democratic representatives of local interests
(Chandler, 2007).
One of the major cases which reflect this trend is the poll tax case described
by Butler, Travers, and Adonis (1997). Modern British history offers no
42
comparable example of government putting a single piece of legislation so
prominently, forcefully implementing it, and then abandoning it. The Thatcher
government imposed the replacement of the domestic rating system by the poll tax.
This step was revolutionary to local government since it abolished a tax system
traced back to the Poor Law of 1601, which had been developed on a basis of
income derived from the rates and property taxes. When the poll tax was
introduced, local government objected to it, and councils, councillors, and officers
were not consulted before the reform was introduced. When professional bodies
became involved in the debate, the negative aspects of poll tax gained greater
importance. In 1990-1 the collection proved to be a nightmare and collection levels
fell well behind the comparable figures for domestic rates. Therefore, the poll tax
was finally abolished.
This case demonstrates, on one hand, the tension between central and local
government. The intervention of the central government points out the local
government weaknesses and its inability to successfully reject a reform that reduced
its fiscal and legal autonomy. On the other hand, the case indicates the strength of
local governments. By 1987, local government was the only national institution to
challenge the authority and ideology of Thatcher government. Almost alone, local
government stood out as part of a wider rebellious opposition.
Though the obstacles presented by the central government LAs did not
blindly followed central direction but make their own decisions regarding their
level and pattern of expenditures, LAs vary in their extent of acceptance of control,
resources, and political and professional factors (Rhodes, 1981). LAs initiated
efforts to increase productivity and found alternative service-delivery mechanisms
based on public-choice assumptions (Denhardt and Denhardt, 2000). In practical
terms, LAs implemented cuts, increased rates, or did both in order to maintain
services provision and employment (Boddy, 1984). In this context, it may be
suggested that due to the continuous cutbacks LAs found a way to become more
efficient.
Support for this view can be found in research that explored the relationship
between competition expenditures and efficiency in LAs (Boyne, 1998). In the
English context, empirical tests support public choice theory and provide
43
justification for the New Right agenda, if low expenditures and efficiency are
perceived as first priority targets. According to the findings, competition between
LAs and competition between service providers are negatively correlated with
levels of expenditures and positively related with efficiency. In other words,
competition and the free market model indeed encourage LAs to constrain their
expenditures and provide services in a more cost-effective manner.
One of the tools that later on were used to achieve cost effectiveness was the
idea of the enabling authority. The government of John Major promoted better
services and New Right values by shifting responsibility for service delivery to the
private sector and the extension of Compulsory Competitive Tendering (CCT) to
professional services (Chandler, 2007). However, the major managerial tools used
to close the gaps between the continuous cutbacks, on one hand, and increasing
expectation to services, on the other, were introduced by the NPM reforms. These
reforms will be broadly discussed next.
2.1.5.3. The Managerial Perspective
During the 1980s, citizens who appeared to be losing faith in the
bureaucratic-professional system expected and demanded greater choice of services
designed to meet individual needs (Dent, Chandler, and Barry, 2004). The reaction
to the failure, the demand to provide appropriate services (Osborne and
McLaughlin, 2002), and the reaction to fiscal crises (Martin, 2002) resulted in a
neo-liberal political agenda and a new phase of the public sector.
While radical changes do not occur very often in large and complex
systems, since the 1980s, local government and actually the entire public sector in
the U.K. experienced a dramatic process and a wide and multidimensional reform
named „New Public Management? (NPM). NPM refers to a collection of ideas and
practices that reflect the call to "run the government like a business". For instance,
NPM emphasises elements as accountability, market-like mechanisms, cost cutting,
budget transparency, high standards of performance, output control, competition,
and rational relationship with stakeholders (Atkinson and Wilks-Heeg, 2000;
Denhardt and Denhardt, 2000; Dent, Chandler, and Barry, 2004; Dunleavy and
44
Hood, 1994; Martin, 2002; Osborne and McLaughlin, 2002; Willis, 2005). This
reform has significantly changed the face of public administration (Boyne, 2002)
and has shaped local government until today.
As previously discussed, the origin of the reform arose from the belief held
in many western nations, which was based on Neoliberal ideology, that the public
sector was under performing and that a radical overhaul was essential and should
include many of the free market strategies, e.g., competition (Willis, 2005). This
change was promoted worldwide by the OECD (Organisation for Economic Co-
operation and Development). In Britain, as described in the former chapter, the
change was first led by the New Right thinking, the Conservative Party, and PM
Thatcher who was followed by PM Major. Later, the New Labour headed by PM
Blair further developed the trend.
These reforms were so extensive and continuous that today, it is hard to
detach NPM from the public sector; it is actually its modern appearance. Some
scholars refer to NPM as an agenda and believe it reflects an ideology on how the
public sector should be, since it emphasises modernisation and excellence of
political and administrative systems (e.g., Carvalho et al., 2006; Mueller et al.,
2004; Talbot and Johnson, 2007). According to the principles of Neoliberalism, the
aims of the changes were to upgrade the status of competition, reduce state
ownership, and commercialise public services (Christensen, Laegreid, and Stigen,
2004). By the mid-1980s, even the terminology was changed and signalised
managerial conceptual shifts: 'administrator' became 'manager' and citizens became
'customers' (Chandler, 2007). Similarly, the term „New Public Management?
represents the assumption that „New? equals good and 'Old' or traditional equals
bad (Cutler, 2004). Even political movements and parties sought to be perceived as
"New": the New Right, the New Labour, and New Liberalism.
Reforms are the focus of NPM. These reforms could be implemented in
different shapes. For instance, it could enhance the availability of LA services by
making them accessible online. Alternatively, it could improve the quality of
services by encouraging delivery by private suppliers. As a matter of fact, the range
and variety of themes, approaches, and terminology related to NPM is huge (Hood
and Peters, 2004). There is no single universal model or homogenous trend of
45
reform. NPM varies in types, routes, countries, and services (Flyn, 2002; Martin,
2002).
Nevertheless, though the NPM agenda has different faces, it is a universal
phenomenon (especially in the western world), which follows some core aspects
reflected in far-reaching internal changes and performance oriented schemes
(Scharitzer and Korunka, 2000). These aspects are common to different agencies
and states. For example, NPM reforms are most likely to emphasise modernisation,
efficiency, effectiveness, economy, accountability, and citizen-orientation; all of
these affect national political-administrative systems (Christensen and Laegreid,
1999; Lynn, 1998).
The question of the LA roles has become more complex. Though the
traditional roles of LAs have stayed much the same, further roles were added, and
the methods by which these roles are executed have been dramatically influenced
by NPM. While implementing NPM reforms, many LAs have gone through radical
changes. According to Keen (2004), NPM has redefined LAs' mission within a 4Cs
framework:
? Challenging the purpose of its service
? Comparing LA performance with other providers
? Consulting the community
? Looking for Competition
Accordingly, new ways of working across the boundaries of traditional services
were introduced. For instance, reorganisation took place in order to focus services
on user need; LAs were asked to publish plans, indicators, and annual performance
evaluations. As a whole, the NPM in LAs appeared to stimulate innovative,
dynamic, and customer/community responsive service. It stimulated the
empowerment of managers to identify and meet wishes of their local communities
(Keen, 2004). For instance, since the 1980s, as part of the NPM reform, English
LAs adopted various and different NPM models and reforms. All of them attempted
to achieve improved value for money. These types of policies are known as best
value policies and are characterised by the 3Es (Stewart, 2003):
? Economy
46
? Efficiency
? Effectiveness.
Consistent with these principles, LAs were expected to move away from
traditional roles towards a more customer-oriented position (Baker, 1995), which
became more and more demanding (Backoff, Wechsler, and Crew, 1993). They
were encouraged to develop innovative practices to improve their efficiency and
effectiveness. LAs were expected to meet NPM standards such as accountability
and performance under high levels of moral and managerial standards. Pressures
continued to increase as they were expected to respond effectively to the needs of
local communities and to make decisions locally, rather than control processes from
the top (Clifford, 2001). Consequently, LAs are currently committed to broader
accountability structures than ever before (Baker, 1995). These structures include
for instance consideration of a wider range of stakeholders and interest groups,
enabling more accessibility to elected politicians, and maintaining a higher degree
of openness and transparency. In addition to the usual demands for economy,
efficiency, and effectiveness, the public had increased expectations regarding
equity, fair treatment, and honesty in LAs? operation and service delivery. As
previously discussed, these enhanced demands and expectations in public services
were not necessarily followed by increased resources, tools, or revenues, and were
usually followed by cutbacks and reductions. Unfortunately, but logically, not all
LAs met the demands and expectations successfully. Some of them encountered
huge difficulties and ended up in organisational failure.
The most common difficulty faced by LAs, as a result of the introduction of
NPM, was the inability to cope with increased demand for services while revenues
were reduced (Martin, 2002). On one hand, the NPM culture challenges the
traditional predominant bureaucratic structure of the public sector and increases
expectations and demands. On the other hand, economies have witnessed growth in
both absolute and relative terms. However, as a result of a substantial growth in
some public expenditure, governments cut other expenses. Thus, central
government strategy often threatened LAs with budget reductions, affecting in this
way the ability of LAs to achieve their mission. In some cases, the ability of LAs to
supply services was damaged in a way that they could not supply modern services
as expected by the public. Moreover, they failed to deliver minimal standards of
47
services. The inability to supply services at the required level is one of the main
characteristics of a failing organisation.
An additional difficulty that NPM imposed on LAs is rooted in the
requirement of continuous adaptation to customer needs and fast-changing
circumstances. Generally, LAs are characterised by an organisational structure
based on the Weberian model of bureaucracy. They tend to be structured as
hierarchical, functionally differentiated, and rule-bound organisations. Such
structure has strong internal divisions between functional areas and intense
competition for resources (Skelcher, 1992). External considerations, like checks
and balances, may lead to the over monitoring of managerial processes, causing
more red tape, formalisation, and stagnation (e.g., an Audit commission review).
Scholars argue that these reflect obsessions with rules and processes rather than
results and outcomes (Rainey, Backoff, and Levine, 1976). These characteristics
place difficulties for the development of a customer-oriented culture that often
require fast, innovative, spontaneous, and inter-departmental intervention. For
example, in contrast to the business area where increased competition may lead to
decline (Slatter, 1984), LAs enjoy lack of competitive pressures from other
agencies, which is assumed to be an advantage. Public organisations usually enjoy a
dominant position in their environment as single service providers (Boyne, 2002).
Yet, there is a risk that a public monopoly would not react properly to a sudden
increase in demands or fast changing consumer needs (Krause and Douglas, 2006).
In this case, inability to supply services at the required level badly affects
consumers who have no alternative supplier.
Furthermore, since traditionally LAs were monopolies, they hardly ever had
to think about attracting and keeping customers, or being customer-oriented. The
access to services was physically limited; for example, access to buildings for
individuals with disabilities was often unavailable, and opening hours were short or
inconvenient. Similarly, access to decision-making and service design was also
partial with no clear procedure to enable citizen participation (Skelcher, 1992). A
customer orientation was assumed rather than demonstrated. The bureaucratic
paternalistic structure led to a situation where the authority followed practices and
procedures established over the years. These practices and procedures were
hierarchical, closed to the voices of customers, and they took the view that they
48
alone knew best. While LAs have well-developed systems for collecting and
analysing social, economic, and demographic data, few efforts have been made to
discover public opinion and customer needs. Consultation and participation
exercises are infrequent and do not always enable the full involvement of citizens.
Usually, only vocal customers or those represented by interest groups find the
opportunity to express their views.
Moreover, due to this inflexible structure, even if managers were willing to
create a customer-oriented environment, public managers have relatively less
autonomy and freedom to react to changing circumstances. For example, the
discretion of public managers in human resources management, such as hiring,
firing, and promoting, is limited (Boyne, 2002; Snavely and Desai, 2001; Zhiyong,
Riley, and Cayer, 2005). Constrained human resources management has several
implications, especially for failing LAs. In these cases, managers have less
available powers, tools, and authority to perform radical, rapid, and effective
changes that could lead to recovery.
Diversity of stakeholders that leads to multiple and vague goals (Aharoni,
1981; Drucker, 1976; Meier and Bohte, 2003) impose an additional difficulty on
LAs since those are hard to control (Brookfield, 2000), cohere, and measure
(Tirole, 1994). LA goals are a product of a political process and not of an intra-
organisational process alone (Boyne, 2002). As such, they are an outcome of
political compromises. Thus, they may reflect contradictory policies supposed to
serve different interest groups. Obviously, contradictory policies are hard to follow
and they push and pull management into different directions. In these cases, the role
of management is to interpret and balance these conflicting and vague objectives,
and to control plans, the execution of activities, and outcomes. Structural changes
designed to improve performance for one goal may hinder performance for others
(Theobald and Nicholson-Crotty, 2005). These difficulties are aggravated in cases
of organisational failure. While in private organisations failure will probably drive
the management to satisfy most stakeholders by increasing profit, LA management
would be expected to satisfy contradictory interests of unions, politicians, other
public agencies, the media, employees, and consumers. These groups might expect
the implementation of different ways of action. For instance, a public debate on
radiation caused by mobile phone antennas would motivate the media, parents, and
49
the minister of health to demand removing antennas near kindergartens. On the
other hand, taking down antennas might damage public-private partnerships and
cause massive dismissals. Another relevant example could arise when a recovery
process requires retrenchment. Transferring resources to areas that are more
productive might necessitate the dismissal of employees. Firing friends, colleagues,
and subordinates, in turn, could lead to an unproductive organisational climate.
Moreover, in order to balance contradictory goals in a political system, there is a
need not only for managerial skills but also for strong leadership (Harker and
Sharma, 2000), and those are often absent in cases of organisational failure.
To sum up, in spite of the broad trend of NPM that emphasised best value
for people, an extensive, pervasive, and deep crisis exists within the public sector
(Corrigan and Joyce, 1997). According to Christensen and Laegreid (1999), NPM is
actually a reflection of international crises in the public sector. Some of these crises
are rooted in economic factors. Despite the reforms, some public organisation
finances worsened, remained weak, and became vulnerable. Fundamental changes
in culture that challenged the traditional predominant bureaucratic structure of the
public sector required the introduction of new methods of accountability and a
greater choice of services. Those had to be achieved under, inter alia, reductions in
expenditure led by central government policies (Martin, 2002), an unproductive
organisational climate, and often under-motivated or unskilled management. Thus,
it is not surprising that some LAs have had severe difficulties in fulfilling their
missions and were considered under performers. According to Corrigan and Joyce,
(1997) this situation in the public sector created a driving force for innovation
within the UK. The next chapter will address local government evolution under
these ideologies, political movements, central policy, and managerial reforms, as a
base for the perception of public failure.
2.1.5.4. New Public Management and Local Government under the Third Way
In the general election manifesto, 1997, the Local Government Act, 1999
(see Appendix 1), and in the White Paper - Strong Local Leadership (see Appendix
2), the New Labour party headed by Tony Blair spoke grandly about bringing
power back to local people by renewing local democracy and revitalising civic
50
government. The rhetoric of the Labour government policy regarding LAs indeed
had a more positive tone. On the other hand, Blair declared that his government
would be quick to respond and intervene if LAs failed to carry out their mission
effectively. The Labour strategy consisted in a number of components such as
modernising local decision-making, encouraging innovation, and enhancing service
quality. The Labour regime expected local government to promote the social,
economic, and environmental well being of the communities it serves and they
promised to give new powers to meet local priorities. The three core themes of the
New Labour modernisation program were community leadership, democratic
renewal, and improving performance (Stewart, 2003).
As was suggested earlier, NPM reforms and Neoliberalism trends have
continued under the Blair regime. Since the 1997 General Election, local
government has experienced a remarkable renaissance in its fortunes. The Labour
government demonstrated its commitment to local government by stating that LAs
will be crucial in making a significant contribution to the delivery of the domestic
policy agenda. Ministers have promised that councils will be provided with new
powers and responsibilities by government. However, new responsibilities for
councils will be conditional on their acceptance of the modernising agenda (Brooks,
2000).
Improving performance (e.g., moving into e-government: delivery of public
services on-line), is the most relevant issue for our discussion. It was promoted in
the White Paper - Strong Local Leadership, which set out a comprehensive
performance framework for service improvement involving national priorities and
targets, along with performance assessments of individual authorities and related
incentives and penalties (Stewart, 2003). Although funding of local services
increased and their improvement became a major government priority, there was no
reduction in the central control (Chandler, 2007) which was called 'control freakery'
(Wilson et al., 2006). Control for improving service delivery was a key element,
which was achieved by securing „Best Value? for local people. It was monitored by
the Audit Commission, which introduced national performance reviews and
indicators for efficiency, cost, and quality (this point will be discussed in detail
later). This process involved consultation with local taxpayers, service users, and
the wider business community on how services could be improved (Atkinson and
51
Wilks-Heeg, 2000).
According to Stewart (2003), LAs were required to review all their
functions over five year periods while following the guidelines of the four Cs:
Challenge why, how and by whom a service is provided, make Comparison with
other performances, Consult stakeholders, and use fair and open Competition. LAs
were required to prepare a best value performance plan each year that must include
a summary of objectives, current performance, targets, comparisons with
performance in previous years, plans for action, response to audit and inspection
reports, and financial information. Since LAs were under the statutory duty to
pursue „Best Value? and in order to make sure these duties would be accomplished,
the government obtained the power to enforce those requirements by audit,
inspection, and direct intervention.
As part of the modernising environment that encouraged excellence
(Cornforth and Paton, 2004; Jas and Skelcher, 2005), public opinion about failures
of LAs became less acceptable and ignorable. Thus, public pressure motivated LAs
to seek creative ways to improve services. However, while some LAs improved
their performance dramatically, others stayed behind (Cabrero-Mendoza, 2000;
Miah and Mia, 1996), increasing the gap between poor and good performers. These
gaps increased the demands for equality. Thus, recognising failing LAs and making
greater efforts to recover their performance became essential. Consequently, these
changes paved the way for government pressures such as performance
measurement and cross-agency comparisons.
These pressures reflect the contradictions between the stated objectives of
the modernisation policy and other Labour?s policies (Brooks, 2000). Specifically,
Labour has emphasised its commitment to enhancing community representation
and the democratic practices of local governments, yet the government has
reiterated that it will continue to direct the management of LAs. In other words, it is
questionable whether the government?s push for modernising local government is
of lasting benefit to local governments or to a system that merely administers
nationally decided policies.
As Boyne (2006) suggested, despite the NPM reforms, or perhaps because
of them, a widespread concern remains about the failure of public sector
52
organisations. Additionally, the government was keen to find ways to achieve
organisational turnaround, remove service disparities across client groups, and
bring the laggards up to the service standards achieved by the leaders. Accordingly,
NPM prepared the ground for the use of TMS, which will be widely discussed later.
Thus, there is a linkage between the two phenomena: NPM and TMS. There is a
linkage between management style reforms (i.e., the atmosphere, norms, and
expectations they created), the desired organisational recoveries for failing LAs,
and particular strategies designed to achieve these recoveries. According to
preliminary scholars (Schendel, Patton, and Riggs 1976; Hofer, 1980), TMS were
known and in use in private failing organisations since the 1950s. Yet, they were
borrowed and expected to be implemented in LAs only in the last few decades.
Although it may be assumed that cases of failing LAs existed in the past, we have
no evidence TMS were in use at the same time. Thus, it can be claimed that the
NPM reforms principles and nature, which rose up in the 1980s, made the
difference that pushed failing LAs to implement TMS. In other words, TMS were
one of the optional sets of strategies directed to recover failures, as a reaction to the
demands presented by the NPM reforms.
Similarly, NPM has changed the face of LAs leadership as well. According
to Christensen and Laegreid (1999), NPM is designed to improve public services in
two ways, which significantly involve management skills. This is done firstly, by
importing managerial processes and behaviour from the private sector and by
implementing them according to financial standards, norms, and values, such as
economy, efficiency, and effectiveness. Secondly, it is done by introducing
professional management committed to these standards and managerial techniques
(Boyne, 2002) (e.g., Management by Objectives (MBO), Total Quality
Management (TQM), and Management by Objectives and Results (MBOR)). Over
the last three decades, NPM has led to a profound shift in the role of LAs and the
nature of their profession. Local managers and political leaders were expected to
demonstrate accountability and high performance. They have sought to restructure
bureaucratic systems, redefine organisational missions, rationalise processes, and
decentralise decision-making (Denhardt and Denhardt, 2000). As time passes and
accountability from managers is in greater demand, the role of local politicians and
officers is becoming broader, deeper, and more challenging (Hall and Holt, 2002;
53
Nutley, 2000; Sanjay and Bradley, 2006). For instance, the present local leadership
faces new missions such as promoting private-public relationship and commitment
to ongoing performance assessment. The complexity of the role is enhanced in both
failure and recovery situations. These situations test management skills to the
extreme, requiring more creativity, innovativeness and added responsibilities while
acting under the open eye of the public and government agencies.
The desire to strengthen the role of political leadership in LAs is one of the
key features of Labour?s renewal agenda. The model suggested followed the
separation of powers in local government in a similar manner to central
government. According to this model, a separate small group of councillors with a
powerful leader would have the authority to make executive decisions. These
powers and decisions would be overviewed and scrutinised before their
implementation by a scrutiny system (Leach, 2006). This model of local checks and
balances is aimed at controlling decision-making and performance, and thus
preventing failures.
Recently, creative ways of dealing with the central policy were
accomplished through the transition from local government to local governance.
The term 'local governance' seems to be more and more relevant, though its roots
go back to the 1980s (Kingdom, 2003) or even the 1950-60s. In a broad view, the
search for reformed local governance is a response to working in a post-industrial,
post-bureaucratic, and post-welfare state. It marks a break from traditional public
administration and NPM, while moving into the emergence of local networks
(Stoker, 2003). Local governance reflects the tendency to shift away from a system
in which LAs were the sole key actor into a system in which decision-making,
authorities, and the provision of services are shared amongst private and voluntary
organisations (Atkinson and Wilks-Heeg, 2000; Kingdom, 2003). Instead of the
direct provision of services to citizens, LAs identify requirements, set priorities,
determine standards of service, and find the best way to meet these standards. Local
governance is the latest evolutionary phase of local government. Though LAs have
never had complete governmental powers, they saw themselves as the leaders of
their community. Now their position is under challenge, as they share
responsibilities with a whole range of bodies and all sorts of players also exercising
governmental powers at the local level. The council is no longer the only or main
54
actor in the field, thus, partnership is a key term in the modern management of LAs
(Wilson et al., 2006).
Overall, the NPM reforms and modernisation agenda described above
required LAs to make adaptations and adjustments. In response to the wave of
Neoliberalism, LAs implemented cuts, increased rates, or both to maintain services
provision and employment, while blaming the central government. Some strong
politically based LAs developed radical initiatives as well as large rates increases to
defence services (Boddy, 1984). Yet, it is important to note that not all LAs had a
strong political base and have not succeed in making those adaptations. Thus,
though NPM is based on modernisation, productivity, and accountability, it has not
always been perceived as an ideal movement, and was therefore criticised by
stakeholders. Dunleavy and Hood (1994) classified this criticism into four groups.
First, the fatalist critique holds that previous problems that had begun back in the
traditional phase have not yet been cured and there is little evidence that the NPM
reforms led to the desired results (Cristensen and Laegreid, 1999). In other words,
this critique holds that Socialism, the welfare state, and the traditional public
administration have not resolved the social problems and that reforming the public
management style would probably not do better. Second, the individual critique
holds that the NPM has been grafted into a system where there are enforceable
contracts and individual legal rights. As a result, instead of performance, tenure is
the factor that determines salary level. Third, the hierarchic critique, which is
rooted in an orthodox view, holds that reforms must be carefully conducted and
should not let things get out of control while there is a risk of irreversible damage to
the wider public. From this point of view, a hierarchical structure is better than
independent managers who have no skills for strategic design since it allows the
individual manager less freedom to make mistakes and wrong decisions. Fourth, the
democratic critique reflects the fear from corrupted, elitist decision-makers that
would serve personal rather than the end users' interests. For example, excessive
decentralisation, privatisation, and budget cutting that might lead to inequality and
corruption.
These critiques raise an important question regarding the NPM role in LA
failures. It could be argued that NPM not only did not solve the problems of the
traditional public sector, as suggested by the fatalist and the individual critiques, but
55
also caused some failures, as hinted by the hierarchical and the democratic
critiques. A linked argument was suggested by Boyne (2002), who did not criticise
NPM outcomes but its concept. He argued that public and private organisations are
fundamentally different, and therefore practices and skills cannot be directly
transferred to public management tasks, and there is little point in seeking to draw
lessons from private management. Adoption of private structures would at best be
fruitless, and at worst counterproductive. However, Boyne?s argument is quite
radical and should be refined and moderated. Indeed, blindly adopting private
managerial techniques, concepts, and values by unskilled managers is dangerous.
However, cautious adoption of appropriately adapted private sector techniques and
skills can enrich the local leaders and officers? repertoire of managerial tools. In
other words, it seems that along with the improvements NPM offers, it also entails
risks, yet these risks could be diminished if changes are executed with caution.
As may be expected, NPM has not solved the entire problems of LAs. It has
not been found as the cure for all the chronic diseases or as the tool-kit for the
whole range of difficulties. During the last three decades, LAs and NPM have
continued to be a target for criticism (Dent, Chandler, and Barry, 2004). This
criticism was even enhanced in cases of failure. Since wide interest in NPM created
a more competitive environment driven by a culture of excellence in which there
are higher standards and higher expectations among stakeholders, these
stakeholders were less tolerant toward public failures (Boyne, 2002; Christensen
and Laegreid, 1999; Glynn and Murphy, 1996). This intolerance was detected,
among other organisations, in LAs and particularly in underperforming ones, which
are at the core of this study. LAs have been in the spotlight of governments and
during the 1990s and the 2000s, LAs' performance has continued to trouble policy
makers, politicians, and managers, especially in the UK (Cornforth and Paton,
2004).
2.1.5.5. Summary
The historical development of English LAs reveals few main points.
Democratic principal authorities derive from the 1835 Act and in rural areas from
1888. Although much abused, since Anglo-Saxon times there was a strong tradition
56
of participative democracy at parish level. Yet, democratic local government is still
struggling for its existence. Legally, LAs are corporations with statutory defined
powers, in which their scope of action is limited by the principle of intra vires, and
their range of duties is imposed on them. Since there is no written constitution in
the UK, central government can at any time change the powers, functions, and
character of local government. In addition, the absence of explicitly established
relationships led to confusion about responsibility, which allowed each to blame the
other, a situation which politically suits both sides (Henney, 1984).
Over recent decades, LAs within England have undergone enormous
changes (Keen, 2004; Whiteman and Turner, 2005). Although support for localism
exists, LAs continuously lose functions to the central government, nationalised
industries, and privatised institutions. Since control over LAs becomes tighter, LAs
become dependent upon central grants. Therefore, local government was seriously
affected by government?s attempts to reduce spending. Consequently, some LAs
have fallen into severe crises and some of them have even stopped expanding
services (Henney, 1984). However, while LAs have been forced to give up some
areas of autonomy, some LAs found a variety of ways to protect and expand their
independence in other areas (Atkinson and Wilks-Heeg, 2000).
The main managerial reform introduced to improve performance under
budgetary limitations was NPM, which imported private sector managerial
practices into public administration. However, as shown through this chapter, NPM
reforms did not cure all the problems of the public sector in general, and failing
LAs in particular. LAs still are at the center of governmental efforts aimed at
improving their performance.
2.2. Best Value Regime: Recent Efforts to Improve the Performance of Local
Authorities
This chapter outlines the special efforts made recently in England to deal
with LA performance. It details the methods used to promote the performance of
LAs, and their achievements, mostly throughout the Best Value regime, as they
have been published by the Audit Commission. In addition, this chapter outlines
some of the criticism written on this method and its disadvantages.
Over the last few decades, UK governments and especially New Labour
57
policy makers favoured modernisation, which resulted in a major concern for LAs
and their management (Cornforth and Paton, 2004). The English Local Government
Act, 1999 (see Appendix 1) and the White Paper: Strong Local Leadership –
Quality Public Service (2001) (see Appendix 2) encouraged Best Value policy,
which means greater focus on improved services for local people. The Best Value
policy develops principles of best practice that derive from a business model based
on excellence, which includes the efficient use of resources, effective policy
making, customer satisfaction, and 'SMART' targets (specific, measurable,
achievable, relevant, and timed) (Bevir, 2001).
Improving performance of public services is a great challenge to any
government. Nevertheless, the New Labour set it up as a major political objective
and as a self-test (Stoker, 2003). It moves towards a comprehensive system of
performance management; it challenges local councils to improve their
performance through locally managed systems of review and restructuring; it
inspects local government using national Performance Indicators (PIs) which
provide information for central government. In other words, it creates a system of
challenges, training, support, rewards, and sanctions.
Enormous efforts have been made to encourage best practices, to promote
stronger management, and to strengthen the leadership of LAs. The importance of
these efforts cannot be exaggerated since in the UK for instance, LAs spend about a
quarter of public spending and raise only about a quarter of that amount (i.e., 1/16
of public spending) from local taxes (McLean, Haubrich, and Gutiérrez-Romero,
2007). This development was part of the implementation of NPM reforms
previously discussed. While these efforts were applied in all LAs, special efforts
were dedicated to failing LAs. The English government introduced a robust
intervention plan designed to recognise failing LAs, supply them with the necessary
support, and supervise them (Walshe et al., 2004).
The government intervention plan was mostly implemented by the Audit
Commission, an independent body founded in 1983. The Audit Commission was
given a mandate to measure, inspect, and supervise council managements. The
main purpose of the mandate was to seek high quality local services and to ensure
that public money is spent economically, efficiently, and effectively. It provided
58
information on the quality of public services, and practical recommendations for
spreading best practice and good value for money (Audit Commission, 2005). As
McLean, Haubrich, and Gutiérrez-Romero (2007) summarised, "...recent UK
governments of both main parties have shown increasing interest in using
performance metrics as a tool to assess and improve the performance of LAs."
Thus, since 2002, the Audit Commission annually rates all 150 English LAs into
one of the following categories according to their performance: poor, weak, fair,
good, or excellent performers.
However, though the interest of both main parties in using performance
metrics as a tool to assess and improve the performance of LAs, the Best Value
regime and its formal appearance through CPA, Office for Standards in Education
(OFSTED), and Commission of Social Care Inspection (CSCI) have been highly
criticised by some scholars (Brooks, 2000). The critics focus on the scale, the
overlap, the inflexibility, and the overwhelming centralism. The Best Value regime
depends on audit and inspection of LA?s services performance. However, according
to these scholars, this inspection takes into account a narrow definition of
accountability based on responsibility and obligations to fix performance indicators
dictated by national agencies rather than taking into account more legitimate factors
such as local targets and priorities. This criticism was even acknowledged by the
government. In 2005 Budget, as a response to the loud criticism, the Chancellor of
the Exchequer, Gordon Brown, cut the number of inspectorates leading to fewer
inspections (Wilson et al., 2006).
At the organisational level, the Best Value regime is criticised for generating
new tiers of bureaucracy and unsustainable administrative costs. Units compete one
with another during the planning, funding, and delivery phases in a way that may
have hindered an appropriate coordination between them. Some organisations, the
argument goes, are unwilling to share principles of best practice for fear of losing
competitive advantage, which is a sign for negative competition (Bevir, 2001). In
addition, continuous performance improvement, particularly from previously
poorly performing LAs, has been a key Governmental objective at the heart of both
Best Value and CPA policy (Game, 2006). Yet, critics sustain that the CPA is an
annually test, run only once a year. Thus, it may create organisational pressure,
excitement, preparation, and bustle for a short period but organisational limpness
59
and relaxation the day after.
An additional critic holds that the centralised and corporatised policy, which
adopts tight social control and protects businesses interests, created trends of
professionalism and specialisation. As this public policy aims at best outcomes
achieved with given resources, it encourages transferring authorities and powers
from agencies driven by political considerations to experts guided by professional
considerations. In other words, agencies dealing with specific and narrow scope of
services are privatised. Even in cases in which the powers to provide services
remains in LA's hands, the review and audit procedures demand for more
professionalised decision making. That way or another, these trends allow the state
to rationally manage local government, fragment it into Quasi-Governmental
agencies (QGAs), and leave it out of LAs' hands (Dunleavy, 1984). The policy
focussed on efficiency in the delivery of services has led to a secure and stable
liberal democratic state, yet, it has neglected liberty for communities (Henney,
1984). In addition, professionalism and specialisation have enhanced the role of
administrators while reducing the discretion of politicians. It has been repeatedly
argued that civil servants rule, since in contrast to their experience ministers have
brief tenure and thus, have to rely upon their advice (Chandler, 1988).
Similarly, the Best Value and CPA result in limited discretion in
determining the policies LAs may implement. The wide intervention, centralisation,
and inspection provide not only the route for LA performance, but also provide the
route that strictly defines the measures for success and failure. Within this
framework, LAs cannot, or can less than before, define the boarders of success and
failure since national PIs already done it without taking into account communal or
regional factors. As a consequence, recovery process would be focused on
replicating and simulating national PIs rather than representing local needs and
wishes.
Notwithstanding the criticism, the CPA provides an overall score for each
LA in England which assesses performance from various perspectives and provides
a more complete picture and a better understanding of activities. The CPA distils a
complex set of judgments into easy, understandable, and transparent terms (Audit
Commission, 2005). It should be borne in mind that this performance measurement
60
supplies tools to ensure an equal level of services for population nationwide, since
LAs are evaluated according to common national PIs. Complete independence of
LAs when establishing aims and providing services, in addition to their self-
inspection, might lead to gaps between the levels of services provided to citizens in
different LAs. Second, since LAs are publicly funded, public transparent inspection
of their expenditures is necessary. The CPA's measurement supplies such
transparent inspection which cannot be executed by single citizens. Finally, CPA
does not totally ignore localism. For example, CPA measures include the level of
accordance between aims, use of resources, and local needs. In addition, according
to Stoker (2003), although there are strong elements of classic oversight, checking,
inspection, and sanctions, equally there are elements of control through group
processes and mutuality using share learning peer review. On the other hand, the
CPA system raises tensions between the set PIs along with inspection processes and
NPM themes of accountability, which emphasise more responsibility of managers.
The Audit Commission?s methodology, as described by Andrews, Boyne,
and Walker (2006) (see Appendix 3), scores (from poor to excellent) the resources
management in addition to all the main areas of LA activities (education, social
care, planning, waste management, housing, benefits, library, and leisure). These
scores derive from a mixture of existing measurement systems (i.e., benefits,
education, and social services), self-assessments, inspection judgments, and
evidence from performance indicators. Whiteman and Turner (2005) mentioned
that within the existing measurement systems we could find other regulators such as
The Office of Standards in Education (OFSTED), which inspects education
authorities as well as schools and the CSCI, which examines both council
departments and private providers. Overall, the performance indicators covered key
dimensions of performance (Boyne, 2002):
? Quantity of outputs (e.g., number of exclusions from primary school, and
number of home helps for the elderly)
? Quality of outputs (e.g., number of cyclists killed, and serious injuries on
highways)
? Formal effectiveness (e.g., average school passes at 16, and percentage of rent
collected from council housing tenants)
61
? Efficiency (e.g., cost per benefit claimed)
? Consumer satisfaction (e.g., satisfaction with waste collection, and users
satisfaction with theatres and concert halls)
Due to differences between LAs and in order to make the rating comparable, the
scores were adjusted according to services and organisational characteristics. For
instance, there are adjusted scores for counties, metropolitan boroughs, unitary
authorities, and London boroughs, which reflect the different responsibilities of
each organisational type.
Since 2002, English LAs are assessed according to the measurements
described above. This process results in a Comprehensive Performance Assessment
(CPA). The CPA framework, which reflects the above-mentioned methodology, is
described in Figure 1. The results of the CPA test are published as a league table
overseen by the office of the Deputy Prime Minister.
In 2002, the first CPA report was published, and it identified 13 failing LAs
(9% of 150 inspected) and 21 weak LAs (14% of 150 inspected) (see Table 1). The
CPA rated all English LAs as poor, weak, fair, good, or excellent performers (or
alternatively, from 0 to 4 stars when 4 reflects the excellent performer) according to
ideal standards, to their past performance, and to other LAs.
Figure 1: The Comprehensive Performance Assessment (CPA)
Framework
(Source: The Audit Commission, 2005)
62
Table 1: Local Authorities’ Comprehensive Performance Assessment
Over 2002 and 2005- N (%)
2002 2005
Poor Weak Fair Good Excellent
Poor 13 (9%) 1 4 6 2 0
Weak 21 (14%) 0 3 9 9 0
Fair 40 (27%) 0 1 18 17 2
Good 54 (36%) 0 1 0 29 24
Excellent 22 (14%) 0 0 0 8 13
Source: Audit Commission (2002-5)
Given this methodology, some LAs had to be rated as failing, at least at the first
measurement. Although the Audit Commission?s inspection, supervision, auditing,
and measurement are part of the NPM reform, or, in other words, are part of
continuous efforts to improve performance of LAs in England since the early
1980?s, these 34 LAs (23% of 150 inspected) provide quite strong evidence that,
despite the efforts, some LAs were still failing in 2005.
However, one should note that the Audit Commission activities,
measurement, and methodology are not free from criticism. Extensive written
criticism concerning methodology and measurements could be found in the
literature (e.g., Bache, 2003; Cornforth and Paton, 2004; Jones, 2004; McLean,
Haubrich, and Gutiérrez-Romero, 2007; Stewart, 2003; Wilson et al., 2006). Jones
(2004) claimed that performance measurability is limited and some of the outcomes
of public services cannot be precisely measured. The difficulty arises when some
services provided by LAs are not reducible to inputs and outputs (Brooks, 2000).
Stewart (2003) and Cornforth and Paton (2004) criticised performance
measurement since it focuses the attention of management on a limited number of
standards, scales, and figures, which are measurable, but not necessarily the most
important. As a result, managers may invest efforts in adapting strategies designed
to improve their ranking rather than improve performance. Moreover, McLean,
63
Haubrich, and Gutiérrez-Romero (2007) showed that the CPA is vulnerable to
categorisation errors since decisions that lead to rating categories might be
arbitrary. In addition, it is vulnerable to gaming in the sense of hitting the target
(i.e., improved rating) but missing the point (i.e. improved performance); it is not
always consistent with other government policies; and, it is partly influenced by
factors that LAs cannot control (e.g., mortality rates, ethnic mix). According to
Bache (2003):
"The approach to identifying failing organizations in England is based more
on judgment than formulae. Organizational performance in functions such
as education and social services is evaluated by national inspectorates who
visit local agencies. Although these inspectorates take results on
performance indicators into account, they have substantial discretion in
arriving at a final judgment."
Moreover, according to Wilson (2006), judgments of the inspection teams are
subjective. They are crammed with sweeping observations, personal impressions,
and biased conclusions. In some cases, elected members are disengaged from the
Best Value exercise and preparation of performance plans. These plans may be
prepared by officials for the benefit of external authorities rather than the product of
political debate about values, priorities, and resource allocation.
In spite of the criticism, according to Wilson (2006) there is no perfect
measurement tool, scale or indicators, which are free from bias. Any measurement
is based on compromises, every scale has its limitations, and there are no unbiased
scales. Moreover, the Audit Commission is well aware of such limitations, and thus
encourages scale re-evaluation. The CPA's methodology is re-evaluated annually
while taking into account public debate, in which local leaders have the opportunity
to express their views and influence the scale, creating in this way a dynamic
measurement tool. Hence, for the purpose of this study, the Audit Commission
methodology and measurement tool will be perceived as reliable, though not as
perfect.
As in this study, criticism has not prevented English governments from
using Best Value products. Furthermore, the collection of CPA scores was the
beginning of a process not the end (Stoker, 2003). English efforts to improve LAs'
performance and the English case as a whole provide an example of massive
government intervention. This intervention reflects the aspiration to follow values
64
and standards that symbolise the pure model and spirit of NPM. As far as we know,
the Audit Commission is the most comprehensive governmental attempt to measure
performance that includes inputs, outputs, and outcomes. The performance
measurement was used, inter alia, to map the quality of performance of all LAs,
and it revealed that about one quarter of LAs are failing.
While the Audit Commission intervention was aimed at dealing with the
general improvement of all LAs, this study is focused only on the recovery
processes of failing LAs. Although in the extensive audit made by the Audit
Commission it was shown that 34 LAs were officially recognised and labelled as
failing, it is still unclear what is the nature and what are the characteristics of a
failing public organisation and failing LAs. Additionally, although after three years
some of these 34 LAs were ranked as fair/good performers, organisational cycles of
failure and recovery have not yet been clarified. Thus, the next section further
narrows down the scope of the research and discusses these areas. First, it discusses
the nature of organisational failure, in particular public organisational failure and
failing LAs. Second, it reviews a stage model of organisational cycles of failure and
recovery.
2.3. Organisational Cycles of Failure and Recovery in Local Authorities
2.3.1. Failure in Local Authorities
2.3.1.1. Definitions and Perceptions of Failure
While the discussion above deals with the general efforts made by the
English government to improve the performance of all LAs, the core of this study is
concerned with a narrower scope. As previously mentioned, this study is concerned
with failing LAs within public organisations. Chapter 2.4. seeks to discover the
nature and characteristics of organisational failure in general, and failure within
LAs in particular. Yet, organisational failure is only one phase in a wider view of
the organisation?s life cycle. To understand the broad picture, the second part of
this section follows and assesses a model of organisational failure and recovery.
Identifying at this stage the nature of failing LAs is crucial since it will be
the basis for exploring the strategies designed to bring about a recovery in those
65
organisations. The literature discussing organisational failure is rich (Paton, 1996;
Paton and Cornforth, 1991) and not necessarily dedicated to one of the sectors.
Hence, although there are some unique characteristics of public organisations, it
would be wise to use this source as a starting point for discovering the nature of
failing LAs. As noted earlier, adoption of a strategy should be made while carefully
adapting and adjusting ideas, concepts, and tools.
As a rule, when exploring organisational failure we should assume that each
failure has causes and symptoms that preceded the crisis and could be recognised
by at least some stakeholders. However, for several reasons, analysing
organisational failure is a complex task. First, it is difficult to spot the existence of a
failure, or in other words, when it started and when it ended. Schendel, Patton, and
Riggs (1976) claimed that there is a problem in separating a natural, but temporary
decline, which is common in any organisation, from one more permanent and
demanding in its impact. In the latter case, the period of decline should be long
enough to demonstrate that there is indeed some basic problem and not a simple
minor mistake with short-run impact. Hence, failure lasts for long periods and can
be seen as gradual declines in performance (Hofer, 1980; Hofer and Schendel,
1978; Schendel and Patton, 1976; Schendel, Patton, and Riggs, 1976). The authors
found an average length of decline in private businesses of five years, with a range
of minimum four years, up to ten years. Yet, spotting the exact point at which a
public organisation begins failing is rare due to performance measurement
problems.
Second, there are difficulties in recognising the causes of a failure. Scholars
agree that organisational failure is a consequence of multiple and interrelated
factors (Balgobin and Pandit, 2001; Schendel, Patton, and Riggs, 1976). Therefore,
pointing out a single cause would not be a reliable reflection of the reality. Third,
various ways of describing the relationships between income and outcome create
difficulties in spotting the factors that assist an organisation to stop failing. Thus,
ambiguity exists regarding the evaluation of a failure, its severity, and its
consequences, especially when asking more than one stakeholder. This ambiguity
often leads to conflicts around the recognition of problems, agreement about their
seriousness, declaration of their existence, and the need to tackle them (Mordaunt
and Cornforth, 2004).
66
These difficulties may be especially severe in the public context. A large
public organisation may deteriorate gradually over several years as the consequence
of combined causes. Since performance measurement is complex, it may be
difficult to point out the specific timing, reasons, and outcomes of failure.
Numerous stakeholders, who may not share the same interests, may probably
disagree on the ideal solutions for recovery. Additionally, according to Walshe et
al. (2004) due to the stakeholders? subjectivity, public organisations failure may be
a political act as much as a managerial one. Put things differently, the perception of
public organisational failure may be different and may be influenced by political
philosophies (e.g., Liberalism versus Socialism), political values (e.g.,
Individualism versus Communitarism), and political practices (e.g., CCT versus
Best Value). Hence, some norms of management and performance may be
acceptable for one political party and unacceptable for another. The same activities
will be evaluated differently by individuals holding different political view. While
the socialist view would prefer a more interventionist policy, neoliberals would
favour a more constrained one. This different view may influence the way success
and failure are perceived. For example, failure of LAs for CCT supporters would be
the inability to efficiently provide services either within the national established
budget or by private providers. However, failure for New Labour supporters would
be the inability to provide efficient services without wide participation of citizens.
As we can see, the decision to label an organisation as failing and to
enforce specific solutions may be driven by non-objective considerations. From a
purely managerial point of view, the above requires a rational analysis of the
organisation?s performance, needs, and keys for recovery.
Due to these difficulties, there is neither a single accepted term nor a
definition for organisational failure. Different terms for organisational failure such
as crisis, decline, fiasco, mortality, or death are used. According to Hofer (1980),
organisational failure is a major decline in performance or organisational
profitability. Pandit (2000) has defined organisational failure as ‘an existence
threatening decline in performance’. Witteloostuijn (1998) defined organisational
decline as ‘the process of decreasing performance over a prolonged period and
performance is measured in terms of profitability’. Meyer and Zucker (1990)
argued that a condition characterised by sustained low performance could be called
67
failure. Finally, Sloma (1985) defined organisational crisis as ‘a business firm that
faces financial disaster’. Despite the differences between the definitions, scholars
agree that failure involves deterioration of performance. However, since these
definitions originated in the business world, deterioration of performance is
reflected mainly in loss of profitability that eventually threatens the survival of the
organisation. While public organisations might be threatened by the reduction of
authorities and powers, failure is usually not considered as a survival threat since
they are not under a threat of closure (Meier and Bohte, 2003). Additionally, a
significant portion of LA senior management is generally not under threat of
dismissal since their nomination involves democratic procedures and their
legitimate power comes directly from the citizens. Likewise, although in public
organisations various financial aspects such as balanced annual budgets are at the
core of their daily activity, profit making is not an aim. Profitability, as measured
according to simple financial ratios (see for example, Furman and McGahan, 2002)
like return on investments, could not be applied as a satisfactory standard for the
failure of public agencies. A single financial criterion assumes there is a universal
and objective criteria of organisational performance. Yet, definitions of decline and
improvement, whether in the public or the private sector, should mirror the
interpretation of external stakeholders (Arogyaswamy, Barker, and Yasai-Ardekani,
1995). Thus, measuring the quality of performance is more appropriate, yet,
difficult (McKiernan, 2003). Given this, deterioration of performance might be the
least bad indicator for failure in the public sector. In these cases, it would reflect
other additional factors besides profitability, such as decreased productivity or
dissatisfaction of consumers. However, since failure is a much more complex
situation deterioration of performance alone does not reflect its entire concept.
Thus, a further adaptation of the definition is required.
According to Mordaunt and Cornforth (2004) ‘failure [is] defined and
arising when at least some of the stakeholders in the organisation believe that the
problems or crises it faces seriously threaten its legitimacy, resource base or even
its survival.’ McKiernan (2003) defined corporate decline as ‘an unintentional
contraction of the strategic discretion of the firm’s executive.’ Pearson and Clair
(1998) defined organisational crisis as ‘a low-probability, high-impact situation
that is perceived by critical stakeholders to threaten the viability of the
68
organisation.’ From this definition, it can be learned that organisational failure does
not only involve performance deterioration but also resources deterioration. These
include, inter alia, lack of personnel enthusiasm and skills, lower value of assets,
smaller management size, or decreased revenues. Furthermore, according to these
definitions, loss of profitability is not the only indicator of failure, and stakeholders?
views are also taken into account. Considering stakeholders? views is more
appropriate for complex and diverse public and political environments. This is
especially important since public organisation stakeholders are not always allied in
their interest; what seems to one group as reasonable performance might seems to
other group as a complete breakdown.
To sum up, despite the lack of a sole precise definition of failure, it can be
concluded that failing organisations generally suffer from performance
deterioration, resources deterioration, or both. These characteristics can coexist.
They may result from similar or different causes and may lead to similar or
different symptoms. In contrast to private organisations, failure in public
organisation does not necessarily involve financial deterioration, though financial
problems are often part of it. In these cases, deterioration in services delivery would
be one of the main characteristics of organisational failure.
2.3.1.2. Causes of Failure in Local Authorities
Not every type of deterioration should be regarded as organisational failure.
According to the pioneering work done by Schendel, Patton, and Riggs, (1976),
Schendel and Patton (1976), Hofer and Schendel (1978), and Hofer (1980) one of
the main characteristics of failure is that it last for long periods and can be seen as
gradual declines in performance. According to the authors, there are two core
causes for a declining process. These causes could be either operational (not
efficient or not effective) or strategic (weak strategic position relative to
competitors). While inefficiency and ineffectiveness in execution of policy may
perhaps be a cause for failure in public organisations, strategic position is less
relevant. Since public organisations are often the only players in the field,
competition is usually not a threat. Moreover, public organisation may suffer from
the opposite problem when, as single providers, the increasing demands for public
69
goods make them fail in satisfying consumer needs (Krause and Douglas, 2006).
Later works that further explain the causes for organisational failure were written
by various scholars (e.g., Gopal, 1991; Thain and Goldthorpe, 1989; Grinyer,
Mayers, and McKieran, 1990; Shamsud, 2002; Slatter, 1984). These works
distinguish between two theoretical perspectives that explain the causes of
organisational failure, though there is no clear-cut distinction between them:
? Out-source extinction- emphasises external factors, frequently involves
financial aspects, and particularly resource dependence, e.g., changes in
customers' expectations, increased demand of consumers, high cost of goods,
decline in resources, unexpected events or catastrophes in the organisational
environment.
? In-source extinction- emphasises internal factors and reduction of resources
within the organisation e.g., poor leadership, deficient organisational learning
process, poor decision-making, mismanagement, dismissal of an expert, lack of
leadership, and internal conflicts, all of which might lead to an organisational
crisis. Additionally, financial aspects, which are in the hands of the
management, could be perceived as internal causes as well. For instance,
declining performance might be caused by inadequate financial control or
financial policy, for example, overlaid conservative financial policy (Grinyer,
Mayers, and McKieran, 1988; Slatter, 1984).
Failure in public organisations follows a similar distinction and has external and
internal reasons for decline. However, external causes are likely to be as much
political as economic (e.g., changes of ideologies, goals, priorities, or policies,
which the organisation was slow to respond to). Internal causes may tend to be
bureaucratic (Boyne, 2006) (e.g., red tape, and unskilled decision makers).
In a recent study Mellahi and Wilkinson (2004) comprehensively
summarised theories concerning the causes of organisational failure. The authors
reviewed the business literature and found two major schools of thoughts: first, the
classical industrial organisation and organisation ecology school and second, the
organisational studies and organisational psychology school.
The classical industrial organisation and organisation ecology school
70
assumes a deterministic role of the environment, which has a greater influence and
more explanatory power than organisational level factors such as managers.
Accordingly, it argues that managers are limited by exogenous environmental
constraints leaving them with little real strategic choice. Since failure is caused by
external factors over which management has little or no control, the role of
managers could be ignored. Over the last 20 years, the expectations from local
leaders have been increased and widened. Yet, leaders in LAs face a limited set of
choices. No leader, even an elected mayor operating in favourable circumstances,
can hope to transform an ongoing council agenda at a stroke. The capability lies in
the political and organisational culture where the leadership priorities can be
introduced without persistent resistance. Some would say it is the capability of
identifying the art of the possible (Leach, 2006).
Although public managers are indeed constrained by governmental and
other external stakeholders, the main weakness of industrial organisation and
organisation ecology theory is that, by putting all the emphasis on external factors,
they underestimate the influence of management on organisational performance.
Too little attention is being paid to the question as to why similar organisations
facing the same constraints fail while others succeed (Mellahi and Wilkinson,
2004). In this context, it can be argued that managers do enjoy, at least to some
extent, a degree of strategic choice and control over their organisation. Thus,
management functioning during a crisis does influence the chances of an
organisation to overcome it.
According to the classical industrial organisation and organisation ecology
school, organisational failure is associated with four inter-correlated middle range
theories concerning the Organisational Population (i.e., a group of organisations
sharing a common form or strategy like LAs). This school of thought argues that
failure could be caused by either of the following environmental causes (Mellahi
and Wilkinson, 2004).
? Waves of external pressures and constraints that affect the entire Organisational
Population (Hannan and Freeman, 1977).
? A natural and objective organisational life cycle inherent within the efficient
operation of the entire population (Meyer and Zucker, 1990).
71
? Increased competition among dense population (Dobrev, Kim, and Hannan,
2001).
? Being a newer (Carroll, 1983) and smaller (Freeman, Carroll, and Hannan,
1983) organisation in comparison to its population, decreases the chances of
failure.
While some of these causes may enlighten public organisational failure,
others may be found to be inappropriate to public sector characteristics. The first
two possible explanations: "life cycle inherent in a population?s efficiency" and
"waves of pressures activated within the entire sector" may supply a possible
explanation for failure in LAs. The NPM reforms, which led to massive cuts in
governmental resources (Martin, 2002) and affected all LAs, might be seen as
exogenous environmental constraints that could have resulted in LAs failure.
Moreover, according to Christensen and Laegreid (1999), NPM is a reflection of
international economic crises in the public sector. Thus, it could be perceived as a
reflection of objective decline in the life cycle of the population. In addition, the
extensive, pervasive, and deep crisis suffered by the entire public sector (Corrigan
and Joyce, 1997) could be seen as a possible reaction to the waves of pressures and
inconsistent demands activated as part of NPM agenda (Skelcher, 1992). However,
these causes may make clearer the performance tendency of an entire population
(e.g., LAs), but not a single organisational failure within this group.
Regarding the third explanation, competition within a dense population,
although it exists in the public sector, it finds a different expression than that found
in the private sector. The activities of a public organisation are usually funded by
limited budgets, therefore, since resources are limited, whenever it comes to
budgeting, public areas compete with each other for funding. Yet, this competition
is indirect and it would be unlikely that competition between two LAs caused the
failure of one of them. The last suggested explanation for organisational failure,
being an older and larger organisation, seems to be irrelevant since most LAs are
large organisations that were established around the same period, back in the 1850s.
Since these characteristics do no not differentiate LAs from each other, they cannot
explain organisational failure in a single agency.
In contrast to these explanations, the second major school of thought, that of
72
organisational studies and psychology, takes a more voluntaristic perspective and
argues that managers are the principal decision makers in the organisation.
Consequently, their actions and perceptions are the fundamental cause of
organisational failure (Mellahi and Wilkinson, 2004). According to this view, the
individual making a decision is more relevant than the external context in which the
decision is made. According to this perspective, even though management actions
are influenced by the environment and their perceptions about the environment
have a strong effect on the way they manage or mismanage the organisation, it
rejects the assumption that managers are powerless. Moreover, managers even have
the ability to influence and shape the environment. Thus, the characteristics shared
by managers of failing organisation are personally-based characteristics (e.g.,
exaggerated pride, over self-confidence, arrogance, narcissism) and misperceptions
of managers (e.g., taking impulsive decisions, interpretation of criticisms as threat,
not responding to change, poorly informed routine, taking unnecessary risks). In
other words, internal inadequacies in dealing with external difficulties lead to
organisational failure (Mellahi and Wilkinson, 2004).
Therefore, most scholars agree that the major causes for continuous decline
in performance that usually lead to organisational crisis are poor management and
poor leadership (Gopal, 1991; Grinyer, Mayers, and McKieran, 1990; Schendel,
Patton, and Riggs, 1976; Slatter, 1984). In these circumstances, management often
does not take the right actions or alternatively, even in situations when appropriate
actions are taken, lack of leadership boycotts their implementation. Since it is the
responsibility of management to remain aware of the possibility of decline
(Balgobin and Pandit, 2001), the initial crisis actually exposes weaknesses in
internal governance and management systems (Mordaunt and Cornforth, 2004).
According to Maguire and Redman (2007), failure is often associated with lack of
attention to "softer" management practices such as culture change and organisation
development. Given that organisational decline or failure can be attributed to
malfunctions of management (Schendel, Patton, and Riggs, 1976), the probabilities
for recovery might not be very high. In other words, if failure is caused by poor
management, when management is called upon to restore the efficiency of the
organisation (i.e., to spot external changes, formulate a recovery plan, and execute
it effectively), it might not be able to do so effectively.
73
In LAs, since some members of the management are elected democratically
and directly, it is particularly accountable for committing errors that put at risk the
organisational effectiveness (e.g., approving unbalanced annual budget) and errors
of omission that prevent recovery. However, although management plays a key role
in organisational failure, one should be careful not to overestimate their role as an
elected leadership tempered by collective responsibility and political party. Though
recent changes pay more attention to strong individual leaders, such as elected
mayor and cabinets, local leadership in this context is influenced by a mixture of
traits of individual leaders and group relationship. Political parties still play a key
role in the local process, though less dominant than they did during the 1960s and
1970s (Leach, 2006). Thus, failure is probably a mixture of individuals and parities
responsibility. Moreover, since public agencies are large and complex, and
management in them may be constrained by national policies and regulations
(Skelcher, 1992) and thus be less autonomous (Rainey, Backoff, and Levine, 1976),
their potential to be regarded as a single cause of organisational failure is limited.
According to the organisational studies and psychology school of thought,
organisational failure is associated with five inter-correlated middle range theories
(Mellahi and Wilkinson, 2004).
? The Groupthink theory (Janis, 1972) maintains that within a team, group
mentality and pressures for unanimity lead to sub-optimal decisions based on
collective rationalisation, illusion of invulnerability, poor search for alternatives,
ignorance of information, and overestimation of the group's chances of success.
This state of mind might end up in organisational failure.
? The Upper Echelon theory (Hambrick and Mason, 1984) argues that
homogenous and long-tenured management is less effective, especially in
uncertain and confusing situations like failure.
? The Threat Rigidity Effect Theory (Staw, Sandelands, and Dutton, 1981) argues
that individuals, groups, and organisations tend to behave rigidly in threatening
situations and seek to maintain the existing status quo. Paradoxically, this
rigidity distracts managers' attention from solving the crisis.
? Psychological factors (Brown and Starkey, 2000) often exist beneath the level
74
of conscious awareness. Organisational failure may hide recognitions,
motivations, feelings and dynamics. These can find expression in ego defences
and regressive defensive avoidance strategies such as denial, rationalisation,
idealisation, fantasy, and symbolism.
? The Curse of Success theory (Starbuck, Greve, and Hedberg, 1978) claims that
most successful organisations in the past becomes the one most vulnerable to
failure in the future due to the assumption that success raises over confidence,
arrogance, and preservation of traditions, which retains the „how and why? of
doing things.
A further complexity related to the reasons of failure is the fact that not
every causes of failure can be classifies into the internal-external dichotomy.
Failure in LAs could probably be inherent in both internal and external reasons.
Since English local government acts in centralised system LAs do not act as
autonomous units. According to this view, failure of LAs is an outcome of both
local and central factors and actions. For instance, according to Henney (1984) the
reasons for bad performance of LAs in the case of housing under the Thatcher
regime are rooted externally in the lack of consumer influence and preference, and
internally in the lack of professionalism and weak management.
Similarly, another typical example for internal and external mixed causes of
failure is related to local government workers unions and their changing power. As
part of social and economical shifts over the years, the power of the unions
increased and was transformed from conservative into aggressive and political.
During the second half of the 20
th
century, these unions were involved more than
ever in strikes and influenced councillors (Henney, 1984).
The combination of several inter-correlated theories significantly
contributes to the understanding of public organisational failure. The Groupthink
theory and the Upper Echelon theory might explain some political aspects, which
are relevant to public organisation leadership. In LAs for instance, a situation in
which political leadership involves a one party coalition of long-tenured senior
councillors sharing similar values and agenda may create old-fashioned and
homogenous leadership. This over-similarity may restrict the ability of management
to be innovative in dealing with a crisis. Political agendas may also cause restricted
75
and rigid leadership since it may tie LAs management to unsuitable policies, tools
and perceptions. In addition, political coalitions may force LAs to maintain the
existing status quo barring the possibility of radical changes. Similarly, since an
essential part of LA management is democratically elected and cannot be
dismissed, organisational failure has to be solved by a management that acts in a
defensive way or under denial. This situation involves further difficulties in
recognising the symptoms of failure, ceasing to deny it, and dealing with it
effectively.
The above difficulties lead public organisations, in some cases, to
permanent failure. Meyer and Zucker (1990) explain permanent organisational
failure in public organisations. The theory describes why, although public sector
performance declines over the years, the organisations still survive (Brown, 2001).
According to Meyer and Zucker (1990), this characteristic is the core of permanent
failure, which is described as a combination of low performance and high
persistence. In these cases, rational stakeholders who are dependent on an
organisation, but are not its direct owners (e.g., consumers, employees or
management), will lobby vigorously for its persistence even if it is inefficient.
While tendencies to maintain low performance organisations may exist in all
sectors, these tendencies increase when dependent actors and non-direct owners
have more influence over the organisation, when organisations cannot be
liquidated, and when politics takes over economics. To put it in a different way,
where performance and persistence are decoupled, a group of dependent actors who
derive benefit from the continued persistence of the organisation must exist.
This theory reveals a point worthy of attention. Interestingly, in contrast to
theories presented previously, this theory does not provide an explanation for why a
public organisation fails in the first place. Alternatively, it explains why public
failures turnout to be permanent failures. According to the theory, in the public
field, interest groups prefer and encourage organisations to keep performing even
though they are failing. Therefore, failing public organisations are less promptly
pushed either towards recovery or be closed down than are private failing
organisations. This tendency raises the question whether public failures are more
common and frequent. Evidences from the literature provide mixed results about
private failure rates. Weil (2007) found 90% failure, Kortge and Okonkwo (1989)
76
found 20%-35%, 24%-98% was found by Crawford (1987), 1%-67% by Dickinson
(1981), and 35%-95% by Crawford in 1979. Since parallel evidence in the public
sector is missing, this question remains unsolved.
In sum, the implications of the above discussion on failure in LAs engage
several aspects. Failure of a LA is an unwanted situation in which negative
consequences extremely affect public welfare in general and in particular the
citizens in its geographical area. Though these implications may have a wide range
of effects on the everyday life of citizens, the most recognisable and direct impact
is deterioration in the quality of services. Consistent with the lesson drawn from the
private sector, the causes for LA failure are most likely to be multiple, inter-
correlated, and rooted in both external and internal factors. Externally, as part of
NPM environment, stakeholders pressure LAs to improve their level of
performance and supply better services, while their budget is continuously
retrenched. Internally, poor and politically constrained leadership, together with
outdated, rigid, and often long-tenured and homogenous management fail to spot
the failure and deal with it. However, in contrast to the private sector, public
organisations are generally not under threat of survival, and thus may permanently
fail without being liquidated. This characteristic enhances the importance of a
successful recovery process. In other words, since LAs cannot be totally abolished,
their recovery is essential.
Public organisational failure is a key issue in this study and several themes
lead and shape its perception. The discussion dedicated to central-local relations in
England (see Chapters 2.1 and 2.2.) emphasised that these relations not only
influence the self perception, role definition, and activities of LAs but also they
dictate what would be regarded as success by the central government and what the
central government believes should be the self perception, role, and activities of
LAs. As a consequence, central-local relations lead the conceptualisation of what
will be regarded as LAs' failure. Local failure is often regarded as non-carrying out
the local missions desired by central government, according to its ideological and
political view. However, the central government it is not the sole stakeholder
involved in shaping this concept. There might be a competition between different
perception of LAs' failure (Beeri, 2009b; Ben-Elia, 2006). Within the competing
perceptions, the government's perceptions would probably be the leading one, since
77
central government is the most influential key stakeholder in LAs environment,
compared to private agencies, third sector agencies, citizens, and local media.
Since there are competitive concepts for public organisational failure,
failure is neither uni-dimensional nor once occurrence but has multiple potential
contributing factors interacting in unique ways in a given case. Accepting this
assumption positions turnaround as a process not an event and sets up the argument
for failure and recovery cycle as a stage approach presented in the following section
(additionally, given the complexity of failure, it also sets up the case study
qualitative exploratory approach presented in Chapter 4).
2.3.2. A Six Stage Theory for Cycles of Failure and Recovery
While the previous discussion paid attention to organisational failure, this
chapter will describe the organisational cycle which is expected to culminate in the
recovery and renewal of a failing organisation. Since this study is concerned with
both failure and recovery in LAs, it is essential to draw a theoretical framework for
these phases. In a broad sense, organisational turnaround expresses the path that
failing organisations follow up to the point they recover. Hence, turnaround is
neither a single event nor a direct and quick transition from failure to the recovery.
It is a dynamic process composed of a sequence of actions and occurrences over a
particular period. Accordingly, Shamsud (2002) argues that a study that deals with
a recovery process should be based on a stage theory perspective because such an
approach could explain how and why repeated occurrences play out in stages and
eventually lead to an organisation's survival or failure. In accordance with this
view, this thesis will be based on a stage theory, which could explain the
performance ranking published by the Audit Commission over three years from
2002 to 2005 (see Table 1).
By definition, a stage theory explains the series of events that lead to an
outcome, the narration of a story about how a sequence of incidents unfolds to
cause a dependent variable to respond to independent variables. A stage theory
contains hierarchical critical structures such as incidents, events, and core concepts.
At each stage, numerous incidents are packed together into theoretically meaningful
78
events, which, in turn, are packed into core concepts whose sequential linkage
facilitates the explanation of an outcome (Van de Ven and Poole, 1995). In this
theoretical context, a stage theory simply explains the phases a LA experiences
from failure to recovery.
The literature suggests various models for cycles of decline and recovery.
Most of these models derive from the business area and are suitable for
corporations (e.g., Arogyaswamy, Barker, and Yasai-Ardekani, 1995; Balgobin and
Pandit, 2001; Chowdhurry, 2002; Grinyer, Mayers, and McKieran, 1990; Harker
and Sharma, 2000; Krueger and Willard, 1991; Pearce, and Robbins, 1993;
Richardson, Nwankwo, and Richardson, 1994; Shamsud, 2002; Smith and Graves,
2005; and Tvorik; Boissoneau and Pearson, 1998). For instance, these models make
use of professional terms like bankruptcy, merger & acquisition (M&A), financial
ratios (e.g., employees/sales, cost/sale, inventory/sales ratio), and levels of
profitability. These terms are strongly related to the private business context and
have no parallel meaning in the public context.
Whereas most of the literature on turnaround concerns the economic
recovery of private corporations after financial losses or bankruptcy (Meier and
Bohte, 2003; Paton, 1996; Paton and Cornforth, 1991), McKiernan's model
illustrates a principal frame for failure and recovery stages of an organisational unit
focusing on behavioural aspects and patterns (see Figure 2). Explicitly, McKiernan
(2003) suggests a model based on a stage theory of turnaround that is appropriate
for public organisations. As the author claims (p. 267): "...many of the more generic
issues [of this model] can be applied to public sector organisational woes". Thus,
extensive adaptation is not required. In addition, McKiernan's model is useful for
this study context as it suggests a stage based model that allows us to study the
dynamics of recovery processes over time, which usually lasts for several years
(Boyne, 2004; Hofer, 1980; Hofer and Schendel, 1978; Schendel and Patton, 1976;
Schendel, Patton, and Riggs, 1976). As outlined in this thesis, public organizational
failure is a complex and multifaceted process. Unlike other models mentioned
earlier, this model addresses and distils causes, symptoms, triggers, and diagnosis
of failure. Thus, it has some potential as a tool to understand and represent failure
in a public sector context.
79
Additionally, since McKiernan's model is focused on managerial
behavioural aspects leading to organisational patterns it has a potential of capturing
elected members and officials' activities and decisions that are important to our
context, and not only macro level information (e.g., balanced budget,
investments/assets ratio). Lastly, the McKiernan's concepts, as illustrated in figure
2, are generic rather than specific to private sector. Nonetheless, alongside these
advantages, the model is isolated from the particular political environment of
English LA in the 21
st
century.
Thus, in order to base this study on McKiernan's model and better reflect
LAs turnaround, some additions, adjustments, and adaptations were applied where
appropriate. The model was adapted and related to the political climate, meaning,
ideologies, political movements, managerial reforms, and political values based on
the literature review and the examination of two experienced researchers from the
public sector.
Figure 2: Stages of Organisational Turnaround – Organisational Perspective
Source: McKiernan, 2003
Failure
Causes of Failure (+ Symptoms)
Triggers for Change
Diagnosis & Recovery Strategy Formulation
Retrenchment & Stabilisation
Recovery
Renewal
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The framework for the model McKiernan suggested includes six stages that
represent the process:
1. Causes and symptoms
2. Triggers for change
3. Diagnosis and recovery strategy plan formulation
4. Retrenchment and stabilisation
5. Recovery
6. Renewal
As Figure 2 portrays, progression along a linear path implies that one stage leads to
another. Yet, only stage 1 is guaranteed. While the bold arrows illustrate an ideal
throughway, the striped arrows reflect the ongoing threat since each one of the
stages could go wrong and lead to an even deeper failure (Jas and Skelcher, 2005).
Stages 1 and 2 include the causes and symptoms of the failure, and the
triggers for change. The distinction between the three terms is vague, given that the
same phenomenon could be classified as each one of them, depending on the
context. For instance, a dramatic bad decision like discontinuing cooperation with
local neighbourhood representatives might lead to failure, but could be considered
as a symptom of a lack of leadership, or be the trigger for organisational change.
Stage 3 reflects organisational preparation toward the main recovery process.
Stages 4 and 5 then reflect the core turnaround process, which could bring the
organisation back to the position prior to the failure. Stage 6 reflects continuous
efforts including organisational learning that drive the organisation to an even
better position than before the failure. The model suggests a linear process, though
in practice, drama, emotions, difficulties, and simultaneous activities will be present
(McKiernan, 2003). For instance, actions directed to stabilise the LA may take
place before diagnosis was completed. The following discussion details and deals
with each one of the stages and their implication for LAs.
The first stage, causes of organisational failure, was discussed in detail in
the previous chapter. This chapter illustrated both wide theoretical explanations of
causes of failure and specific causes related to LAs and LAs in the English context.
81
In a nutshell, failure of a LA is an unwanted situation in which negative
consequences extremely affect public welfare.
The implications on the everyday life of citizens mostly include
deterioration in the quality of services. The multiple, inter-correlated causes for LA
failure are rooted in external factors like continuously retrenched resources,
changed perception of failure of governmental agencies, and internal factors like
poor leadership, conflicted ideologies, and absence of local participation. Within
the English case, the recent reforms under the Best Value regime have widely
shaped the expectations and thus, the definition and perceptions of failure. The
national PIs and their measurement have precisely pointed, named, and shamed
LAs that have failed to present minimum standards of performance. Yet, scholars
have raised question regarding the suitability of these measures to accurately point
out failing LAs.
Since this model distinguishes between the causes and their symptoms, a
few comments will be added. Generally, the symptoms of a failure are different
from the causes that led to it; because they appear later on, they reflect the outcome
of the problems but not the problems themselves; nor do they directly point out the
necessary reactions (Slatter, 1984). The key factor in the analysis of failure
symptoms is recognition, which means the ability of both identifying and admitting
the existence of the failure. Recognising the symptoms is important since
ineffective recovery occurs when managers fail to successfully diagnose the
problem or respond inappropriately to it.
Yet, in reality, it is not simple to immediately recognise the symptoms of
failure, partly because low standards of services become the norm (Meyer and
Zucker, 1989), and partly because the public tends to tolerate failure (Walshe et al.,
2004). According to Schendel and Patton (1976), the symptoms of organisational
failure are the events or circumstances of decline, which are recognised by
stakeholders. This statement raises a couple of questions regarding their suitability
for LAs context. First, which stakeholders are accounted for this mission? This
question is important, since stakeholders are not usually unified in their interests
and priorities.
Therefore, only multiple severe symptoms of deterioration involve wide
82
recognition, which stimulates turnaround (Walshe et al., 2004). Second, should this
recognition be formal? If so, how should the LA measure decline and success? In
other words, complexities in the measurement of performance in the public sector
would probably make it difficult to point out successes and failures, and therefore,
their symptoms. Indeed, LAs are expected to have an internal control system that
enables them to recognise possible failure symptoms (Audit Commission Website)
and guide the management during later phases of the recovery process (Walshe et
al., 2004). Nevertheless, within the English case, the government does not rely only
on an internal control system and imposes a centralised system, which intervenes
and pressures LAs to admit that failure exists. For instance, the Comprehensive
Performance Assessment (CPA) tool introduced by the Audit commission was
aimed at achieving an accurate performance measure. Yet it was criticised by
scholars and public servants due to its inability to supply widely accepted
comparative picture of LA performance and for biasing managers' daily missions
(Bache, 2003; Cornforth and Paton, 2004; Stewart, 2003).
At the second stage of turnaround, the organisation may experience triggers
for change, which were described as stimulating activities necessary for the
implementation of turnaround (McKiernan, 2003). Nevertheless, not all failing
organisations experience such activities. While all failures have causes and
symptoms, triggers for change are events that may not necessarily be recognised as
such or might be ignored. Since this model simplifies the turnaround process into a
linear trend, if one stage does not occur, then the next stages will not take place as
well. If the LA?s political leadership ignores the symptoms of failure and maintains
business as usual, it might not interpret events as triggers for change. In this
situation, recovery would probably not take place, leading the LA to permanent
failure. Therefore, interpreting events as triggers for change is crucial in order to
launch a turnaround process. These triggers should be significant enough to activate
a diagnosis process, to formulate a recovery plan, and to call for action.
Pointing out the time in which triggers are severe enough to lead to change
is difficult. Within LAs, the severity of triggers that are required to initially „shake
up? the organisation?s routine depends on management skills, awareness, and
motivation. Generally, a change will be triggered in two stages. First, a gap
between desired and actual performance grows either because of a fall in
83
performance, a rise in aspiration, or both. This growing gap gradually creates a
climate for change. Second, events that are perceived as triggers for change take
place at the widest gap point between aspirations and actual performance
(McKiernan, 2003). For instance, during a period of budget retrenchment that
requires cooperation and sacrifice from the public, a report that reveals
management corruption is published. This publication, at this specific time, may
trigger stakeholders to demand a radical change. While in this example the trigger
is internal, they can be external as well, e.g., regulations, the launch of a national
plan, or the Audit Commission?s massive intervention that requires specific
changes.
Walshe et al. (2004) distinguish between three main types of triggers: First,
events that appear in a period of neglect and performance decline and cannot be
ignored. This kind of trigger might be very common in an LA environment since
public organisations can survive for a long period even though they continuously
fail. In this case, an external key player such as the media, an interest group, or the
central government might break the routine and alert the management that failure
cannot be tolerated any longer. The second kind of trigger was identified as a sharp
change in the organisation's leadership that leads to formal diagnosis and
declaration. In the LAs context, this does not occur very often yet it is a reasonable
scenario after a local election or personnel turnover. Finally, the last type of trigger
is a single egregious event that points to a significant catastrophe. Such events are
rare as well, although natural disasters, corruption, and scandals do occur. While
such a single event can shake the management and trigger a recovery process, it can
also shock the management, cause paralysis, delay the recovery process, and entail
the occurrence of additional triggers. Obviously, a LA could experience more than
one kind of trigger.
One of the interesting questions about triggers is whether they should arise
from an internal voluntary organisational source or forced external intervention.
The balance between these two attitudes may affect the management status and
motivation to lead the recovery process. In the English case, it seems that the
centralist attitude externally triggers recovery processes and organisational changes
as part of the Best Value regime and CPA. Turner et al. (2004) recommended,
according to ten case studies, that central governments should be engaged in the
84
recovery process without intervention, with minimum interruption, and with no
formal power. That means governmental bodies should work with a council,
motivate, encourage, and support turnaround while leaving one hundred percent of
the responsibility for the recovery process to the local management. The authors
explained that interfering and leaving out self-managed process would prevent
recovery, cause deeper decline in performance, weaken the leadership, and create
lack of motivation. In reality, an organisation may experience a set of triggers
rooted both in internal and external sources; yet, all triggers would lead to the same
outcome, formulation of a recovery plan, which is the third stage of the model.
Diagnosis and recovery strategy plan formulation is the first active stage of
turnaround. This stage requires recognition and reaction. Taking this step
distinguishes between an organisation that denies failure, which is at risk of not
recovering (Lorsch, 1990), and an organisation that handles its failure. As the first
proactive measure taken, this stage involves some dilemmas and key questions that
will affect the recovery process and the LA as a whole. This stage can be regarded
as the first time in which the organisation openly admits and even declares the
existence of a failure. Such a declaration has extensive political, public, and
managerial implications (e.g., risk of stakeholders? call to resign, damage to the
LA's image, and employees' resistances). Thus, although predicting a failure may
be possible, recognising it is commonly delayed, ignored, mitigated, and even
covered up (Walshe et al., 2004). On the other hand, honest recognition could be
perceived as an act of good will that leads to relief and courageous diagnosis. In LA
environment, these could give a second chance to the leadership and the party.
While recognising a failure is a political and declarative act, diagnosing and
formulating a recovery plan requires more analytical tools. According to
McKiernan (2003), diagnosis tracks and expresses the links between symptoms and
causes of failure. The diagnosed problems point up suggested strategies to tackle
failure, which are translated into operative actions and gathered into a coherent
recovery plan. Planning has been found to be essential since there is a significant
positive correlation between planning and performance (Pearce, Robbins, and
Robinson, 1987). However, it is hard to define what a good recovery plan is since it
has to be synchronised with the specific needs of consumers and the circumstances
of failure. Nevertheless, according to Sloma (1985) a good plan, is cohesive,
85
relevant, restorative, understandable, measurable, monitored, communicable,
convincing, communicated, and approved. Quintero (1989) emphasised that
successful recovery requires a detailed plan that reflects the collective judgments
and knowledge of managers and professional advisers regarding optimal strategies
and realistic budgeting (Mayer and Quintero, 1992). Usually, the latter will include
an emphasis on retrenchment until stability is achieved, followed by a shift of
emphasis towards growth (Pandit, 1998). In the case of LAs, where managerial
processes involve democracy, the participation and support of political leaders,
parties (and opposition parties), interest groups, and citizens is crucial for the
formal approval and implementation of a recovery plan. In a practical manner, the
third stage must produce a clear picture of the LA status. It should supply clear
answers to the questions as to why and how the LA has got to this point, where the
LA should be in the future, and how it is going to get there
At the fourth stage, the organisation retrenches its activities in order to
achieve stabilisation, improve efficiency, and ensure future reinvestment in core
missions. From the Best Value perspective, retrenchment is a crucial stage since it
encourages provision of services in the most efficient, effective, and economy way
(Bevir, 2001). From a managerial perspective, stabilisation is vital to ensure
survival (i.e., keep providing reasonable services and respecting the rights of
employees) (Robbins and Pearce, 1992) and to generate balanced resources and
expenses. It means temporarily taking one step back so that two steps forwards can
be taken in the future. In other words, if stability is achieved, the focus could move
forward to a longer-term prospect (Balgobin and Pandit, 2001). This organisational
stage is vital, and evidence shows that an organisation cannot skip this stage and
straightforwardly move towards growth. Robbins and Pearce (1992) found that it is
rarely possible to achieve recovery without an initial period of planned
retrenchment, and that the degree of retrenchment is positively related to the
success of a recovery. For instance, a proper recovery process would include
planned decreased salaries expenses of particular personnel designed to balance the
annual budget.
Though retrenchment directed towards stabilisation is vital, it has its price
and its victims such as employees and external stakeholders. The responses of
victims to the crisis might be radical since retrenchment may be perceived as a „step
86
back? and as an additional decline. These reactions may take unexpected directions;
they may lead to the outcome of failure or the success of recovery (Pearson and
Clair, 1998). Thus, managers prefer to skip this stage and avoid dealing with the
tension between the aspirations to stabilise the organisation and stakeholders'
reactions. Public retrenchment has to be carefully conducted due to equality
considerations. These considerations restrict public managers who cannot just
withdraw or close down inefficient chapters. For instance, after years of
deterioration and inability to provide reasonable services, a LA recovery plan may
include the dismissal of staff. A possible reaction could involve an employee strike,
which may demand a political price in the form of demands for collective
resignation and earlier local elections. These reactions may seriously delay the
implementation of a recovery plan and reaching the fifth stage: recovery and return
to growth. Yet, retrenchment by itself, even if completed successfully, does not
achieve recovery. Thus, the following chapter will describe the fifth stage in the
cycle.
Recovery and return to growth is the desired result of the efforts made by an
organisation up to this stage. While retrenchment involved restricted and minimised
resources, at the fifth stage resources are redistributed to key services in order to
ensure continuous efficacy and effectiveness. As a new vision and policy come into
effect, strategies for development are aimed to secure long-standing success in
providing high quality services (McKiernan, 2003). This stage is at the heart of the
turnaround process, which leads a LA from being (and rated as) a poor performer to
being a reasonable to good performer. Recovery and return to growth of a LA could
be recognised by stakeholders as a significant improvement of performance that
they experience. For example, the provision of better services, renewal of existing
services, serving new consumers, or fulfilling obligations to employees. Since a LA
is a wide-ranging and complex organisation, the achievement of a comprehensive
recovery and a return to growth may be a long and ongoing process that requires
patience. Schendel, Patton, and Riggs (1976) maintain that the period of upturn
should be long enough to give confidence that it is real. The authors found an
average length of private businesses recovery phase of 7.7 years, with a range of 4
to 16 years while Boyne (2004) mentioned public recovery may last for several
years. Since public organisations are large, it can be estimated that public
87
organisation recovery will be gradual and last for several years.
Though recovery and return to growth is the desired outcome of a
turnaround process, it is not guaranteed. It might occur after years, or not at all.
According to Witteloostuijn (1998), a failure has four possible outcomes:
successful recovery, persistent failure, immediate exit from the market and exit
after a period of losses. The last two are irrelevant to LAs, due to the tendency of
public organisations to survive even after a failure (Meyer and Zucker, 1990). As
mentioned earlier, each stage involves an opportunity and a risk. Not completing a
stage successfully means more than stagnation; it could damage the organisation
and further deteriorate it. In this case, stakeholders might conclude that the
organisation suffers a triple failure: failure to supply reasonable services, failure to
recover, and inability to recover in the future. The risk in these situations is that
triggering a second recovery process, which requires inspiring the leadership and
stimulating other partners for the second time, could be more difficult, since fear of
an additional failure is more real.
According to McKiernan (2003), a sixth stage, renewal, might take place
after recovery. Technically, while accomplishing recovery, the organisation is
expected to return to the level of performance it had enjoyed before the decline.
Returning to the previous level of performance is necessary but risky; it does not
promise a permanent recovery. In contrast to recovery, renewal demonstrates that
the recovery is permanent. Renewal involves better performance than had been
enjoyed before the decline, and greater prosperity. According to Jas and Skelcher
(2005), an organisation should take into account the possibility of experiencing a
temporary, fragile, short-term recovery in only partial domains of performance.
Avoiding this cyclical movement between success and failure depends on further
actions. According to McKiernan (2003), it is these key actions inherent throughout
continuous organisational learning that makes renewal possible. A recovery process
is a good time for developing learning skills. In this context, organisational learning
processes are very important since they ensure that lessons from the failure will be
drawn. If there is no organisational learning, there is a risk of returning to the
primary causes of failure that may lead to decline again.
Assuming that recovery was accomplished, achieving renewal in a LA is not
88
less difficult or complicated. This stage requires a different leadership state of
mind. Whereas analysing, planning, stabilising, and recovering the LA could be
motivated by the will to avoid on-going failure, this incentive might be irrelevant
when it comes to renewal. Achieved recovery could lead to relief and relaxation
that result in reduced activity. Thus, since failure might be perceived as an unlikely
situation, the stimulus for further efforts decreases. However, in order to achieve
renewal, organisations must be driven by a wish for excellence. This change of
stimulus might be problematic due to lack of motivation. Only after long and
continuous efforts the employees might expect to enjoy the fruits of their labour
and slow down the demands for activity.
While every failure is unique and requires an adjusted recovery process, the
theory and basic concept of organisational failure, failing LAs, and organisational
cycles of turnaround were identified and discussed. In practice, the English
government made vigorous attempts to recover failing LAs. However, politicians,
decision makers, and managers who took part in these attempts did not always
succeed in remedying LA troubles, as discussed in the following chapter.
1
Hence,
the next chapter moves forward and narrows down the discussion as it scrutinises
the way failing LAs were treated, the mixed results of these interventions, and their
consequences.
2.3.3. Cycles of Failure and Recovery in the English Context
In the previous chapters, we have explored failing LAs, their nature, and
characteristics. However, in order to evaluate the efforts made by English policy
makers we should first decide what level of improvement should be regarded as
organisational recovery. Recognising a successful recovery process or indicating
the point from which an organisation has recovered is not an easy task. Similarly
pointing out failing organisations involves various outcomes, complexities of
performance measurement, and contrast assessment of interest groups. Though
1
Please note that while Chapter 2.3. traced the general efforts recently made by the English
government to improve performance within all LAs, the next chapter is focused on attempts made to
recover failing LAs in particular.
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comprehensively defining recovery is beyond of the scope of this work, a basic
understanding of which organisations would be regarded as recovered is essential.
In accordance with definitions of organisational failure in the private sector, Barker
and Duhaime (1997) defined successful recovery using similar terminology: 'a firm
undergoes a survival threatening performance decline over a period of years but is
able to reverse the performance decline, end the threat to firm survival, and
achieve sustained profitability'. Alternatively, Joyce (2004) defined a more
appropriate definition for a public organisation that experiences a recovery process:
’an organisation moving from being a poor performer to being a good performer’.
This definition is tuned to the LA environment since it emphasises quality of
performance rather than survival threats.
However, for the purpose of this thesis, in order to effectively identify
failing organisations, and in order to adjust this model to English LA environment
and circumstances, we are required to use a more operational definition.
Accordingly, we have transformed the above definitions into practical terms using
the rating of the Audit Commission. For example, moving up only one category
(e.g., from being a weak performer to being a fair performer) is not likely to be
considered as a significant recovery by most of the stakeholders, thus only
improvement of two categories or more were regarded as recovery.
2
According to Stewart (2003), British authorities have widely accepted the
duty to pursue governmental plans and NPM principles, and these processes have
led to significant improvements in performance. According to the Audit
Commission National Report (2005, p. 2), there was a broad significant
improvement in LA performance from 2002 to 2005:
"Over the last three years, council services have improved significantly, and
CPA is acknowledged to be one of the catalysts for this. CPA has also been
a lever for reducing inspection and regulation in better performing councils
and focusing support for others…most councils continue to perform well
and to improve…"
However, these reports seem to be too optimistic and they raise some doubts
regarding their reliability, since the definition and practical terminology of
performance rating previously developed indicate lower levels of performance.
2
Further details on this classification can be found in the methodology chapter.
90
Although improvements have been made, they were usually achieved within
moderate and good performers. As will be demonstrated next, the success among
poor performers was merely moderate. In 2002, after the first Audit Commission
report was released, it was clear that some LAs do fail to deliver reasonable
services (see Chapter 2.3.). The league table published by the Audit Commission
(see Table 1) revealed no homogenous achievements within failing LAs. Till 2005,
some LA ranks have been improved. Yet, some failing LAs were trapped in
continuous failure and did not progress toward a better position.
According to the Audit Commission publications and the CPA reports,
within the LAs rated as poor performers in 2002, 38 percent did not recover and
were still rated as poor/weak performers in 2005 (see Table 1, p. 38). None of the
failing LAs in 2002 are yet to be rated as excellent performers (updated to 2006
reports). Within the LAs rated in 2002 as weak performers, 14 percent have
stagnated and were still rated as weak performers in 2005. None of these LAs is yet
to be rated as excellent performers in 2006. Within all the poor and weak
performers in 2002, after three years of efforts, 12 percent have not made any
progress, and 38 percent have made minor progress, moving up only one category.
In addition, two LAs have deteriorated in their performance from being fair/good
performers to being weak performers. Overall, in 2005, 68 percent of the LAs were
still performing poorly/weakly/fairly. Alongside these cases of stagnation, the data
reveals that some LAs did improve their performance and accordingly, their rating.
For instance, within the 13 poor performers, 6 (46%) LAs improved two categories
to being fair performers and 2 (15%) LAs moved up three categories to being good
performers, showing the most dramatic change in those years. Within the 21 weak
performers, 9 (43%) LAs improved two categories and were rated as good
performers. Overall, in 2002 34 LAs were labelled as poor/weak performers and 8
LAs remained in that position (plus 2 LAs which joined them) (Audit Commission,
2005). From here, we can conclude that the data suggests a partial success in
recovering failing LAs.
However, it is critical not to draw a conclusive analysis since the results are
mixed and contradictory. On one hand, some LAs have achieved a significantly
better rating, which probably indicates, at least to some extent, improved
performance. This improvement may be considered as recovery. On the other hand,
91
some LAs have stagnated and could be perceived as persistently failing. These LAs
point to the gap between the efforts made by the English government and the actual
success. Three years after the first publication of the CPA, the results are far from
being satisfactory and thus, it would be fair to say that decisions makers,
governmental officers, councillors, executives, and consumers are still seeking for
better solutions for failing LAs. The mixed results question the suitability of the
efforts made to solve the problem under the current circumstances.
As previously noted, public sector performance is currently a significant
issue for management practice and policy, especially for organisations delivering
less than acceptable results (Jas and Skelcher, 2005). From the English case, it is
clear that there is an increasing and ongoing interest in measuring and improving
performance. Accordingly, these growing interests directed the government to
introduce robust intervention (Cornforth and Paton, 2004). As part of this
intervention, efforts were made to recognise failing LAs and to supply them with
the necessary support (Walshe et al., 2004). Most of this intervention was carried
out by the Audit Commission, which served as supervisor, inspector, and auditor
for LAs.
Although failing LAs have received special and adapted treatment, these
interventions were introduced only recently and they were vague, since previous
experience, grounded knowledge, and tools for the recovery of failing LAs were
missing. Attempts to achieve public service turnaround were undertaken in the
absence of comprehensive theories or rigorous evidence (Boyne, 2006). As
Cornforth and Paton (2004) pointed out "little is known about whether, how often
and why „normal? cycles of decline and recovery may be arrested". Accordingly,
Boyne (2004) claimed that many national bodies and providers of local services are
searching eagerly for recovery strategies that can ease the problems they face.
Managers in the public sector suffer from a lack of appropriate tools to predict
failure in their organisation, prevent it, and generally deal with a crisis after it has
occurred (Mellahi, Jackson, and Sparks, 2002; Melahi and Wilkinson, 2004; Paton,
2003). In addition, although special treatment was given to failing LAs, one should
bear in mind the circumstances in which this aid was provided. According to
Stewart (2003) this aid was a political intervention, which was part of the New
Labour agenda. As such, it was not based on purely managerial considerations but
92
was contaminated by resourcing decisions. At the end of the day, governments and
especially NPM reforms try to achieve the most but spend the least. Thus, a
scenario in which this intervention was more of a political show with no adequate
financial support is not unlikely. Overall, whether the intervention suffered from
lack of knowledge, experience, managerial tools, political considerations, or lack of
resources, the mixed results point to a severe lacuna in this area, which should be
further investigated.
The lacuna in knowledge regarding the recovery process of failing public
organisations is not incidental. Jas and Skelcher (2005) and Cornforth and Paton
(2004) explained that this lack is rooted in government policy and the predominant
ethos that is focused on excellence. For instance, organisational learning and peer
review was based on declared Beacon Councils. The focus on excellence has
centred the research on good performers creating serious gaps for failing
organisations (Meier and Bohte, 2003). As a result, most research dismisses poorly
performing cases and strategies engaged in consistent failures. Hence, institutions
and scholars avoided measuring the relationship between strategies and
performance. This tendency can be recognised in the Audit Commission
measurement policy, which deals with outcomes and performance, rather than
process and strategies (Beeri, 2006). English failing LAs are recognised, labelled,
required to achieve recovery, supervised, inspected, and measured by their
performance. However, the Audit Commission?s measurement policy does not deal
with the managerial process itself. Given that, the ability of the Audit Commission
to give valuable guidance and advice on the way the recovery should be achieved is
limited.
In conclusion, there are several reasons for the limited success of recent
attempts made to recover failing LAs. It seems that these reasons are related to each
other. Due to a national predominant ethos of excellence the focus was given to
excellent performance and excellent performers. The search for knowledge related
to poor performance and poor performers was absent. The research focus on
excellence had created a lacuna of knowledge, experience, and managerial tools.
This lacuna affected the ability of governmental bodies to assist failing
organisations and consequently the ability of managers to deal with LA failure.
Moreover, the political circumstances in which these efforts were made invited
93
constraints, which made it more difficult to achieve success. In the context of this
study, the limited successes in recovering failing LAs and the huge lacuna pointed
by several scholars (e.g., Boyne, 2004; Cornforth and Paton, 2004; Mellahi,
Jackson, and Sparks, 2002; Melahi and Wilkinson, 2004; Paton, 2003) draw
attention to the great need for research in this area. While little is known about LAs
failure, especially about recovering them, the fact that LA failures have wide
negative implications makes researching this area urgent and vital.
Nevertheless, in conjunction with criticising the partial success, which left
behind about half of the failing LAs, one should keep in mind that three years after
the first Audit Commission report was published, the other half of failing LAs were
rated as better performers (e.g., from being a poor to being a good performer). It is
important to follow this group of LAs due to two rationales. First, the presumed
recoveries these LAs achieved should be followed in order to examine how real,
comprehensive, and convincing they are. Second, assuming that a comprehensive
recovery was achieved, it is crucial to figure out what change strategies were used
and how they were implemented. The next chapter develops this analysis as it
examines Turnaround Management Strategies as a lens to address such question.
2.4. Turnaround Management Strategies in Local Authorities
2.4.1. Turnaround Management Strategies
The previous chapter exposed the recent attempts made by the English
government to recover failing LAs, which ended in mixed results. While the lacuna
in this area explains the stagnation and fruitless attempts, the cases of success are
yet to be uncovered. Therefore, the data concerning the quality of LA performance
published by the Audit Commission should be further explored and explained.
While the data points to some LAs that had a low ranking in quality of performance
at the starting point and a high ranking at the endpoint, it does not disclose what
happened between these two points. In practical terms, the managerial tools and
techniques used to improve the ranking were exposed by neither managers, nor
scholars, nor by the Audit Commission itself. Exploring the strategies implemented
in those LAs might lead to possible schemes and policies for dealing with failure.
94
Additionally, it might enrich the knowledge in this area. Hence, the purpose of the
following chapter is to examine the „Black Box?, the strategies and the actions
implemented behind the scenes and the rankings in cases that had been significantly
improved. Three key questions lead this discussion: What are the appropriate
strategies for dealing with organisational failure? What is their applicability for the
public sector and LAs? What are the characteristics of these strategies that make
them a possible option for dealing with public organisational failure?
The term „strategy? was described by various scholars. In 1980, Porter has
described a category scheme consisting of three general types of strategies that are
commonly used: cost leadership, differentiation, and market focus, emphasising
efficiency, uniqueness, and effectiveness respectively. Hofer and Schendel (1978)
emphasised the match between the organisation?s resources, skills, environmental
opportunities, constraints, and the purposes it wishes to accomplish. Landrum and
Gardner (2005) emphasised the broadness of strategic management and described it
as a wide setting of goals, examinations, and behaviours, where the organisation
promotes managerial cognitive processes, managerial abilities to coordinate
intraorganisational and interorganisational resources, and managerial abilities to
support organisational learning (Sanchez and Heene, 1997). In addition, Khanfar
(2007) suggests a traditional ontology of management and summarises several of its
aspects:
"The traditional ontology of management science relies very heavily on
strategic planning and strategic thinking. Management sees its role within
this paradigm as reducing conflict, creating order, controlling chaos and
simplifying all the complexities created by the environment. Goals and
objectives are set, possible outcomes are predicted and alternatives for
action are planned, and these are communicated throughout the
organization. The traditional approach to strategic management describes it
as a process of analysis where the strengths, weaknesses, opportunities, and
threats of the organization are used to develop the mission, goals and
objectives of an organization. The management of tactics to plans and
programs are short-term and adaptive whereas strategy would be more
continuous and changes are geared toward broader goals and the vision of
the organization."
The formation of a strategy is thus one of the major management tools for
coping with both external and internal challenges. Given the characteristics of
failing LAs, the major purpose of those organisations is to accomplish the recovery
95
of the quality of services. This managerial process requires the art of matching and
balancing between resources, skills, opportunities, and constraints (Hofer and
Schendel, 1978) (in the LAs context these could be e.g., balancing available
finances, local volunteers? participation, local private-public partnerships, and
national plans, respectively). Balancing means matching spending to available
resources, for instance, if there is a reduction in available finances, services should
be respectively retrenched or assets should be sold. In addition, the authors
emphasise that it is worthwhile and important that the organisational strategies be
formally formulated. Hence, management should make a better forecast of possible
developments and adapt policy to them, rather than improvise. Most importantly,
according to the authors, a proper strategy can indeed result in superior
performance and it has the potential to achieve the following purposes:
? Development of organisational goals and objectives
? Identification of major organisational problems
? Allocation of resources
? Coordination and integration of complex organisations
? Development and training of managers
? Helping to forecast future performance
? Evaluation of management
? Stretching the thinking of top management
Looking at this list reveals that in general, formulating a strategy is important in
failing organisations. For instance, developing organisational goals in a failing LAs
could lead to formulating a recovery plan; identifying major problems could lead to
mapping the causes of failure; allocating resources could guide the management to
redistribute resources to new and more important areas; and evaluating the
management may lead to required replacement of senior managers.
While these aims demonstrate the general need for the formulation of a
strategy, this study seeks for a particular set of strategies, which are applicable in
failing situations. As far as we know, the literature suggests one main set of
strategies to deal with organisational failure, which are Turnaround Management
96
Strategies (TMS) (Boyne, 2006; Schendel, Patton, and Riggs, 1976). The roots of
TMS can be found in the private sector as most of the research in this area has been
conducted using samples of private companies in the USA (Ketchen, 1998). The
pioneer scholars (i.e., Hofer, 1980; Hofer and Schendel, 1978; Schendel, Patton,
and Riggs, 1976; Schendel and Patton, 1976) claimed that adopted strategies and
management actions during the recovery process could successfully influence
performance outcomes. A comparison between firms that recovered and did not
recover revealed that successful TMS included strategies such as management
changes, organisational changes, marketing, new investment expenditures,
diversification of products, efficiency increases (e.g., firing and cost control),
divestiture, and vertical integration (Schendel, Patton, and Riggs, 1976). Hofer
(1980) categorised these strategies into revenue increasing, cost-cutting, and asset
reduction. A later work done by Meyer and Zucker (1990) suggested two main
characteristics for TMS. The first one is „cutting expenditures to the bone?, which
usually includes reorganisation elements such as deep staffing reductions and the
second is complementary characteristic „investment in new areas?. These strategies
were named by the authors as „the combination of slash-and-burn together with
aggressive new growth?.
The key question at this point is whether TMS are feasible and applicable to
public organisational failure in general and failing LAs in particular. As noted
earlier, adopting ideas, concepts, and tools from the private sector should be made
carefully, while adapting and adjusting them to the public sector environment. The
adoption of ideas from the private sector became common since NPM reforms took
place. Therefore, NPM trend encouraged the use of imported practices from the
private sector, which consequently, became more feasible and applicable than
before. In this sense, TMS, which were adopted from the private sector, may
express the English government desire to recover failing public organisations
(Boyne, 2006).
According to Boyne (2004), private firms are more likely to recover from
failure if they follow TMS. This key argument points out a linear relationship
between managerial strategies directed towards recovery and significant
improvement of performance. Given that, he suggests the suitability of these
strategies to the public sector as well. Although some difficulties might arise from
97
their implementation in the public sector, they may be feasible and relevant to it.
However, at this stage, cautious is necessary since TMS may not automatically lead
to recovery. Accordingly, TMS will be perceived as a possible, useful, and potential
(and not necessarily the single) managerial method to deal with failure in LAs. In
other words, TMS may be appropriate in drawing the first step for a theoretical
framework concerning cycles of failure and recovery in the public sector context.
Therefore, the main purpose of this thesis is to discuss and assess the relevance, and
the applicability, of TMS in recovering failing LAs.
Boyne was not the only scholar to claim that TMS may be relevant to failing
public organisations. Turnaround management rhetoric has gained popularity in the
public sector context among other scholars as well (see for example, Cornforth and
Paton, 2004; Jas and Skelcher, 2005; Joyce, 2004; Paton and Mordaunt, 2004;
Turner et al., 2004; Walshe et al., 2004). Many of the ideas, concepts, and models
that have been developed in the for-profit sector have at least some application in
public service. As Walshe et al., (2004) stated:
"It contains a number of ideas, theories, and findings which are almost
certainly relevant to the study of failure and Turnaround [recovery] in
public organisations. While the empirical experience of recovery in public
service may be quite different from that in the for-profit organisations, there
are sufficient similarities for ideas about… the causes… the measurement,
prediction, diagnosis… stages… nature and the effect of interventions… of
failure and Turnaround".
Though private and public organisations are surrounded by different
environments, general organisational cycles could be similar. Cornforth and Paton
(2004) noted that as a result of imperfect and erratic market-driven processes,
"cycles of relative decline and recovery are commonly observed among companies
and this has been a major focus of research…similar cycles of decline and recovery
occur in the public and non-profit setting - indeed, the rhetoric of „turnaround? has
become commonplace". Therefore, TMS will be further explored in the following
chapter.
2.4.2. Classification of Turnaround Management Strategies
TMS were classified by Boyne (2004) into the 3Rs: Retrenchment,
98
Repositioning, and Reorganisation strategies. Walshe et al. (2004) suggested a
slightly different version of them: retrenchment, renewal, and replacement. For the
purpose of this study, the difference between the two is minimal. Since Boyne?s
suggestion is usually cited in other publications, the „retrenchment, repositioning,
and reorganisation? will be used in this study. When classifying and describing the
3Rs one should note that the strategies discussed are not conclusive, and more
strategies may be added. In this context, the 3Rs only simplify the classification of
TMS into sets of actions.
2.4.2.1. Retrenchment
Retrenchment deals with efficiency. It includes a reduction in the scope or
size of the organisation, for instance, by selling assets, contracting out to an
external service provider, and cutting costs of services. One of the main objectives
of these steps is to release resources from unproductive sections that can be
reinvested in ones that are more productive. As a result of this reinvestment, higher
quality of performance and better outcomes would be delivered to the public
(Boyne, 2006). The implementation of retrenchment in a public organisation might
be more complex than in the private sector. Since generally private organisations
are profit oriented, non-profitable activities could be halted whilst implementing
retrenchment strategies. In the case of LAs, such cessations might be more
complicated and comprise a limited set of substrategies than in the private sector,
even though technically and politically they are feasible and possible (Balgobin and
Pandit, 2001; Boyne, 2004). One should remember that English LAs at present time
and over the last decades have already been under continuous national
retrenchments, cutbacks, and search for efficiency. These governmental moves are
well known by local government and rejected whenever possible. Furthermore,
omitting and reducing services are not determined by the profitability test alone, but
other considerations are evaluated as well.
Despite these complications, there is growing evidence that suggests that
retrenchment is one of the basic and common sets of actions used in successful
recoveries. Thus, researchers have described retrenchment as a positive and
essential activity. Nonetheless, according to Robbins and Pearce (1992)
99
retrenchment cannot be held as a stand-alone strategy because it mostly includes
reactive actions, thus they must be supported by proactive actions such as
repositioning.
2.4.2.2. Repositioning
Repositioning is an entrepreneurial strategy that deals with effectiveness
emphasising growth and innovation (Schendel and Paton, 1976). This response to
failure involves redefinition of the mission and core activities of the organisation
and encourages the active improvement of existing services, or the supply of brand
new services to current consumers or to a new variety of consumers (Boyne, 2004).
It includes identifying successful services and products in one area or locating and
duplicating them in other areas. Compared to retrenchment, repositioning is a more
proactive strategy. It might be considered as the complementary strategy to
retrenchment, which emphasises cuts and reduction. As described above, resources
released by the implementation of retrenchment strategies can be reused. The
release of funds triggers the use of repositioning strategies aimed at redesigning
more cost effective services to be supplied to the public. The introduction of cost-
effective services immediately improves the performance of the organisation,
creating in this way a win-win situation.
However, one of the problems with the implementation of these strategies in
failing LAs is that it requires creativity, and managers in failing organisations are
usually mired in traditional ways of working rather than innovative ones. In
addition, English local government performs in a centralist and restricted
environment (McClelland, 1996). Therefore, expectations concerning proactive,
innovative managerial actions based on large free resources should be moderated.
2.4.2.3. Reorganisation
Finally, the third R is reorganisation. This strategy can be regarded as any
internal organisational change, including changes within leadership, personnel, and
management arrangements such as changes in planning systems, the extent of
decentralisation, styles of human resource management, or organisational culture.
100
The purpose of reorganisation is to support either retrenchment and repositioning or
simply the recovery of organisational performance. Yet, the history of local
government is characterised by continuous and repeated national forced
reorganisation moves (Clarke, 1955; Henney, 1984). In addition, the ongoing
changes of authorities and roles of LAs directed from the Government have also
required reorganisation (Chandler, 1988). Thus, it may be presumed that LAs
would rather prefer to avoid using these strategies if possible.
In private sector literature, the most cited re-organisational act is the
replacement of senior managers (Mueller and Barker, 1997; Thain and Goldthorpe,
1989b; Walshe et al., 2004). Schendel, Patton, and Riggs (1978) found that
management change leads to successful recovery in over 80 percent of the cases.
However, due to political restrictions and democratic processes in LAs,
replacement of the leadership in these cases might be more complicated than in the
private sector.
Replacing the CEO and other top managers is considered as a precondition
for successful recovery (Hofer, 1980). It is supposed to facilitate strategic change
because new top managers often have different backgrounds and experience; they
bring new understanding of the firm's environment, and enable productive change
to take place (Boyne, 2006). Additionally, new top managers, especially outsiders,
have no personal commitments to previous policies and practices, and so are freer
to commit radical changes (Schendel et al, 1978). Bibeault (1982) explained the
importance of replacement by arguing that a recovery situation is an abnormal
period in any organisation's history. It requires unique management approaches,
which are distinctly different from those of stable or growth managements. In a
recovery situation, many of the old management tenets lose their validity. In
contrast, nomination of new top managers can be an important signal for
seriousness about recovery (Boyne, 2006). However, Borins (2002) argues that
bottom-up innovation is frequent and common and thus, political leaders and
agency heads can create a supportive climate for bottom-up innovation when they
have popular appeal.
In the broad sense, these strategies reflect the main actions made by the
management after a crisis (Boyne, 2004). Since TMS originally deal with the
101
survival of companies, they are viewed as a matter of performance in strategic
management. Strategic management refers to a set of managerial decisions and
actions that determine long-run organisational performance. TMS may be regarded
as a particular potential set of managerial actions directed towards achieving a
radical improvement of organisational performance.
At this stage, it is important to notice that the 3Rs described above cannot
be perceived as a tool-kit or as full package for recovery. A blind implementation
of these strategies with no sensitive adjustment to particular circumstances is
useless. Therefore, appropriate implementation of these strategies, e.g., matching
problems to solutions is essential. Additionally, one should pay attention to the
importance of implementation phases in determining the value of particular
strategies. Any step taken by the management depends on steps previously taken
and their outcomes. According to Fayols' principles, order is important and was
found as useful in strategies implementation (Shafritz and Russell, 2005;
Yoo, Lemak, and Choi, 2006). As Price and Chahal (2006) noted, revolutionary
change involves incremental process.
The implementation of TMS is aimed at putting an end to the supply of poor
services in order to achieve sustainable performance recovery. In other words, not
implementing TMS in the private sector eventually means organisational death.
Yet, the outcome in the public sector is survival alongside continuous poor
performance. Given this, TMS can be defined as ‘the actions taken to bring about a
recovery in performance in a failing organisation’ (Pandit, 2000). Pandit's
definition reflects the public sector environment and the NPM principles; it
emphasises performance and refers to the managerial aspect of recovery rather than
the typical aspects used in private sector literature (e.g., income, used by Schendel,
Patton, and Riggs (1978)).
Nonetheless, it could be argued that there is no need to distinguish TMS
from other type of strategies that could be use to improve failing LA performance.
Consequently, as the argument goes, management that seeks to recover an
organisation could implement general change/improvement strategies. This
argument is important since whenever change is necessary, organisations seek and
push for reconfiguration in the most value-producing way (Bloodgood and Morrow,
102
2000). At this stage, it is not obvious that TMS are unique, nor should it be seen as
distinctive from general change strategies. Moreover, there is no base to prefer
TMS over other change strategies, and thus caution is required. Hence, this thesis
asserts that TMS might be useful in recovery processes as an additional option in a
management?s arsenal, since they have a possible and potential role as a set of
strategies for confronting public organisational failure. Therefore, the next chapter
assesses TMS characteristics and suitability for recovery situations.
2.4.3. Turnaround Management Strategies: Characteristics and Suitability for
Recovery Situations
According to the literature and official governmental reports, the
characteristics of TMS could be classified into six major aspects (Audit
Commission, 2005; Balgobin and Pandit, 2001; Beeri, 2006; Boyne, 2004; Boyne,
2006; Boyne and Dahya, 2002; Hofer, 1980; Joyce, 2004; McKiernan, 2003;
Mellahi, Jackson, and Sparks, 2002; Mordaunt and Cornforth, 2004; Paton and
Mordaunt, 2004; Turner et al., 2004; Walshe et al., 2004).
1. Aim, scope, and proportionality – TMS are radical, comprehensive managerial
strategies directed to bring about a recovery in failing organisation.
2. Timing and Time restriction – TMS effectiveness depends on timing and length
of implementation. TMS are more effective when implemented right after
failure and during a short period.
3. Urgency – Due to the necessity of preventing a crises or recovering an
organisation after the crisis occurred, TMS are urgent managerial action.
4. Inspection and examination – TMS are extensively inspected and examined by
internal and external organisational stakeholders.
5. Management – TMS are implemented by either managers who were part of the
organisational decline or a new management team.
6. Organisational climate – TMS are implemented throughout negative and
unproductive organisational climate.
103
The feasibility of TMS is more likely to fit organisations that were labelled
as weak or poor, which means, organisations assessed as declined performers. The
stimulus for TMS is broad performance decline experienced by an organisation. In
accordance to this stimulus, TMS are undertaken and executed decisively and
purposively (Boyne, 2004). They are well planned and directed to achieve
comprehensive recovery and would not be an impulsive or capricious promotion of
middle managers. Accordingly, minor, local, temporary, or departmental decline
will probably involve more moderate change strategies. In this view, Grinyer,
Mayers, and McKieran (1990) argued that turnaround situations require a different
managerial approach from common performance improvement (e.g., action-
oriented, motivated, committed management) since they are implemented after a
recognised crisis or a continuous failure.
Following McKiernan (2003) model, actions directed to recovery will take
place after the second stage, after causes and symptoms were perceived and
recognised. In other words, as failing LAs reach the lowest point in their
organisational life, radical actions such as TMS are required (Walshe et al., 2004).
Accordingly, TMS constitutes a series of internal and external activities (Boyne,
2004) aimed at achieving a radical, positive organisational change. In contrast, not
every organisational change justifies radical response and in practice and not every
organisational change will be followed by a radical response.
The aim of TMS, by definition, is to create a radical organisational change,
to overcome severe organisational problems, and to achieve comprehensive
recovery starting from the lowest possible point. As TMS are substantial (Paton and
Mordaunt, 2004), they affect all parts in an organisation and all stakeholders. Thus,
they are not suitable for local minor upgrades (Boyne, 2004). In other words, the
tools used by the management should be proportional to the aim that the tools are
meant to achieve. Therefore, to bring about a significant and comprehensive
recovery in failing LAs, radical steps should be taken and vice versa. For instance,
based on the principle of proportionality, there is no need to replace the whole
management team just to improve the services for single parents. Equally, an
expert?s lecture about "How to deal with aggressive consumers" would probably
not completely upgrade the level of services supplied. Managers that review
strategies, deals with weaknesses, or improve ineffective areas, might assist the
104
organisation but they do not implement Turnaround Management.
The timing of TMS implementation is critical. In order to be effective TMS
should take place as soon as the crisis hits (Paton and Mordaunt, 2004), as a quick
response to the failure (Boyne, 2006). While the timing refers to the ideal starting
point, time restriction refers to the length of implementation. TMS should be
implemented in a condensed and defined frame of time, which as suggested by
Boyne (2004) spans over a period of years. In the private sector, it was estimated
that such process will take four to ten years (Schendel, Patton, and Riggs, 1976).
An additional characteristic of TMS is that they are implemented urgently. Because
TMS are applied as a reaction to a crisis or as an attempt to prevent a forthcoming
crisis, delay involves further deterioration. Any further deterioration might find
expression in greater resources needed for the reversal of a situation or in
irreversible problems. A second chance at the same conditions will rarely be
available (Boyne, 2006). When it is clear that the present circumstances will lead to
unwanted results, management must move decisively to introduce necessary
alternations and reduce the need for later painful and highly risky adjustment.
TMS are usually required, imposed, supervised, inspected, and examined,
by external stakeholders (Turner et al., 2004). Due to publicness, LAs tend to be
highly exposed and politically salient. Accordingly, they are likely to be under
pressure to act rapidly so as to prevent further deterioration (Boyne, 2006) and
recover organisational performance (Joyce, 2004). In contrast to conventional
organisational change, which has a greater element of choice, when it comes to
TMS implementation, the leadership has less degree of freedom to choose whether,
when, and which strategies to implement.
Poor management is one of the significant causes and characteristics of
organisational failure (Audit Commission, 2005; Walshe et al., 2004). Accordingly,
leadership is important for recovery (Harker and Sharma, 2000). Since managers
who implement TMS deal with a complex process, according to some scholars,
replacement of the leadership was found to be one of the most common and
necessary TMS (Boyne and Dahya, 2002; Hofer, 1980; Turner et al., 2004; Walshe
et al., 2004). However, some scholars maintain that internal leaders should lead the
recovery process since, in their opinion, they may be found to be more experienced
105
and innovative leaders (see for example: Borins (2000)).
According to McKiernan (2003), the recovery process is a complex one
since managers must be simultaneously tough and soft: tough, because change and
decisions are usually unpopular; and soft, because staff need to be motivated and
encouraged to take part in the recovery efforts. These complexities have to be dealt
either by a new management, who is unfamiliar with the organisation, or by an
experienced but poor, centralised, and stagnated management. Obviously, if
management was talented and professional enough in the first place, it could have
foreseen the crisis emerging from out-source extinction. Even in cases where the
causes of the crisis are external (like in situations created by NPM reforms that
resulted in increased demands on services while cutting back resources) crisis is not
an inevitable outcome. Management can still adapt to environmental changes.
Indeed, not all organisations failed to make adaptation during NPM reforms and
some of them performed well. Thus, management can make a difference while
dealing with external-source extinction and environmental changes.
Finally, TMS are generally implemented in a negative climate and in a
negative external environment, at least at the beginning of the process. For instance,
the leadership would probably face lack of motivation, antagonism, conflicts, and
resistance to change by employees, consumers, and other external stakeholders
(Balgobin and Pandit, 2001; Mellahi, Jackson, and Sparks, 2002).
In sum, turnaround situations are complex and involve varied and
simultaneous actions. As described by Dr. Wendy Thomson in Joyce's article
(2004) when in 1996 she became the CEO of London borough of Newham and led
a recovery process:
"I don?t think there are many organisations where I?d do that again in that
way…we were doing best value and we had to do it better than
anybody…there were quite a lot of initiatives…there was not just one thing
that was done. Everything was done at once...actions on employment,
actions on education…"
Turnaround situations are characterised by radical, urgent, and time
restricted operations generally taken by an unskilled or new management in a
negative climate, and under supervision and examination of external stakeholders
(Beeri, 2006). However, in order to better understand TMS, these managerial
106
actions should be seen in a wider context, as part of an organisational process.
Thus, the next chapter draws a theoretical framework for TMS.
2.4.4. Stages of Organisational Turnaround - A Managerial Perspective
This theoretical framework was suggested by Boyne (2006) as a generic
model that had been distilled from various stage models of decline and recovery in
private organisations (see Figure 3).
The author searched and identified studies that contained systematic
empirical evidence about the effectiveness of TMS including comparison of
successful and unsuccessful recovery attempts. This search was limited to a journal
article as a rough quality control and search of keywords in which 21 comparative
studies yield the suggested model. Additionally, five qualitative studies describing
success stories of recovery processes derived from the public sector are analysed in
order to evaluate whether the model can be applied to public organisations. The
author concludes that the model of TMS is derived from the private sector literature
but offer a useful platform for the public organisation context.
While the previously presented model: „Stages of Organisational Turnaround?
(McKiernan, 2003) emphasised the stages that a failing organisation goes through,
Boyne?s model emphasises the crossroads in managerial strategies during a
recovery process. Nonetheless, stages and aspects that were covered earlier will be
briefly presented to avoid repetition. This model constitutes a managerial process
that reflects and simplifies seven stages that may be complex, disordered, occur at
the same time, compressed or extended.
1. The Onset of Decline
3
- The first stage refers to the causes of the failure.
2. Corrective Action and Recovery to Avert a Turnaround Situation- A corrective
is an action taken in quick response to decline. This action prevents a deep
decline from developing and avoids the need to implement TMS.
3
This subject was thoroughly discussed in Chapter 2.4. and in the first stage of McKiernan?s model
(Causes of failure) . Therefore, no repetition is required here.
107
Figure 3: Stages of Organisational Turnaround-
A Managerial Perspective
Source: Boyne, 2006
1. Onset of decline
3. Turnaround
situation
4. Search for
strategies
2. Corrective action
and turnaround
Performance
Time
7a. Turnaround
7c. Terminal decline
7b. Continued failure
5b. No „escape?
strategy found
5a. Selection of
new strategy
6. Implementation
of new strategy
108
As previously mentioned, one of the problems in researching organisational
failure is making the separation between a natural, temporary decline and a
permanent one (Schendel, Patton, and Riggs, 1976). A corrective action
distinguishes between the two. In other words, in cases where successful
corrective actions were employed, performance returned to be normal, and TMS
were not used. In such cases, the situations could be considered as temporary
declines but not as turnaround situations. By contrast, cases in which
unsuccessful or no corrective actions were employed, and performance
continued to deteriorate, can be considered as permanent declines. Additionally,
corrective action not only helps the organisation to escape from failure, it
encourages organisational learning that may prevent future identical
breakdowns since it trains the organisation to quickly spot a decline and
appropriately react to it. Repeated cases of decline later on would find a
management that has already dealt with such situations. In LAs for instance, the
prompt establishment of a psychologist team for children in reaction to a terror
attack could be considered as a corrective action. A quick response to a crisis
could support the education system in this case, and prevent further
psychological and emotional damage and deterioration. In addition, drawing a
lesson afterwards could be an organisational learning act that would help in
similar future crises.
3. Turnaround Situation
4
- This stage refers to the core organisational failure.
4. Search for New Strategies
5
- At a later point in time, the leaders of a failing
organisation might recognise that a new course of action is required. This
recognition could trigger the search for new strategies to prevent terminal
decline. The search for new strategies includes preliminary steps such as
diagnosing the causes of failure and determining present organisational needs.
4
For a comprehensive discussion of this stage, please see Chapter 2.4.
5
This stage is parallel to the third stage described by McKiernan (2003) in his model of a diagnosis
and recovery strategy formulation. Yet, the third stage of McKiernan?s model is split here into two
managerial efforts, which are compatible with the political process in LAs: Search for New
Strategies and Selection of New Strategies.
109
However, in accordance to the democratic process, the selection of these
strategies has to be approved by other bodies, such as the council.
5. a. Selection of New Strategies
6
- The selection of new strategies is a formal
managerial act that ends in agreed strategies as part of the recovery plan. In
LAs, approval of a recovery plan may involve democratic procedures such as
consultation with local volunteers, coalition deals, private-public participation
and partnership, and official voting of council members. These procedures
might delay the implementation of the recovery plan especially if it involves a
retrenchment of services which might, in turn lead to stakeholder resistance.
However, not every search for strategies ends up in selection of strategies, as
described in stage 5.b.
5. b. No Escape Strategy Found- Selection of new strategy is not guaranteed.
Political considerations like those mentioned above or lack of managerial skills
may find the management with no clear and approved strategy. This problem is
severe since it occurs after the failure has struck and although the management
admitted its existence it failed to start a recovery process. When no recovery
strategy was found and approved, perhaps because political or managerial skills
were missing, the LA will fall into a combination of low performance and high
persistence, which is permanent failure (Meyer and Zucker, 1989).
6. Implementation of New Strategies
7
- This is the core managerial act during the
recovery process. The management implements TMS: retrenchment,
repositioning, and reorganisation. The implementation of TMS could lead to
one of the three options presented in stage 7.
7. a. Turnaround
8
- The ideal outcome of the implementation of TMS is turnaround
in organisational performance. However, there are no clear-cut timescales and
criteria to define whether a process has been successful or not. Generally, the
relevant benchmark is the return to the level of performance that was
6
This stage, which engages the approval of recovery plan is part of the second part of the third stage
in McKiernan?s model (diagnosis and recovery strategy formulation)
7
It is interesting that a parallel stage in McKiernan?s model is missing, since it is focused on the
organisation as a unit but not on the management.
8
This stage is similar to the fifth stage, recovery, in McKiernan?s model.
110
maintained before the beginning of the downturn. In LAs, just as decline and
minimally acceptable performance are subject to political interpretation, so is
turnaround and recovery. Thus, depending on the constellation of political
forces, some organisations may need only a small improvement in performance
to be perceived as successful, whereas others may face much higher hurdles.
7. b. Continued Failure- The second optional outcome of the turnaround process is
persistently poor performance. This may occur because the new strategy has
failed, which is a similar condition to the one described in stage 5.b., in which
no escape strategy found. However, it may be perceived as a more severe
situation: if TMS implementation failed in a LA, its organisational resources
will probably be weaker than before the recovery attempt. The failure to recover
is a further painful situation that could be humiliating for the management.
Since it involves enormous and special efforts by the management, and since the
management is being tested by stakeholders, a failure in this case can be
perceived as a proof for management inabilities. Consequently, creating a brand
new stimulus and driving the management team, employees, governmental
bodies, and other cooperators for the second time is harder. Moreover, it could
lead to terminal decline, as described in stage 7.c.
7. c. Terminal Decline- The worst possible outcome of TMS implementation is
terminal decline. Due to poor TMS implementation or no selection of new
TMS, failure could end up with terminal decline and the disappearance of the
organisation in its current format. Though LAs do not cease to exist, the
Ministry of Interior usually has the power to merge LAs, to transfer, or privatise
some of its powers. Given this, it may be argued that in consumers? eyes
terminal decline might not be a bad option at all. Assuming customers are
rational players, they aspire for the best services available, and when terminal
decline results in mergers or privatisations, it may be for the benefit of
consumers.
Overall, this model provides one possible explanation for the data published
by the Audit Commission. The LAs that improved their ranking and supposedly
recovered have probably gone through stages 5a and 7a. By contrast, cases which
stagnated and did not improve their ranking, could have gone through stages 5b/7b
111
(we have no evidence for terminal decline). In the same way, this model offers a
possible explanation for the partial success. According to the model, successful
recoveries were achieved after implementing TMS, while persistently failing
organisations have either not adopted TMS, or have not implemented TMS, or
alternatively, implemented TMS inappropriately and unsuccessfully. However, one
should bear in mind that this model is a possible explanation, a suggestion, which
has not been empirically tested. As this option is derived and based on private
sector literature, the model and the typology need to be refined and developed for
application to public organisations (Boyne, 2006).
Empirically testing this model in public organisations could provide
answers for various questions. For instance, what are the common causes and
symptoms of public failure? What are the common triggers for change? How does
the search for TMS implemented, and which procedures lead to their selection? In
what way is the organisational performance affected in cases where no escape
strategy is found? What are the commonly used TMS and what is their
effectiveness? How should they be implemented in order to be effective? What are
the circumstances and what is inappropriate managerial implementation of TMS
that leads to persistent failure/terminal failure? How long does this process take?
Are there any other alternatives for TMS, which lead to recovery? In order to better
deal with these questions, the next chapter will review TMS? current state of
research.
2.4.5. Turnaround Management Strategies’ Current State of Research
While this model comprises a wide and complex process, it raises many
questions. However, the scope of this study is limited to the relationship between
TMS and recovery (stages 6 and 7). This relationship is at the center of the recovery
process. According to this model, the implementation of TMS is a managerial act
that dramatically influences the chances to recover a failing LA. Nonetheless,
research on this relationship is far from being complete. Most of the research
consists of normative prescriptions, success stories of companies, and the net effect
of TMS, while research on the effectiveness of different TMS is rare (i.e.,
comparisons between recovered and non-recovered organisations). Moreover, this
112
lack is even more noticeable in the public sector context since it has remained
largely isolated from studies of turnaround in the private sector.
The search method for TMS' current state of research in the public sector
was based on Boyne's (2006) search method for turnaround in the private sector
9
.
The literature concerning turnaround in the public sector context could be divided
into three groups of studies. Each one of the three employs a different outlook and
raises different theoretical and methodological difficulties.
1. The first group of studies consists of eight case studies of successful public
service turnaround in single organisations (Contino and Lorusso, 1982; Decker
and Paulson, 1988; Holzer, 1988; Moore, 1995; Poister, 1988; Rainey and
Rainey, 1986; Stephens, 1988), which were reviewed by Boyne (2006) (see
Table 2). None of these studies used the 3Rs as a conceptual framework for
their analysis, which was developed and adjusted to the public sector context a
few years later by Boyne (2004). The review reveals that retrenchment was
used in five of the eight successful recoveries. It included cuts in the level of
inputs (e.g., staffing and equipment) and reductions in the supply of services
(e.g., the number of houses provided by the Housing Authority). None of the
case studies indicated the use of market exit as a retrenchment strategy.
However, there is evidence for the use of strategies such as downsizing the
organisations and limiting the scope of services, even if they met political
resistance from staff and consumers. Repositioning was pursued in four out of
eight cases.
9
The search process employed was used to discover studies that contain some evidence on TMS,
failure, and recovery in the public sector. The search for evidence was limited to academic scholarly
journal articles, due to the assumption that peer-reviewed work is more likely to have passed
minimum criteria of academic severity. A search of keywords in the title or abstract was undertaken
on the ISI Web of Knowledge that contains the contents from 1945 onward of the world's leading
social science journals. This includes publications in economics, management, political science,
public administration, and sociology. The keywords used were turnaround, recovery, and failure.
Further journal articles were then identified by snowballing from the sources located through the
web search. Articles identified through this process were then selected for analysis if they included
empirical evidence on either TMS or failure and recovery in the public sector. The search process
yielded a set of 17 studies of TMS or failure and recovery in the public sector.
113
Table 2: Studies Used in Public Service Turnaround Success Stories
Reviewed by Boyne (2006)
Source: Boyne (2006)
Reorganisation Repositioning Retrenchment Organisation Study
New director; new senior
management team; more
performance management;
more
staff participation.
In-sourcing of
manufacture of
replacement
parts.
Cut in
expenditure on
overtime;
reduction in
overstocking of
materials.
Bureau of Motor
Equipment,
New York City
(NYC),
Department of
Sanitation
Contino
and
Lorusso
(1982)
New director; change in
formal
organizational structure;
more
staff participation.
Social Security
Administration-
Bureau of Retirement
and
Survivals insurance
Rainey and
Rainey
(1986)
More performance
management;
more staff participation.
Reduction in
staffing.
Solid waste
collection, NYC
Department of
Sanitation
Holzer
(1988)
New chief executive; more
performance management.
Efficiency
savings (source
unspecified).
Jacksonville Electric
Authority
Decker and
Paulson
(1988)
New director; more
performance
management.
Alabama Division of
Rehabilitation and
Crippled
Children Service
Stephens
(1988)
New secretary of
transportation;
new senior management
team; change in formal
organization structure;
more strategic planning.
Change in
balance of
activities; better
stakeholder
management.
Reduction in
staffing.
Pennsylvania
Department of
Transportation
Poister
(1988)
New chief executive; new
senior
management team;
decentralization.
Change in
mission; better
stakeholder
management.
Reduction in
housing stock.
(a) Boston Housing
Authority
Moore
(1995)
New chief of police;
decentralization of
budgeting;
more strategic planning.
Change in
mission; better
stakeholder
Management.
(b) Houston Police
Department
114
Three of the four cases changed the organisation?s priorities within an existing
market (e.g., the Police Department became more responsive to minority
groups). One case extended the scope of its operations by self-supplied goods
that were previously purchased. None of the cases adopted the radical action of
moving into a completely new area. The absence of this strategy again reflects
the constraints and legal restrictions to enter the territory of other agencies.
Thus, the cases demonstrate that repositioning is feasible but tends to consist of
a narrower set of strategies than in the private sector, and correspondingly they
may have a smaller impact on turnaround.
The most widespread strategy described in the studies was reorganisation,
implemented in all eight cases of the success stories. The strategy was
implemented in at least two of the following forms: the appointment of a new
top manager, replacement of the entire senior management team, new
performance management systems, and decentralisation of power. The extended
use of reorganisation may reflect the limitation to apply other strategies that
involve quitting areas or entering new ones, which makes reorganisation the
default strategy. Boyne (2006) concluded that overall, it can be concluded that
all 3Rs are feasible as a conceptual term for use in the public sector and may
lead to a successful turnaround. However, it should be borne in mind that the
evidence is derived from only eight cases. This small number of cases queries
the ability to infer the effectiveness of TMS in other cases. Additionally, since
the stories of success occurred at different points in time, environmental
circumstances (e.g., national plan and intervention) were not controlled and
might influence the relationship between the implemented TMS and recovery.
According to Boyne (2006), although the authors found the 3Rs to be
successful, it is impossible to judge whether this interpretation is valid since no
comparisons were drawn with unsuccessful turnaround attempts. Therefore,
cases in which these strategies were implemented and recovery has not been
achieved are possible.
2. The second group of studies presented in Table 3 consists of eight papers
published recently (Borins, 2002; Boyne, 2004; Jas and Skalcher, 2005; Joyce,
2004; Mordaunt and Cornforth, 2004; Paton and Mordounnt, 2004; Turner et
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Table 3: Studies that Use the Language of Turnaround
Study Aim Method
E
m
p
i
r
i
c
a
l
q
u
a
l
i
t
a
t
i
v
e
d
e
s
c
r
i
p
t
i
o
n
s
o
f
c
a
s
e
s
o
f
r
e
c
o
v
e
r
y
a
t
t
e
m
p
t
s
Turner et al.
(2004)
Evaluation of recovery plans
delivery, assessment of service
outcomes, and generation of
evidence regarding the
recovery process
10 case studies of LAs
Interviews with key stakeholders and
analysis of documents
Jas and Skalcher
(2005)
Development of a more
differentiated analysis of
public service performance
determinants (what leads to
poor performance?) and
improvement strategies (what
strategies are most effective?)
5 case studies were tracked.
Interviews and structured data on 20
managers, staff, politicians, and external
advisors
Paton and
Mordounnt (2004)
Highlighting differences
between public and private
Turnarounds
4 case studies from very different public
areas.
Retrospective accounts of key figures
Joyce (2004) Examination of the leadership
behaviour during successful
recovery
One case study
One interview with LA chief executive and
analysing documents
Mordaunt and
Cornforth (2004)
Examination of the board?s
role in public organisation
during TA process and
organisational failure
4 case studies from different areas
Interviews with board members and senior
managers
T
h
e
o
r
e
t
i
c
a
l
p
a
p
e
r
s
t
h
a
t
d
e
v
e
l
o
p
t
h
e
o
r
i
e
s
t
o
e
x
p
l
a
i
n
e
m
p
i
r
i
c
a
l
f
i
n
d
i
n
g
s
Walshe et al.
(2004)
Reviewing the existing
literature on failure and TA in
the for-profit sector and their
relevance to the public sector
Literature review
Boyne (2004) Reviewing the existing
literature on failure and TA
strategies in the for-profit
sector and drawing a lesson
for the public sector
Literature review
Borins (2002) Theorising the nature and role
of leadership in three ideal
types of public management
innovations, one of them is
turnaround
A survey among public servants concerning
the source of innovative actions
al., 2004; Walshe et al., 2004). In contrast to the papers reviewed previously,
these articles indeed used the turnaround terminology.
Three of them theoretically examine aspects of turnaround and develop
explanations for empirical findings. The other five are empirical qualitative
descriptions of one to ten cases of recovery attempts. While these studies
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contribute to the understanding of recovery, their contribution to the
understanding of TMS or other activities that led to recovery is very limited.
These studies do not point out the actual strategies and actions used in the
turnaround process.
In addition, they lack the ability to identify significant or specific
relationships between TMS and recovery/persistent failure, and thus they not
suggest causal explanations for recovery or other outcomes. Consequently, the
conclusions do not provide guidance for public managers, decision makers, and
politicians. So questions like „what should I do in order to recover a public
failing organisation?? and „what strategies are most effective?? remain
unanswered.
3. The third group of studies is mostly meagre. Empirical quantitative studies that
analyse TMS and tests their impact on recovery are rare. Boyne (2003) had
critically reviewed 65 empirical quantitative studies dealing with public service
performance. None of them was directed toward failing organisations and
recovery. These studies observed, measured, and followed fair performers
trying to achieve good performance. Parallel evidence for poor performers
trying to achieve good performance is not provided. It seems that only recently,
the first research, which follows the above criteria, was conducted. Boyne and
Meier (2007) developed a new model that is derived from theories of the effects
of environmental and human resources on organisational performance. The
model was applied to failing public schools in Texas and tested among other
predictors, whether retrenchment, repositioning, and reorganisation were
positively related to recovery (i.e., significant improvements in performance in
1995-2002 as TAAS score (Texas Assessment of Academic Skills)). A survey
was distributed among school district superintendents and archival data was
collected.
The results indicated mixed effects. The extent of turnaround was
significantly influenced by all 3Rs, but not always in the predicted direction.
Two of the three retrenchment variables („focus on core business? and „time
spent on internal management?) had no significant effect on performance
change. The impact of the third measure of retrenchment („emphasis on
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lowering costs and increasing efficiency?), directly contradicted the authors?
assumption: districts that adopt this strategy were significantly less likely to
produce better results. In contrast to the private sector, this form of
retrenchment contributed to further failure rather than rapid recovery. The
authors explained that retrenchment is regarded a successful strategy if an
organisation suffers from high costs and low efficiency. Two of the three
repositioning variables ('superintendents who seek change? and „initiate
interactions with a wide range of stakeholders?) were positively related to the
extent of turnaround and were more likely to lead their districts towards
performance improvement. The third element of repositioning („emphasis on
acquiring private funding?) had no significant impact on recovery from failure.
Taken together, the results for retrenchment and repositioning suggest that
„financial? turnaround strategies (cutting costs and seeking revenues) are not
effective in school districts. Reorganisation had a significant positive effect on
performance. School districts that replaced their superintendent with an insider
were more likely to achieve turnaround, but the appointment of an outsider was
an insignificant factor. Districts that did „raise the proportion of their staff who
are teachers? and „recruit more experienced teachers? had significantly better
prospects of recovering from failure. The results for reorganisation were
consistent with the assumption that turnaround is associated not only with top
management changes but also with human resource strategy that pays particular
attention to core staff.
In conclusion, it can be seen from the above description that some
strategies had significantly contributed to recovery, some strategies had not, and
one strategy even prevented it. However, the conclusions of this research should
be handled with care since there are some weaknesses and biases regarding the
sample of respondents and the manner in which the measures were
operationalised. These biases raise several questions regarding the reliability
and validity of the measurement tool. First, the authors chose school district
superintendents as the respondents for the survey. Though this position enjoys
the authority and discretion to act in an effort to improve a failing organisation,
superintendents are in charge of several organisations at the same time, they act
as outside inspectors, and thus are probably not fully involved in organisational
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decisions and changes. In that sense, their ability to assess the „black box?, the
managerial processes, and informal changes is limited. Second, it seems that the
measurements do not directly assess TMS implementation but are a general
reflection of their probable outcomes. For instance, in order to assess the extent
to which retrenchment strategies were implemented, superintendents were
asked to evaluate the relative priority that they attach to „lowering
costs/increasing efficiency?. While priorities were evaluated, the actual
implemented actions directed to achieve this goal were not assessed. Higher
priority may be reflected as giving much thought to an issue while not
necessarily acting to promote it. Third, some measurements assessed attitudes
toward ideal standards. However, these evaluations actually ignore the
strategies implemented in practice, as intentions may be different from actions.
For instance, in order to measure repositioning strategies, the superintendents
were asked to evaluate to what extent „a superintendent should advocate major
changes in school policies?. Fourth, the authors chose to concentrate on specific
strategies, which give the impression that they are a random sample of a greater
number of possible activities under each of the 3Rs. For example,
measurements such as „increase percentage of teachers? and „experience in
years? collected from archival data do not cover all the dimensions of
reorganisation and leaves behind such aspects as organisational climate and
organisational training.
Thus, from the above description we can conclude that further research that
employs better measurement tools for TMS is needed. The way TMS have been
measured in previous studies is inaccurate and inappropriate for the LA
environment. The published work on TMS largely consists of case studies of single
organisations with no systematic comparison of persistently failing and recovered
cases. These studies generally concentrate on the exploration of strategies
implemented in successful recoveries while no test group is used (i.e. there is no
description of strategies used in unsuccessful cases). Moreover, it can be argued
that the existing measurement of TMS is biased. Therefore, there is a need to
further explore the „black box? content and test its relationship with recovery
(Walshe et al, 2004).
Earlier in time, Barker and Duhaime (1997) handled such problems and
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developed a scale, which evaluates the extent of specific strategies used to compare
successful and unsuccessful organisational recoveries. Yet, this scale was designed
for private organisations and emphasises private sector terms and spirit. A similar
study based on such a methodology has not yet been conducted in the public sector
and this indicates the importance of the present research. By using an adapted scale
based on Barker and Duhaime?s (1997) this study aims to portray a more accurate
picture of the „Black Box?. By comparing recovered and persistently failing LAs
while using a comprehensive, reliable and valid measurement tool for TMS, we
expect to uncover the actual managerial acts able to bring about a successful
recovery in a LA. A full description of the TMS measurement tool used in this
study and its development process will be presented later on in the methodology
chapter.
From the above chapter it can be concluded that TMS in the public sector
context requires further investigation. From a theoretical point of view, there is
quite a strong argument to perceive TMS as a promising, valuable, potential set of
managerial reactions to deal with public organisational failure. The concept of the
3Rs seems to gather a set of strategies, which may be adequate to lead an
organisation to recovery. On the other hand, the knowledge, experience, and
empirical study in this area suffer from a huge lacuna. While the Turnaround
literature in the private context covers three areas (i.e., empirical quantitative
studies analysing the effectiveness of TMS, empirical qualitative studies that
describe individual cases of recovery (e.g., Brown and Starkey, 2000), and
theoretical papers that develop explanations for empirical findings), parallel
comprehensive data and tools in the public sector context are still missing (Walshe
et al., 2004). The determinants of turnaround in the public sector have not been
theorised or tested, creating a significant gap in the literature (Boyne, 2006).
In order to achieve the most effective recoveries, governments and LAs
should base their policy on grounded evidence. The necessity to fill the specific
theoretical gap concerning TMS has been recognised by numerous scholars (e.g.,
Jas and Skelcher, 2005: Cornforth and Paton, 2004; Boyne, 2004; Walshe et al.,
2004). As Boyne (2004) argued: TMS in LAs "have received scant attention by
public management researchers", although this is a topic of immense practical
significance as well as of academic value. Walshe et al. (2004) added that more
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research is needed regarding the context and the process of effective recovery
interventions. The existing theory of Turnaround Management is currently either
inadequate (Barker and Duhaime, 1997) or not existent (Pearce and Robbins, 1993).
Overcoming the lacuna is of enormous practical significance since holes exist in the
policy governments choose to promote (e.g., the English Government). On one
hand, failing LAs are recognised, labelled, and required to achieve recovery. On the
other hand, the ability of government authorities to provide grounded knowledge
and tools to assist LAs is limited.
Therefore, this study seeks to sharpen the concept of TMS, based on
investigation of the impact of TMS on public organisational recovery. A sharpened
concept of TMS would point out the value of TMS in recovering failing LAs and
path the way to uncover the most appropriate manner TMS should be implemented
and measured. To state the matter differently, this study strives to expose the 'Black
Box', the exchange process led by the senior managers and designed to bring about
a recovery. However, since few studies statistically evaluated whether different
TMS are associated with success/failure, and others draw conclusions based on
qualitative interpretation, it is difficult to employ a meta-analysis technique to the
studies of turnaround (Boyne, 2006). Indeed, a comprehensive theory has not yet
been developed; quantitative scales of implemented TMS are absent; empirical
evidence concerning the impact and effectiveness of TMS are rare; no studies that
compared successful and unsuccessful TMS in the public sector were found; and
overall, it is yet to be made clear how failure and recovery dynamic in public
organisations works. Closing the practical and theoretical gap requires that research
employ such comparisons, particularly in the public sector context. Nevertheless,
the present literature and evidence are sufficient for the rigorous and
comprehensive investigation of these issues. To do so it is necessary to move
beyond single cases to large-N studies, which compare successful and unsuccessful
recovery attempts. This would provide evidence and reveal whether and how
management leads recovery processes (Boyne, 2006). An empirical examination of
TMS and their effectiveness within successful and unsuccessful cases of public
organisational failure consists of wide methodological considerations and
procedures. The next chapter discusses and details these methodological issues.
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CHAPTER 3: METHODOLOGY
Evaluating and testing comprehensively and empirically the relationship
between TMS and recovery within persistently failing and recovered LAs require
multiple methods. According to Fritz and Durhane (1988), there is a particular need
for multiple methods when studying a complex phenomenon such as organisations,
because they have a variety of behaviours and indicators. In this study, using
multiple methods means employing induction and deduction, linear and non-linear
orientations, and various techniques. The combination of several approaches has the
potential to complement each other and enrich each other (Neuman, 2003). This
would be especially vital when the analysed phenomena are not well known to
researchers and similar studies are rare as there are no quantitative empirical studies
that measure TMS and compare their relationship with successful and unsuccessful
organisations in the public sector. Exploring the 'black box' requires, inter alia, dual
complementary methods of both qualitative and quantitative techniques.
In this research, the qualitative methods involve two case studies of LAs,
which were exploratory research to probe the 'Black Box' in recovery cases. These
cases revealed qualitative data that provided a descriptive account of the process of
change and created the base for the development of the TMS scale. This process
required careful examination based on face-to-face meeting and exposure to
experience gathered in the field. The quantitative methods involved a survey that
validated the new TMS measurement tool and empirically tested the relationship
between TMS and recovery. The quantitative data depends and rely on the
qualitative data and both supply the materials for answering the research questions.
The methodology chapter aims at describing the qualitative and quantitative
methodological considerations and procedures used to accomplish those missions.
Therefore, it answers practical questions such as what is the study population, how
the cases and participants were chosen and sampled, how the variables were
constructed, in what way data was collected, what statistical and analytical tools
were employed, and what are the justifications for the decisions made. While the
following chapter answers these questions, it demonstrates that this study is based
on reliable data, representative samples, and valid measurement tools.
Consequently, this study intends to generalise the findings within a wider
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population of cases than those sampled.
As part of the attempt to address the theoretical lacuna and the lack of
practical experience that public managers and policy makers face in relation to
understanding and achieving comprehensive recovery, this study seeks to answer
several research questions. Theoretical aspects like defining organisational failure
and conceptualising TMS will be examined both by employing reviewing tools and
qualitative methods. The conceptualisation and construction of a new measurement
tool for TMS will employ qualitative methods, while the reliability and validity
process will rely on quantitative methods. Observations directed to evaluate the
'Black Box': the extent TMS were implemented within failing LAs and the
effectiveness of TMS in achieving recovery will be tested by employing
quantitative methods.
In sum, based on the recommended techniques of research methods (Strauss
and Corbin, 1990), the qualitative tools, i.e., analysed documents published by the
government, analysed reports published by the Audit commission or the LAs, face-
to-face interviews, and the case studies report (i) provide a better conceptualisation
of public organisational failure, (ii) acquire a better understanding of cycles of
failure and recovery in failing LA, (iii) clarify the causes of these failures, the
triggers led to organisational change, and the implications of such failure, (iv)
highlight the phenomenon of persistent failure of some LAs and the partial success
to recover them, (v) conceptualise TMS and characterise them, and (vi) construct a
new measurement tool of the extent of implementation of TMS in LAs. The
quantitative tool, i.e., the survey, the questionnaire distributed to senior managers
(vii) validate the new TMS measurement tool, (viii) explore the extent of TMS
implementation in LAs, (ix) spot the difference between persistently failing and
recovered LAs regarding TMS implementation, and (x) investigate the relationship
between implementation of TMS and recovery.
In conclusion, the outcomes of both methods for this study generate a
theory, an explanation, that enlightens successful recovery in failing LAs and
recommends practical directions for failing LAs and future studies.
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3.1. The Study Population and Sample of LAs
Although the population and sample study are of similar groups, they are
not completely identical because the sample aspires to represent the population. The
population is defined as the unit to be researched. Defining the research unit is
important in order to enable later on the sampling of a smaller number of units that
represent the population (Neuman, 2003). In addition, a careful sampling process
would enable to infer from the results of the survey on population.
The population of this study is defined as LAs and senior managers in
England that have suffered from organisational failure. This population supplies a
platform for empirical examination of the relationship between TMS and recovery
since English LAs can be tracked according to the CPA measures. Thus, the
defined population might include a huge number of organisations and senior
managers. Even the focus on failing LAs only might still provide a large number of
cases. Obviously, since our resources are limited, it is impossible to access all
cases. Accordingly, the collection of data should be made within a narrower group
of LAs, which is the sample. The sample must represent the entire population, so
that the primary goal of sampling is to gather a representative group, a collection of
units and cases, which would enable the researcher to deduct, generalise, and
conclude on the entire population of cases (Neuman, 2003).
In order to explore the relationship between TMS and recovery while
comparing successful and unsuccessful recoveries, a sample from three different
groups (according to the CPA rates from 2002 to 2005) of LAs was chosen:
1. Persistently failing LAs - An experimental group of LAs that experienced
failure and are persistently failing.
2. Recovered LAs - An experimental group of LAs that experienced failure and
achieved significant recovery.
3. Well performing LAs - A control group of LAs that have not experienced
failure.
The comparison between group 1 and 2 with group 3 may point out the use of TMS
during recovery process. From this comparison we will be able to learn whether
TMS were less used in well performing LAs. The comparison between group 1 and
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group 2 may supply an explanation regarding TMS effectiveness.
To do so, it was necessary to determine which LAs had failed, and within
those who failed which LAs have recovered. Two problems are present while
making this distinction. First, due to measurement complexities of performance in
the public sector, the measurement of failure and recovery and the distinction
between failing and other LAs are not straightforward (Walshe et al., 2004). In fact,
few public organisations are systematically supervised and labelled according to
accepted scales, and some failing public organisations keep failing without being
noticed for long periods. Second, the use of financial ratios as the main criteria to
determine failure is not adequate for the public sector environment. The application
of a single financial criterion to different organisations assumes the existence of
universal and objective criteria of organisational performance. While private
organisations can be classified as failing according to financial ratios, LAs are not
for-profit organisations and thus financial ratios cannot be regarded as the main or
as the single indicators for performance (Cutler, 2004; Dawson and Dargie, 2002).
Accordingly, public performance should be subject to interpretation by external key
stakeholders and higher bodies (e.g., customers, rivals, and regulators)
(Arogaswamy et al., 1995; Boyne, 2007; Gimeno et al; 1997; Short et al., 1998),
which engage various indicators (e.g., ambition, prioritisation, quality of services,
and performance management). These terms of performance measurement were
indeed followed by the English Audit Commission, which publishes data that
distinguishes between persistently failing, recovered, and well-performing LAs.
Therefore, the sampling process of this study will be based on the data produced by
English Audit Commission and it will be dealt with as secondary data.
According to the data published in 2002 by the Audit Commission
10
, out of
150 inspected LAs, 13 (9%) were rated as poor performers and 21 (14%) were rated
as weak performers (see Table 4). These 34 (23%) LAs would reflect the
population of failing LAs.
11
10
The CPA and the Audit Commission methodology that led to these ratings were described in
detail in Chapter 2.3 and Appendix 5.
11
The sample revealed no significant difference in the extent of implementation of TMS between
poor and weak performers. Thus, combining these LAs into one category of failing LAs was
125
Table 4: Three Groups of Local Authorities According to the Secondary Data
2002 2005
Poor Weak Fair Good Excellent
Poor 13 (9%) 1 4 6 2 0
Weak 21 (14%) 0 3 9 9 0
Fair 40 (27%) 0 1 18 17 2
Good 54 (36%) 0 1 0 29 24
Excellent 22 (14%) 0 0 0 8 13
PF = Persistently Failing LAs R = Failed and Recovered LAs WP = Well Performing LAs
According to the data published in 2005, within the 34 failing LAs, 17 LAs (11%
out of 150 inspected) improved their status in two to three categories and were rated
as fair/good performers. These 17 LAs would reflect the population of significantly
recovered LAs. Further 17 LAs, (11% out of 150 inspected), stagnated or moved up
only one category and were rated as poor/weak/fair performers. These 17 LAs
would reflect the population of persistently failing LAs. In 2002, 22 (14%) LAs
were rated as excellent performers.
Within these 22 LAs, 13 (9%) LAs kept performing well in 2005. These 13
LAs would reflect the population of well performing LAs. All together, 47 English
LAs were sampled and were the source for collecting both qualitative and
quantitative data.
possible.
PF
WP
R
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3.2. Collecting Qualitative Data
The conceptual frame for TMS and the model of the 3Rs was used as a
guide for questions about specific actions undertaken to facilitate recovery in the
LAs. This stage was an exploratory phase, its most important purpose was to make
the first step toward uncovering the 'black box', the actual managerial process, and
the strategies employed in successfully recovered LAs. Alongside this major
purpose, two secondary purposes justify and were achieved through the qualitative
data: First, further exposure of the nature of failing LAs. Second, to assist with the
construction of a quantitative measurement tool of TMS that was used to collect
quantitative data.
In order to meet these aims, based on secondary data, which provided
information about council's structure (i.e., Metropolitan District Councils/unitary
authority/London Borough Councils), extent of improvement, and geographical
area, two LAs were randomly sampled from the recovered LAs group (group
number 2, see Chapter 3.1.). This group was regarded as the most adequate group
for the exploratory research since they represent the extreme cases in which
successful change strategies were presumably implemented. The sampling process
retained as much as possible the principle of representativeness. In practical terms,
applications for cooperation added to the aims of the study were either mailed or
emailed to all Head Council and CEOs offices. Yet, due to limited resources and
constraints of cooperation we were able to explore only two cases. These two cases
were chosen according to the willingness to cooperate and availability. Since
structures of LAs may differ in size, service provision quality, efficiency,
effectiveness, and socio-economic development (Atkinson and Wilks-Heeg, 2000),
the author made sure the sampled LAs were of different structures, different
geographical areas, and were ranked in 2005 in different categories. While these
two cases LAs do not perfectly represent the variety of English LAs, they did
provide a reasonable base for an exploratory research of the 'black box' and a
descriptive account of a process of recovery:
1. Walsall is a metropolitan district council, located in the West Midlands and one
of the two LAs that made the most impressive recovery (moving from being a
poor performer to being a good performer).
127
2. Swindon is a unitary authority, located in the South West, and one of the six
LAs that made an impressive recovery (moving from being a poor performer to
being a fair performer).
In addition, the case studies are based on qualitative data that refers to a
timeframe of four years, from 2002, when the first CPA report was published, to
2006, when data was collected. Since previous studies found that this time-frame
could allow recovery (Schendel, Patton, and Riggs, 1976) and according to the
secondary data some LAs had indeed improved their rating during this period, we
would assume these four years can reflect the recovery phase or at least a
significant part of it. Furthermore, the two selected case studies improved their
rating during this period and were categorised as fair/good performers.
Generally, two sources of data were used: relevant documents and semi-
structured face-to-face interviews. The documents were supplied by the LAs e.g.,
Comprehensive self assessment, organisational working plan, Cabinet meeting
reports, and by the Audit Commission, e.g., Comprehensive performance
assessment reports and scorecards, Annual Audit, and Inspection Letter. In
addition, a search was conducted in national and local news websites, which
produced contemporary newspaper accounts. This search was carried out while
using keyword such as Walsall/Swindon, council, local, government, and authority
in the BBC Archive and Google News Archive search engines. The documents
supplied an insight and a rich overview regarding the LA demographic information,
the LA level of performance before and during the recovery process, the recovery
progress, descriptions about the management official plans, and the political climate
these LAs went through from 2002 to 2005. Yet, the strategies used (the „black
box?) were not detailed in these official sources but were discovered through the
interviews.
The major aim of the semi structured face-to-face interviews was to reach
and gather high quality information from original sources regarding the recovery
process and the „black box?. They were specifically designed to expose concepts,
terminology, stages, and managerial actions taken during the recovery process. This
was done by enabling fluent responses, statements, opinions, and evaluations to be
expressed by the interviewees. In order to accomplish these aims it was important
128
to select the appropriate interviewees. While performance evaluations of failure and
recovery were mainly based on external key stakeholders and superior bodies (i.e.,
the Audit Commission data and documented reports), managerial insights should be
supplied by internal key figures (the interviewees). Therefore, exploring the 'black
box' should be based on an appropriate, credible internal key players that originate,
plan, control, implement, and therefore, can evaluate and report on the change
strategies used. In the case of recovered LAs, the body that has these abilities is the
senior management, which leads organisational changes and has a proactive
position in complex organisational processes. Therefore, senior managers were
chosen to participate in the interviews.
The author decided to interview the top senior managers, meaning the head
of the council who is the senior politician and the CEO who is the senior officer.
The assumption is that the most reliable, extensive, and accurate information will
be in the hands of these figures as they were involved in the most influential
decision making during the recovery process. Moreover, the structure of power of
the LA senior management consists of a mixture of both elected and non-elected
staff members since the constellation of English local government management and
policy making includes professionals alongside politicians (Dunleavy, 1980).
Accordingly, both professionals alongside politicians were represented. In each LA,
one of the interviewees was an elected member: the Leader of the Council; and one
of the interviewees was a non-elected member: the Chief Executive/Finance
Executive Director (subject to willingness to cooperate and availability). The
rationale behind this choice was to reflect a typical LA management team as
accurately as possible.
In practical terms, after a Council agreed to participate in the research,
applications were sent to the Head Council and CEOs offices asking for permission
to interview these specific figures. As accepted, the applications were handled by
the secretariat. The interviews were conducted with four leaders who were deeply
involved in the recovery process in their LA over the last few years. Two of the
interviewees joined the Council of Walsall in the late 1980s and two of them joined
Swindon Council in the early 2000s.
The interviews were conducted in July 2006; they took place in the
129
interviewees' offices, they lasted an average of 1½ hour, and they were recorded
with the permission of the interviewees. During the interview, open-ended
questions were presented to the interviewee by the interviewer and answers were
followed by asking for clarifications and examples where it was required.
The tool used to collect the desired data was developed in three stages:
1. The author created the first draft of the proposed interview. The first draft
contained questions aimed at exposing as much information as possible
regarding the failure, its characteristics, the recovery process, and the strategies
that were employed for achieving recovery.
2. The draft was presented to two experienced scholars who were familiar with the
LA research area. These researchers acted as independent judges, who made
some improvements concerning the content and the phrases used. This process
increased the validity of the tool.
3. The first draft was updated, redesigned, and developed according to the judges'
comments. The judges and the author then approved the final version.
The final interview included three sections (see Appendix 4). The first
section contained the introduction presented to the interviewees: the research topic
and the aim of the study. At this stage, the interviewer asked the manager for
his/her cooperation and discussed confidentiality issues. The second section
contained demographic questions meant to follow personal and employment
background (e.g., age, tenure in the current position). The third section contained
the core questions aimed at exposing the interviewees? opinions, evaluations, and
examples concerning the LA failure phase, the organisational cycle that led to
recovery, and most importantly, the change strategies taken in order to bring about
a recovery. For instance, „What were the causes that led to the deterioration of the
local authority??; „What actions were taken in order to recover the local authority??
etc.
The approach of interpreting and analysing the qualitative data was based
on the integration of two strategies: analytic induction and narrative analysis.
Analytic induction begins with the definition of a research question, preceded by a
rough hypothetical explanation of the problem, and then continues with the
130
collection of data, i.e., examination of cases. The gathered data reshapes and
reformulates the initial hypothetical explanation in order to explicate phenomena
(Bryman, 2004). In other words, this study examines the question of TMS
effectiveness in achieving a recovery and assumes that change strategies have a
possible, useful, and potential role in dealing successfully with a LA?s failure.
Narrative analysis is sensitive to words, gestures, and the sense of temporal
sequences that the interviewees, as tellers of stories, expose (Bryman, 2004).
Alongside exploring „what actually happened?? during the recovery process, this
strategy uncovered „how did the managers make sense of what happened?? and
what are their interpretations of organisational events. In order to get rich
information, this strategy employed broad, open-ended questions, such as „how did
you bring about a recovery?? Both interpretation strategies, analytic induction and
narrative analysis, reshaped the initial assumption about TMS effectiveness, and
made the first step in drawing the nature of relationship between TMS and
recovery, explaining the data published by the Audit Commission, and illustrating
the cyclical sequences of failure and recovery. The information gathered was
further used to explain the nature of failing LAs and to construct a quantitative
measurement tool.
In sum, the careful sampling and the interviewing techniques used ensures
that the data reflects a descriptive account of failing LAs. Since, as far as the author
concerns, the LAs chosen are not unique or significantly different from other
English failing LAs the findings are valid for generalisation. Yet, each LA, failure,
and recovery process has its own distinctiveness circumstances, figures, and
narrative. Thus, while general organisational moves and phases, managerial
strategies, and central-local relations characteristics would probably be common to
other cases, personal occurrences and relationships would probably differ.
3.3. Collecting Quantitative Data
3.3.1. Sampling of Participants
While the participants who provided qualitative data were from recovered
LAs, the participants who provided quantitative data were from all three samples of
131
LAs: persistently failing, recovered, and well-performing LAs. Similarly, identical
considerations were taken into account in choosing the interviewees and in
choosing the surveyed population. Here again, information was gathered from
senior managers (both councillors and executives) (see Chapter 3.1.).
In practical terms, the sampling process included the collection and listing
of the contact details (i.e., names, positions, phone-numbers, and e-mail addresses)
of all senior leaders (i.e., council leaders, cabinet leaders, cabinet members,
committees? chairman, and executive directors). The details were collected from all
LAs that were rated and labelled by the Audit Commission as poor/weak
performers in 2002 and those that were rated and labelled as excellent performers in
2002 and 2005. The number accounts to 43 LAs (four LAs, in which the personal
details of the senior management were not accessible, were excluded from the
sample).
These 43 LAs enabled a classification of LAs into three distinct groups
according to their performance and as will be discussed in Chapter 3.3.2. This
information was accessible, and was mostly gathered from official websites. In
some cases, the contact details were sent to the author by email, after contacting the
council?s online contact centre. Overall, a pool of participants was gathered from
these 43 sample LAs totalling 553 potential participants. At this point of the
sampling process, the population and the sample were almost identical. They both
included senior managers of failing and well performing LAs. However, since not
all listed senior managers eventually replied, the final sample was smaller, yet still
representative. The representativeness of the sample was not influenced by the
actual number of participants because there was no pattern of participation. The
sample consists of a random group of senior managers.
3.3.2. Descriptive Statistics of the Local Authorities
Within the 43 English LAs (N = 43) sampled in 2002, 25.6% were rated as
poor performers, 44.2% were rated as weak performers, and 30.2% were rated as
excellent performers (see Table 5 and Figure 4). In 2005, 2.3% of these LAs were
rated as poor performers, 14% were rated as weak performers, 37.2% were rated as
132
Table 5: Descriptive Statistics of the Local Authorities’ Sample (N = 43)
Variable Values N %
CPA Rates in 2002 for LAs Poor 11 25.6
Weak 19 44.2
Excellent 13 30.2
CPA Rates in 2005 for LAs Poor 1 2.3
Weak 6 14.0
Fair 16 37.2
Good 7 16.3
Excellent 13 30.2
Recovery (Dichotomy) of LAs Consistently failing LAs 17 39.5
Recovered LAs 13 30.2
Performing Well LAs 13 30.2
Extent of Recovery within Failing LAs
12
Stagnated 4 13.3
Moved up 1 category 13 43.3
Moved up 2 categories 12 40.0
Moved up 3 categories 1 3.3
fair performers, 16.3% were rated as good performers, and 30.2% were rated as
excellent performers (see Figure 5). Division of the sample into the three major
groups according to performance shows that in 2002 and 2005, 39.5% of the LAs
were consistently failing, 30.2% were failing LAs that recovered, and 30.2% were
good performers (see Figure 6). Within the failing LAs, 13.3% stagnated, 43.3%
improved their performance in one category, 40% in two categories, and 3.3% LAs
in three categories (see Figure 7). The following table and graphs describe the
sample of LAs.
12
Extent of recovery refers only to poor and weak LAs (N=30) while excellent performers are
excluded. This point will be discussed in details in Chapter 3.3.4.
133
25.58
44.19
30.23
Poor
Weak
Excellent
Performance in 2002
2.3
14
37.2
16.3
30.2
Poor
Weak
Fair
Good
Excellent
Performance in 2005
Figure 4: CPA Rates in 2002 for Local Authorities (%) (N = 43)
Figure 5: CPA Rates in 2005 for Local Authorities (%) (N = 43)
Figure 4 and 5 show a reasonable distribution of rating of performance of LAs.
134
Stagnation Moved up one
category
Moved up two
categories
Moved up
three
categories
Extent of Recovery
0
10
20
30
40
50
P
e
r
c
e
n
t
13.3
43.3
40
3.3
Extent of Recovery
39.53%
30.23%
30.23%
Failed & Failing
Failed & Recovered
Well Performing
Recovery (Dichotomy)
Figure 6: Recovery (Dichotomy) of Local Authorities (%) (N = 43)
Figure 7: Extent of Recovery within Failing Local Authorities (%) (N = 30)
Figure 6 and 7 show a reasonable distribution of level of recovery of LAs.
135
3.3.3. Distributing the TMSLA Questionnaire
In order to collect a large quantity of data, a questionnaire was distributed
among the sample participants. The questionnaire included three sections (see
Appendix 5):
1. A short personalised cover letter which specified the aim of the study and
assured confidentiality
2. The TMSLA scale, which measured the extent of implementation of TMS
according to the participants' evaluations
3. The demographic questions
The questionnaire was distributed and administrated by using professional
online survey software, a technique that has recently been more extensively used
(Bryman, 2004). The list of participants and their personal details (i.e., name, role,
address, e-mail address, and name of LA) were coded into the software. In addition,
an electronic version of the questionnaire, which is identical to the hard copy
version was coded into the software as well (please see an example in Appendix 6).
Then, the questionnaire was sent to all 553 participants? personal e-mails and a
reminder, a short e-mail, was sent after two weeks to those who did not respond.
The software enabled the participants to fill in their responses into an on-line web-
survey and send the results by one click. The software also tracked individual
participation (i.e., the name, role, and name of LA of the participant), blocked
multiple replies, and automatically downloaded the responses into an electronic
database. Since participation in this survey did not necessitate computer expertise,
printing or mailing facilities and since the participants published their email
addresses we believe the website survey was not a barrier for taking part in this
study.
3.3.4. Descriptive Statistics of Participants Sample
126 senior managers, councillors and executive directors (N = 126),
136
participated in the research, a response rate of 23%.
13,14
77.8% of the respondents
were males, 16.7% were females, and 5.6% did not answer the question. The
average age of the respondent was 54.3 years old (S.D. = 9.99), the mode age was
56, and the median age was 55. The average years of education was 16.4 years
(S.D. = 3.45), the mode and the median years of education were 17. The average
tenure in position was 6.73 years (S.D. = 7.85), the mode tenure was 3 years, and
the median tenure was 4 years. 78.6 % of the respondents held a councillor
position, 16.7% were non-elected members, and 4.8% did not answer the question.
5.6% of the participants were cabinet leaders, 42.9% were cabinet members, 27%
were committees chairman, 15.1% were CEOs/executive directors, and 9.5% did
not answer the question. The detailed descriptive statistics containing central and
dispersion measures is presented in Table 6. The graphical descriptions of the
demographic variables are presented next (see Figures 8 to 13).
34.2% of the participants were from LAs that were rated in 2002 as poor,
34.1% of the participants were from LAs that were rated as weak, and 31.7% of the
participants were from LAs that were rated as excellent. 4.8% of the participants
were from LAs that were rated in 2005 as poor, 11.1% of the participants were
from LAs that were rated as weak, 40.5% of the participants were from LAs that
were rated as fair, 12.7% of the participants were from LAs that were rated as good,
and 31% of the participants were from LAs that were rated as excellent.
13
Typically, response rate to on-line surveys are lower than those for comparable postal
questionnaire survey (Bryman, 2004).
14
Following up on nonrespondents revealed that they were distributed in a similar way to the
respondents: 32% were from persistently failing LAs, 32% were from recovered LAs, and 36% were
from well-performers, compared to 39%, 29%, and 32% (respectively) within the respondents. 80%
of the nonrespondents were councillors and 20% were non-elected members compared to 83% and
17% (respectively) within the respondents.
137
Table 6: Descriptive Statistics of the Participants (N = 114-126)
Variable Values N % Mean S.D. Range Minimum Maximum
Gender Male 98 77.8 - - - - -
Female 21 16.7 - - - - -
Not Answered 7 5.6
Position Councillor 99 78.6 - - - - -
Non-Elected
Member
21 16.7 - - - - -
Not Answered 6 4.8
Title Cabinet Leader 7 5.6 - - - - -
Cabinet Member 54 42.9 - - - - -
Committee
Chairman
34 27 - - - - -
Chief Executive/
Executive Director
19 15.1 - - - - -
Not Answered 12 9.5
Age (in years) - - - 54.3 9.99 51 29 80
Education
(in years)
- - - 16.4 3.45 21 9 30
Tenure
(in years)
- - - 6.73 7.85 39.5 0.5 40
Table 6 shows that participants were reasonably split between genders, positions,
titles, ages, years of education, and years of tenure.
138
77.78%
16.67%
5.56%
Male
Female
Missing
Gender
20.0 30.0 40.0 50.0 60.0 70.0 80.0
Age
0
5
10
15
20
25
F
r
e
q
u
e
n
c
y
Mean = 54.263
Std. Dev. = 9.9987
N = 118
Age
Figure 8: Gender of Participants (%) (N = 126)
Figure 9: Age (in years) of Participants (N = 118)
Figure 8 and 9 show reasonable distributions of gender and age of participants.
139
5.00 10.00 15.00 20.00 25.00 30.00
Education
0
5
10
15
20
25
30
F
r
e
q
u
e
n
c
y
Mean = 16.4615
Std. Dev. = 3.45048
N = 117
Education
0.00 10.00 20.00 30.00 40.00
Tenure
0
10
20
30
40
F
r
e
q
u
e
n
c
y
Mean = 6.7309
Std. Dev. = 7.85686
N = 118
Tenure
Figure 10: Education (in years) of Participants (N = 117)
Figure 11: Tenure (in years) of Participants (N = 118)
Figure 10 and 11 show reasonable distributions of years of education and tenure of
participants.
140
78.57%
16.67%
4.76%
Elected
member/Councillor
Non-Elected
member/Executive
officer
Missing
Position
5.56%
42.86%
26.98%
15.08%
9.52%
Cabinet leader
Cabinet member
Committee chairman
Executive director
Missing
Title
Figure 12: Position of Participants (%) (N = 126)
Figure 13: Title of Participants (%) (N = 126)
Figure 12 and 13 show reasonable distributions of position and titles of participants.
141
Division of the sample into the three major groups according the variable
Recovery (dichotomy) showed that 38.9% were from consistently failing LAs,
29.4% were from recovered LAs, and 31.7% were from well performing LAs. The
variable extent of recovery only refers to participants from failing LAs, since
participants from good performers had no equal chance to improve their rate
compared to their ranks in 2002. Among the participants from failing LAs, 10.5%
were from LAs that stagnated, 46.5% were from LAs that moved up one category,
38.4% were from LAs that moved up two categories, and 4.7% were from LAs that
moved up three categories. The detailed descriptive statistics for the participants?
LA?s performance is presented in Table 7. The graphical descriptions of these
variables are presented next (see Figures 14 to 17).
142
Table 7: Descriptive Statistics of the Participants’ Local Authority’s
Performance (N = 126)
Table 7 shows that participants were reasonably split between levels of
performance and levels of recovery of LAs.
15
Extent of recovery refers only to participants of poor and weak LAs (N=86) while participants of
excellent performers are excluded. This point is discussed in details in Chapter 3.3.4.
Variable Values N %
Participants? LA Performance in 2002 Poor 43 34.2
Weak 43 34.1
Excellent 40 31.7
Participants? LA Performance in 2005 Poor 6 4.8
Weak 14 11.1
Fair 51 40.5
Good 16 12.7
Excellent 39 31.0
Participants? LA Recovery (dichotomy) Consistently failing LAs 49 38.9
Recovered LAs 37 29.4
Well-Performing LAs 40 31.7
Participants? LA Extent of Recovery
15
Stagnated 9 10.5
Moved up 1 category 40 46.5
Moved up 2 categories 33 38.4
Moved up 3 categories 4 4.7
143
34.13
34.13
31.75
Poor
Weak
Excellent
Participants' Local Authority's Performance in 2002
4.8
11.1
40.5
12.7
31
Poor
Weak
Fair
Good
Excellent
Participants' Local Authority's Performance in 2005
Figure 14: Participants’ Local Authority’s CPA Rates in 2002 (%) (N = 126)
Figure 15: Participants’ Local Authority’s CPA Rates in 2005 (%) (N = 126)
Figure 14 and 15 show that participants were reasonably split between CPA rates.
144
38.89
29.37
31.75
Failed & Failing
Failed & Recovered
Well Performing
Participants' Local Authority's Recovery (Dichotomy)
Stagnated Moved up 1
category
Moved up 2
categories
Moved up 3
categories
Extent of Recovery
0
10
20
30
40
50
P
e
r
c
e
n
t
10.5
46.5
38.4
4.7
Extent of Recovery
Figure 16: Participants’ Local Authority’s Recovery (Dichotomy) (%)
(N = 126)
Figure 17: Participants’ Local Authority’s Extent of Recovery (%) (N = 86)
Figure 16 and 17 show that participants were reasonably split between levels of
recovery.
145
3.3.5. Study Variables
3.3.5.1. Extent of Implementation of Turnaround Management Strategies
The aim of this study is to create a measurement tool for Turnaround
Management Strategies in LAs. Creation of a new measurement tool follows two
main steps:
1. Conceptualisation
2. Operationalisation
The literature review has dealt with the conceptualisation of TMS, their
characteristics, theoretical framework, and adaptability for LAs. The qualitative
data and particularly the interviews will further contribute to the conceptualisation
of a scale and fill it with content that reflects the field. This abstract level is the start
point for the second step. Operationalisation means linking and designing concepts
and definitions to a specific set of procedures, measures, questions, and items. It
employs the construction of the scale and the validation process.
The variable 'Extent of Implementation of TMSLA' is the operational
definition for the theoretical definition of TMS: „the actions taken to bring about a
recovery in performance in a failing organisation? (Pandit, 2000). This variable is
an independent variable, which may affect the achievement of recovery (Beeri,
2009a). Although existing literature has dealt with the measurement of TMS, we
found the measurement tools used inadequate for this research. In our view, the
way TMS have been usually measured in previous studies has yet to uncover the
full picture regarding the extent of implementation of TMS. The published work on
TMS largely consists of case studies of single organisations. As previously noted,
the methodological problem with such studies is that the strategies that supposedly
led to organisational recovery may also have been used in persistently failing
organisations. This study aims to be more accurate by comparing recovered and
persistently failing LAs. No research based on this comparative methodology while
using a detailed scale of TMS has so far been conducted in the public sector
(Boyne, 2004).
Additionally, it can be argued that the existing measurement of TMS tends
to treat the „black box? as a homogeneous set of strategies. Given that the „black
146
box? is heterogeneous, there is a need for testing and explaining the nature of each
group of strategies (or each strategy) in a recovery process (Walshe et al, 2004).
The quantitative part of this research dismantles the „black box? by using several
ways of measurement: extent of implementation of the overall TMSLA, TMSLA
according to the 3Rs dimensions, and TMSLA as individual strategies.
16
3.3.5.2. Recovery of Performance
According to Joyce (2004), a public organisation that experiences a
recovery process is ’an organisation moving from being a poor performer to being
a good performer’. Recovery of performance is the core and expected outcome of a
successful recovery process. While we have assumed that Recovery of Performance
may be positively related and affected by TMS, Recovery of Performance is the
dependent variable in this study.
The variable recovery was based on secondary data published by the Audit
commission between 2002 and 2006 (see Table 1). Since there is no measure for
LAs? recovery in previous studies, we created two optional operational definitions
for recovery. The secondary data contains all 150 English LAs and their CPA rates
over those years (The Audit Commission methodology and findings were specified
in Chapter 2.3. and Appendix 3). According to the CPA rates LAs were categorised
into five groups of performance: Poor performers, Weak performers, Fair
performers, Good performers, and Excellent performers. This data enabled the
measurement of recovery in two ways, which do not compete but complement each
other. The dual measurement will enable to run various tests and have several
points of view on the relationship between TMS and recovery:
1. Recovery as a Dichotomous Variable- The measurement level of this variable
is nominal. Each failing LA and the senior managers who participated in the
study were classified either as recovered or persistently failing. Since the
definition of recovery emphasises radical improvement and movement toward
being a good performer, improving performance in at least two categories
16
The construction and validation process of 'Extent of Implementation of TMS' will be discussed
after the Results and Discussion chapter since it is partly based on the Case Study chapter.
147
(from poor to fair, from poor to good, or from weak to good) was considered as
a significant recovery. Thus, the variable Recovery was coded as following:
Persistently Failing – 0 and Recovered – 1.
2. Extent of Recovery- The measurement level of this variable is ordinal. It could
be argued that it is impossible to make a decision regarding the exact point
from which a recovery is significant. In order to deal with this argument, this
variable regards the categories used by the Audit Commission as gradual levels
of performance and recovery. These levels reflect the extent of recovery. Thus,
climbing up three categories could be considered as a larger extent of recovery
than climbing up two categories.
3.3.5.3. Demographic Variables
In order to characterise the sample of participants and make sure it reflects
the general population of senior managers in LAs, several demographic variables
were measured. The demographic variables were Gender, Age, Years of Education,
Position (Elected Member – Councillor/Non-Elected Member - Executive Officer),
Title in the Local Authority (Cabinet Leader/Cabinet Member/Committee
Chairman/Chief Executive/Executive Director/Other), and Tenure in the present
position.
3.3.6. Analyses and Statistical Procedures
In order to describe the sample, test the validity and reliability, and test the
effectiveness of TMS, the participants? evaluations were inputted into a data file.
Using SPSS 14.0 (Statistical Package for Social Sciences version 14.0) the data was
manipulated, described, and analysed. As presented previously, descriptive
statistics were used to portray the sample. The demographic variables were
described using central measures (Mean, Median, and Mode), dispersion measures
(Standard Deviation, Range, Minimum, and Maximum), appropriate graphs (Pie
chart, Bar Chart, and Histogram), and cross tabulation.
Testing the reliability and validity to support new scales was done according
148
Neuman?s (2003) recommendations and the Vigoda-Gadot et al. (2007) process.
Multiple tests examined three major aspects of „Extent of TMS implementation?:
1. Content Validity- TMSLA scale was expected to have face and content validity.
That means that the conceptual and the operational definitions of the new scale
were expected to be internally coordinated. The items were expected to reflect,
cover, and represent the concept of TMS in LAs. In this case, the expectations
were examined with qualitative tools according to two criteria: Content
Validity, which answers the question whether the new scale captures the entire
meaning of TMS, and Face Validity, which focuses on the value of the new
scale in the eyes of others.
2. Construct Validity- In line with TMS construct, and consistently with the
reviewed literature, TMSLA was also expected to reflect aspects of three major
sets of associated strategies: retrenchment, repositioning, and reorganisation. In
order to support the convergent validity, which means that multiple measures of
the same construct hang together or operate in similar ways, these constructs
were expected to be associated with each other. These expectations were tested
using factor analysis technique (Principal Components Analysis) and Pearson?s
Coefficient Correlation.
3. Reliability- The new scale was expected to be dependable and not to produce
numerous results that vary across divergent contexts or groups. Thus, TMSLA
was expected to have internal consistency, equivalence reliability (comparison
between divergent contexts), and representative reliability (comparison between
sub-populations). These expectations were tested using various techniques:
Cronbach?s alpha was applied to assess the internal consistency; Split-Half
technique and Spearman-Browne Correlation Coefficient were conducted to test
the equivalence reliability; and lastly, to test the representative reliability,
independent samples t-tests for groups of different demographics characteristics
were conducted.
The core analysis of the quantitative data concerned tests that analysed the
effectiveness of TMS in achieving recovery. The inferential statistics required
various procedures, which were carried out in two stages:
149
1. For each test (e.g., Chi
2,
Spearman, Pearson, T-test, Anova, Mann-Whitney U,
Regression), we tested whether the correlation/difference/prediction should be
rejected or not. According to the common recommendation for social sciences
scholars, the probability that our model or effect is generally applicable and not
just an occurrence should be tested. The more variation our model explains, the
bigger the test statistic will be, and the more unlikely is it that it occurred by
chance. Thus, as test statistics grows bigger, the probability that it occurred by
chance becomes smaller. When this probability falls below 0.05, it allows us to
assume with some extent of confidence that it reflects what really occurred
within the study population (e.g., failing LAs in general) (Field, 2005).
2. For each test, the effect size (e.g., Eta Squared, r), an objective and standardized
measure of the magnitude of the difference between the groups was calculated.
In other words, it was checked if the effect the test measured was meaningful or
important. Eta square can range between 0 and 1 and represents the proportion
of variance of the dependent variable that is explained by the independent
variable. The guidelines for Eta squared values interpretation are as follow: .01
= small effect, .06 = moderate effect and .14 = large effect (Pallant, 2001). The
„r? value can range between 0 to 1 and represents the proportion of variance of
the dependent variable that is explained by the independent-group variable; the
guidelines for r values interpretation are: .1 = small effect, .3+ = moderate
effect, and .5+ = large effect (Field, 2005).
In order to explore the nature and effectiveness of TMS, various tests were
conducted. While the above procedures describe the general stages of inferential
statistics, the following details the tests employed and their aims:
1. The extent of implementation of TMS in failing LAs- The first assessment
employed descriptive statistics procedures such as central measures (Mean,
Median, and Mode), dispersion measures (Standard Deviation, Range,
Minimum, and Maximum) and the analysis of shapes of distributions. Among
senior managers in failing LAs, the variables to be described were Overall
TMSLA, the eight factors, and the individual strategies. These procedures
provided the necessary information to estimate the extent of implementation of
TMSLA and particularly in failing LAs.
150
In addition, a comparison made it possible to assess whether particular
TMS were more popular than other TMS. In order to compare the extent of
implementation of different factors, One-way repeated measures ANOVA
including Post-Hoc tests (i.e. Paired-samples T-tests) were conducted. This test
is used for comparison of mean scores of dependent variables (i.e., the eight
factors). This test has several underlying assumptions that had not been
violated: the use of a dependent variable, which is measured at ratio level; the
scores were obtained by using a random sample; the observations were
independent; the populations were normally distributed (however, this test is
tolerant for the violation of normality in large sample sizes (e.g., 30+)); and,
samples were obtained from populations of equal variance (Field, 2005; Pallant,
2001).
2. Comparison of the extent of implementation of TMS between failing and well-
performing LAs- This comparison enabled to assess whether TMS are more
popular within failing LAs. These comparisons were conducted by using Two
Independent Samples T-tests. This test is used for comparison of mean scores of
dependent variables (i.e., Overall TMSLA, the eight factors) between two
groups (i.e., participant from failing LAs versus participants from well-
performing LAs). This test has several underlying assumptions that are similar
to those presented for One-way repeated measures ANOVA.
Comparisons of individual strategies between senior managers of failing
and well-performing LAs were conducted with the use of Mann-Whitney U
tests. This non-parametric test is actually used to test the differences in medians
of two independent groups. This test has two underlying assumptions that had
not been violated: the scores were obtained by using a random sample and the
observations were independent (Field, 2005; Pallant, 2001).
3. Comparison of the extent of implementation of TMS between recovered and
persistently failing LAs- This comparison is aimed at assessing whether TMS
tend to be implemented to a larger extent in LAs that had successfully
recovered. Comparisons of TMSLA were conducted by using Two Independent
Samples T-tests. Comparisons of individual strategies were conducted with the
use of Mann-Whitney U tests.
151
4. Correlating the TMS extent of implementation and recovery- This test was
aimed at estimating whether there are linear relationships between the variables
and whether increased implementation of TMS relates to increased recovery.
The correlation was tested using Spearman's Rank Order Correlation (Rho).
This non-parametric test is used to calculate the strength of the relationship
between two ordinal/continuous variables. The Spearman coefficient values
range between –1 (indicating strong negative correlation) and +1 (indicating
strong positive correlation). This test was used for the Overall TMSLA, the
eight factors, and the individual strategies.
5. Predicting successful recovery- The aim of this test was to assess whether
increased implementation of TMS can predict successful recovery. In order to
explore and assess the impact of a set of predictors on a dependent variable,
logistic regression was used. The underlying assumptions such as sample size,
multicollinearity, and outliers were taken into consideration. Multiple
regression is adequate to predict a categorical dichotomy outcome. Thus,
„Persistently Failing? LAs were coded as „0? and „Recovered LAs were coded as
„1?. An explorative approach required to follow Field (2005) recommendation
and use the stepwise Forward Wald method, which automatically excludes the
variables not explaining the dependent variable and presents the best possible
predicted model.
In sum, this chapter provides an overview of the operational crossroads of
this study. The description of these crossroads illustrates the decisions made in
reference to methodological questions like (i) how this study was carried out, (ii)
how information was gathered, (iii) how units were sampled, (iv) how variables
were measured, and (v) how statistical procedures were made. In other words, the
methodology chapter clarifies how the research questions were evaluated and tested
and how the results, which are about to be presented, were found.
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CHAPTER 4: CASE STUDIES
The following report is based on two stories of LAs. Although the ability to
infer from these two cases to all other cases is limited, the exploratory approach
enables an initial and basic overview of TMS and recovery process in failing LAs.
By being sensitive to the organisational narratives, as they appear in the documents,
self-reports, governmental reports, newspaper articles, and throughout the
interviews, the qualitative data enlightens the insight developed up to this point.
Namely, it provides a reshaped perspective concerning the characteristics of failing
LAs, the content of TMS used later to construct a matching scale, and the impact of
these strategies and recovery.
Before getting into the details, it is important to put the cases in the wide
context of English local government. Therefore, this report should be read as a
continuation of the literature review and as a detailed description of scenarios of
failure and recovery within the English local government case described earlier.
Assuming the reader bare those circumstances in mind, the first part of the report
consists in the political background and demographical population of each LA.
Second, the LA services' performance, financial status, and organisational climate
before the recovery process are portrayed. Third, managerial processes such as
triggers that led to change and strategic plan formulation are presented. Fourth, the
extent of recovery is evaluated and the strategies used to bring about these
recoveries are detailed. Lastly, a comparison between the cases concerning several
aspects is drawn.
4.1. Walsall and Swindon Turnaround
4.1.1. General Description of the Councils
According to the Audit Commission (2002) and the LA self reports (2005),
Walsall was formed in the 1970s by the merger of two LAs. It has a population of
more than one quarter of a million, and is close to the heart of the national road and
rail networks. It covers over 100 square kilometers and combines urban, suburban,
and rural communities that reflect the area?s socio-economic history of heavy
industry and craft based industry. About 33% of residents are aged under 25 (above
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the national average of 31%), 20% are under 16 (equal to the national average of
20%), 14% are from minority ethnic backgrounds (India, Pakistan, Bangladesh, and
Black Groups) and around 40 different languages are spoken. Compared to the
national average Walsall has a low percentage of residents in managerial and
professional posts - (20% against 26% at national level)
Walsall has more than 50 councillors: The Conservatives hold more than
60% of seats, the Labour has 30% of seats and the Liberal Democrats have around
10% of seats representing 20 wards. Walsall currently has an overall Conservative
administration majority and the same leader since 2001. Walsall has „leader and
cabinet? constitutional arrangements. There is a one-party Cabinet and five scrutiny
and performance panels. The posts of chair and vice-chair are shared between the
three political groups. The council provides work for around 10,000 employees and
the draft net revenue budget for 2005/6 was about £350 million.
Since the 1970s and during the 1980s and the 1990s there was a decline of
the local economy with the loss of traditional sources of employment. Urban
Program, City Challenge, Single Regeneration Budget (SRB), New Deal for
Communities (NDC), Neighbourhoods Renewal Fund (NRF), and other regional
development assistance plans have sought to regenerate the local economy and its
communities. This was done by restoring previously contaminated brown field
sites, building capacity in the local workforce, developing fresh industrial and
commercial business opportunities within the borough, and improving the physical
infrastructure (Audit Commission, 2002). However, these national plans had not
prevented poor performance in Walsall, as will be described later.
According to the Audit Commission reports, the second case study,
Swindon, has a population of about 200,000 people, most of whom live in urban
areas. Since the 1950s, the population has doubled, compared with a 20%
population increase nationally, and it is projected to continue to be one of the
fastest growing areas in England. The population is slightly younger than the
national average (50% aged fewer than 40 while 54% is the national average). The
proportion of people from black and minority ethnic groups is 3.3% compared with
the national average of 7.25%.
The LA area economy is buoyant. Despite the loss of its railway base,
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effective dialogue with the business sector encouraged firms of significant size to
relocate their headquarters to its area. In 1998 the Office for National Statistics
listed Swindon as having one of the highest gross domestic products per capita in
England outside London. Unemployment levels continue to be well below the
national rate, falling to a record low of 1.55% in 2000 compared with 3.4%
nationally. The LA rank of Area of England has passed the median in 2005, which
reflects the improving status of residents in past years. Despite this, it has
significant social and economic diversity within its relatively small and compact
area, with two wards that are nationally ranked amongst the most disadvantaged
wards.
The Audit Commission?s reports points out that, for many years Swindon?s
Council and its predecessor had a Labour majority, but in the last couple of
elections the majority changed more than once. Swindon?s council comprises more
than 50 Councillors. The Conservatives hold more than 50% of seats, the Labour
has 33% of seats and the Liberal Democrats have about 17% of seats. In 2000
Swindon adopted a decision-making model based on a Cabinet with Leader. The
cabinet has responsibility for executive decisions within the overall budget and
policy framework, whilst a scrutiny commission monitors and assesses the
performance of both the cabinet and the LA as a whole. The cabinet includes the
leaders of both conservative and liberal democrat groups as members without
portfolio. There are four area panels, consisting of ward councillors meeting with
local people and groups to develop services. Finally, Swindon has a standards
commission of councillors and independent people to consider issues of probity and
to establish ethical codes of behaviour.
The overall revenue budget of Swindon for the year 2004/05 was around
£300 million. The LA employed around 8,000 people making it the largest
employer within the borough. The Chief Executive is supported by a team of five
directors that represent different areas: Education and Community Services,
Housing and Social Services, Resources, Environmental Services, and the LA's
Services. Yet, this organisational structure had not prevented poor performance in
the case of Swindon as well, as will be portrayed below.
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4.1.2. Poor Performance
In December 2002, Walsall was labelled by the CPA report as a „poor
performer?. A number of serious concerns relating to the LA corporate governance
arrangements, services delivery, and organisational culture were described in an
earlier governmental Corporate Governance Report, published in 2002 (p. 7). As
described by the report:
'We found significant weaknesses in Walsall?s corporate governance
arrangements…
Community Focus- The Council does not have a corporate vision … and as
yet has no community strategy… no strategic approach to community
consultation and involvement. There is cynicism about council politics in
Walsall and mistrust of local politicians...The Council does not have a
communications strategy and there is no overall management of
communications or image. This leads to a fragmented and reactive
approach, and results in negative media coverage and a poor external
perception of the Council. Without clear political leadership…Walsall?s
community focus is unlikely to improve.
Structures and processes- The Council lacks the infrastructure for effective
modern local government…There is no systematic approach to planning or
performance review to drive service improvement and the Best Value
process is not being used to challenge and make significant service
improvement…
Risk management- The Council?s finances are critical and precarious.
Action taken to date is inadequate given the longstanding nature and
seriousness of the problems. There has been no review of how resources are
spent, nor any attempt to take a strategic approach to the budget or use best
value to look at fundamentals.
Service delivery- There are pockets of good service delivery but the Council
is unable to learn from these or integrate improvement or good practices.
This is because there is no corporate process of performance and service
improvement.'
As a consequence of these findings, the Council crisis has been widely covered by
the media. While shaping the public view, it stressed out the tensed central-local
relationship, as the BBC (2002a) reported:
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'Sir Andrew Foster, controller of the Audit Commission, said the situation
was "very grave… Walsall Council has failed local people… The findings
of the inspection team include poor financial management such as "hand-to-
mouth" budgets with the authority lurching from one financial crisis to
another. Uncontrolled over-spending and unrealistic budgets often set too
late had led to "serious inaccuracies" in the figures, according to the
auditors. Funds intended for long-term investment had instead been raided
to tackle short-term financial problems. As a result, roads in Walsall were
the "worst" of any local authority in England or Wales.'
This paragraph demonstrates the extended role taken by the Audit Commission in
interpreting local needs and local priorities. Similarly, the Birmingham Post
(2002a) reported:
'Council is 'hopeful' of getting better. A crisis-ridden Midland council
condemned by inspectors in a devastating report is getting better but still has
a long way to go, Ministers have warned. Walsall Council had made some
improvements, said a spokesman for Local Government Minister Nick
Raynsford. However, it still suffers from many of the problems that led it to
receive the worst inspection report ever published about a local authority…
The inspectors concluded Walsall council was "in a crisis". It was given a
deadline of the end of April to improve. Yesterday, the council said it was
"cautiously confident and hopeful" it would be able to show progress by
then, but admitted "there is a huge amount still to do." They warned the
council had no communications strategy, there was "cynicism about council
politics in Walsall and mistrust of local politicians", there was no clear
political leadership, the council "lacks the infrastructure for effective
modern local government", its finances were "critical and precarious" and
"medium term financial planning is virtually non existent".'
Obviously, local decision makers were not happy with the results presented
by the Audit Commission and newspaper reports. Since locals held the idea that the
Best Value regime and CPA were not free of lacunas, decision makers fought back
and criticised these reports, ideas, procedures, and performance measurement
system, while the Audit Commission justified them. For instance, the following
report demonstrates this struggle:
'Some councils complained that the exercise was unfair and one even
threatened legal action on finding itself marked down. But James Strachan,
commission chairman, said: "It was definitely and absolutely fair. Local
people will have a stronger and clearer idea of the overall performance of
their council than they have ever had before."... Even the best performing
councils had misgivings about the tables. Simon Milton, leader of
Westminster, said: "The 'name and shame' regime will see the reputation of
local government decline, not improve.' (Johnston, 2002).
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Though that the media describes some kind of resistance to the CPA
methodology at the end of the day LAs admitted their bad performance and
eventually fully cooperated with central agencies. The audit report and the media
coverage supply evidence for a failure characterised by multiple and interrelated
factors. When the interviewees were asked to describe the council's performance
during this period (the late 1990s and early 2000s) they chose to use a tough
language, indicating that the failure was recognised by more than one stakeholder.
This description goes hand in hand with the governmental Corporate Governance
Report (2002) previously presented. As the interviewees described:
'[T]he services that were delivered to the citizens were crap, poor and low...
Financially, Walsall was bankrupt... As a result, there was a deep
dissatisfaction regarding the leadership, their behaviour, and their
managerial tools... This was the leadership fault since they were using an
old fashioned approach and they were managing the crisis unprofessionally.'
Trust and commitment had deteriorated and reached a point that employees
made a call to replace the chief executive. The poor performance led to criticism
and poor reputation among external stakeholders as well. According to the
interviewees, Walsall was labelled by public opinion as "the worst council in
England". The evidence showed that criticism resulted in pressures from external
stakeholders, e.g., politicians and the media, to bring about a recovery. The
interviewees felt that the government put Walsall under heavy pressure to change
the situation, creating in this way a stressed relationship. In addition, the
interviewees described a feeling of struggle with their environment. Their
relationships with other authorities and institutions were tense and demanding.
Examples for these pressures can be found in the media. These examples
provide evidence for the use of governmental statutory powers to regulate
individual councils. According to the Best Value principles, the Government
decided to massively intervene in Walsall Council, as reported by the BBC
(2002b):
'The government has ordered intervention in another three local education
authorities following critical inspection reports... Consultants are to be sent
into ... Walsall council as a result of the Office for Standards in Education
(Ofsted) reports... The inspectors' verdict on Walsall was that key functions
were not being performed adequately. These included planning the
education budget, support for schools causing concern, support for
maintaining discipline in schools, and support for pupils with special
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educational needs.'
Second, alongside governmental and inter-organisational pressures were
coming from the opposition and strengthened by the media:
'"Rotten borough" screamed out from the front page of the local paper in
Walsall. Just days before the polls open in the elections, the Advertiser was
quoting the latest campaign material by the Labour group. It reminds the
people of the West Midlands town their council was almost taken over by
central Government just two months ago. In a last bid for votes, Labour has
sought to distance itself from the way the council, currently under a
Conservative/Liberal Democrat leadership, has been run. The party has used
evidence from the Audit Commission (AC), which delivered a damning
report on all aspects of the council's work in January. "Walsall council has
failed local people," said AC controller Sir Andrew Foster, when it was
released.' (Schaffer, 2002).
Not surprisingly, while failure found impression in low standard services,
consumers were not the only ones to suffer from Walsall's failure; internal relations
were affected as well. Accordingly, the interviewees? revealed:
"[the employees]…suffered from negative feelings like guilt, regret, and
even shame... We all had negative attitudes... we went through ongoing
conflicts and we felt our jobs were not secure anymore… we had mixed
feelings: wanting to leave and be part of the solution."
Conflicts within the management were also present. As the Corporate Governance
Report (2002, p. 9) reveals:
'The Council has made little progress in ensuring transparent governance
and high standards of conduct. This may have contributed to the passive
approach of officers and their acceptance of the way in which business is
done in Walsall. The relationships between officers and councillors are
often unacceptable and the poor relationships between councillors are not
conducive to effective governance. There is a culture of fear and mistrust at
senior levels. We saw no signs of anyone being able or willing to challenge
poor conduct.'
Professionals are central players in local activity while taking a crucial part
in both policy formulation and policy implementation. Thus, they were part of the
conflict and public debate:
'A mayor is at the centre of a fierce row after a council officer stormed out
of a meeting in disgust at the civic chief's treatment of him. Walsall Mayor
Coun Roger Collins was accused of being sarcastic and using put-downs to
Neville Ball as colleagues discussed a seemingly innocuous application for
a garden fence last night.' (Hardy, 2002b).
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Internal conflicts were not kept behind closed doors and were expressed and
criticised in the media. The BBC reported 'Councillors in Walsall have been
accused of bullying and intimidating senior officers and being more concerned with
feuding and in-fighting... there are a lot of egos in there at the moment' (BBC,
2002a).
From the interviewees? point of view, the poor performance and abandoned
staff created a negative and unproductive organisational climate. The staff had
many internal political struggles, not just between politicians but between non-
elected officers as well. The interviewees reported that there were extreme cases of
"managers who were bullying and depressing staff, and staff that reacted by
expressing anger and fear." At this stage, the attitude of both leaders and employees
toward the failure was of denial and resistance to change, as stated by one of the
leaders: "people had difficulties to accept the governmental reports that actually
said that we are a rubbish organisation." This difficulty reflects the problems
inherent to public failure, e.g., the ambiguity around its recognition, seriousness,
declaration, and the need to tackle it. While the Audit Commission did recognise
the crisis, it recommended the Office of the Deputy Prime Minister (ODPM) to
remove the executive team and to bring in an interim management team to support
the original management team and the recovery process. In this case, the original
executive team was retained together with the supervision of an appointed interim
board.
Yet, this move created further pressure on the Council and the conflicted
relationship with central government has worsened since intervention was massive
and destabilised local leadership:
'Walsall has just 48 hours to stop Whitehall ordering a private takeover of
the crisis-hit council. Senior officers, including chief executive Hardial
Bhogal, will all be axed unless councillors are able to persuade local
government minister Nick Raynsford by Thursday that they can turn round
the council's fortunes' (Hardy, 2002a).
'Proposals to prevent several senior council officials in Walsall from being
sacked have been rejected by the government. Ministers have said that 10
officers, including the chief executive, should be replaced by a team of
management consultants. But councillors say the authority can solve its own
problems and Whitehall should not impose the new team on the borough.
After a meeting between the two sides on Thursday the borough council has
been given just over a week to come forward with "more robust" plans to
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improve performance' (BBC, 2002c).
Similar to Walsall, Swindon was also rated in 2002 as a poor performer.
According to the Audit Commission reports, the council was just beginning to
tackle long-standing and serious weaknesses. Whilst Swindon had started to
address these issues, the progress was limited and it was unlikely that
improvements would be recognised by the public. Swindon received a score of 1
out of 4 for the way the Council was run. The council?s ambitions were large but
were not backed by clear targets. As a result, there was confusion amongst partners
and service users regarding what Swindon was trying to achieve. The LA did not
have a medium or longer-term strategy, everything was regarded as first priority,
and therefore nothing indeed was treated as such.
As a result of this lack of clarity, Swindon had no focus. The council
recognised that it still had significant work to do in order to engage effectively and
set clear priorities regarding partners and the local community. The management,
which was described by the Audit Commission as weak, promised to tackle several
issues, though none of them was delivered on time. The average satisfaction level
of consumers with the LA was low. The delivery of key services, such as education
and social care, were still weak, though there were some important achievements in
other areas such as community safety. There was sound planning in isolated areas,
such as asset management and education, but robust plans for future improvements
were missing (Audit Commission, 2002).
The following newspaper reports demonstrate the poor services provided:
'Swindon Borough Council was rated as 'poor' in the report. Swindon
Borough Council has been ranked as one of England's worst according to
league tables published by a public services watchdog… It is the second
year running that Swindon has been ranked as "poor", the lowest possible
rating of five. Mike Bawden, leader of Swindon Borough Council said: "As
we have set a new administration… we will be driving change through in
2004. If we don't deliver then there needs to be some fundamental questions
asked" ' (BBC, 2003d).
'Social services in Swindon are amongst the worst in England, says a new
report. The authority [Swindon] is one of eight in the country to receive no
stars from the Department of Health's Social Services Inspectorate (SSI). It
is the second year in a row the council has received the lowest rating,
because it is deemed not to be serving children well, although its adult's
services are better.' (BBC, 2003c).
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Similar to Walsall, and in accordance to the arguments of this thesis, the
interviews confirm that sustained deterioration of performance in the supply of
services is a reliable indicator for failure in a public agency. As the 2002 Audit
Commission report (p. 4) summarised, the approach of the Swindon council to
performance management and to the best value process had been weak:
'Despite some signs of improvement, attention to performance management
from members and officers has been poor and sporadic. Financial
information is not linked to performance and therefore the council is unable
to determine if it is providing effective services at a reasonable cost.'
The report portrays the roots of this deterioration (p. 4):
'The council's corporate centre is almost non-existent and, in its absence,
there is a fragmented approach to corporate planning with individual
departments dealing with different plans and with no framework for
integration. This weakness at the centre of the council?s activities is
exacerbated by the difficulties, which members have encountered in
operating politically in a situation where there is no overall political control.
There are only the very fragile beginnings of co-operation across the parties
on agreed areas of difficulty.'
These findings support the argument previously presented that indicate the
management as the core cause for decline. The interviewees? description of
Swindon matched this argument. According to them the poor performance was
rooted in mismanagement, specifically organisational negligence:
"The internal services for staff were abandoned or completely missing. I
admit we did not invest in our own people… For instance, on average, there
was about one day of training per person per year."
Interestingly, the interviewees maintained that while the financial reports
were good, poor services were delivered, as one of the interviewees stated:
"[W]hile the economic condition was satisfactory, the facilities provided to
the community were poor. There was an unacceptable gap between the
financial evidence and the way the LA?s environment looked like."
The given explanation for this gap was that although the budget was balanced, it
was used ineffectively. This further enhances the conclusion that failure in public
organisations does not necessarily depend on, is related to, or is rooted in financial
deterioration.
The poor performance and abandoned staff created a negative and
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unproductive organisational climate, a climate that was portrayed as „long corridors
and closed doors?. The common spoken language reflected the negative climate
using judging terms like „fault and guilt?. Part of this negative climate resulted in
internal political struggles and conflicts. The interviewees argued that the extent of
these political struggles was greater than normal and it caused dysfunction within
both the management and employees:
"…within part of the management team members, the attitude toward failure
was of denial and ignorance. There was a wide resistance to changes…
Even when the failure was recognised, a culture of no risks taking and
innovativeness avoidance was widespread… At this stage, there were still
signs of stagnation. For instance, too many discussions were around the
belief of 'no can do' and they were focused on the employees rather on the
consumers… unfortunately, during that period, the council had the political
power, but it was not a guarantee for success."
Consistent with the integrated analysis of the interviews, documents, and
literature, the major implications for LA failure could therefore be classified into
two groups: externals and internals. Externally, the core mission of a failing LA is
not accomplished. The obligations to the consumers are not fulfilled, or more
practically, poor services are delivered. As a result of unresponsiveness to
consumer needs and poor reputation the LA relationship with the environment is
tense. The consumers, the media, politicians, and national decision-makers put the
LA under heavy pressures to bring about a recovery. Internally, the management of
failing LAs is usually poor, unskilled, centralised, stagnated, inflexible, and suffers
from lack of leadership. Alongside supplying poor services, the LA suffers from
inability to bring about a recovery. The management's inability to lead the staff and
deal with emotion management results in a negative and unproductive
organisational climate. The employees suffer from negative attitudes, discomforts,
and conflicts, which make the employees relatively unmotivated and unproductive.
In sum, failing LAs are characterised by these internal and external implications.
However, these characteristics are not conclusive. Drawing the line between failing
and non-failing LAs is still a hard task that requires appropriate measures.
Interestingly, the description of English LAs pointed out that LA failure is
possibly rooted in decreased external resources, environmental factors, and external
causes (e.g., governmental changes of ideologies and priorities, external pressures,
and financial restrictions concerning the entire population of LAs). By contrast, the
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Audit Commission reports, the LA formal self evaluations, and the interviewees, all
pointed out decreased internal resources, organisational factors, and internal causes
for failure, for instance, poor leadership, mismanagement, deficient organisational
learning process, poor decision-making, inadequate financial control, inadequate
financial policy, and internal conflicts.
Another important point reveals that the characteristics of failing LA were
found to be quite similar in Walsall and Swindon except for one. Whereas in both
cases dysfunction, poor performance, and financial mismanagement dominated the
LA, these took place while Swindon was financially balanced and Walsall was
insolvent. In contrast to failure of private business, which is most likely to be
characterised as non-profitability and deterioration of resources (McKiernan, 2003;
Trussel, Greenlee and Brady, 2002), a failure of LA can exist while finances are
balanced yet utilised ineffectively. In other words, a proper financial control does
not indicate a high quality of services and failure in LA does not indicate the
financial status. Hence, finances are neither the major nor the singular indicator for
a failure in a public organisation; however, poor services almost certainly are.
4.1.3. A Comprehensive Recovery Plan and General Improvements
In 2003, the failure in Walsall, led the new management team to conduct a
diagnosis of the LA and formulate a corporate recovery plan. Yet, this plan was
approved only after previous version was rejected, demonstrating the strict and
harsh relationship with central government:
'Minister throws out Walsall plan. Walsall Council's action plan designed to
save it from takeover by private consultants has been rejected by the
Government. Ministers are not convinced proposals drawn up by council
leaders and managers would solve the problems identified in a damning
report by the Audit Commission. Now the authority has been given extra
time, with a deadline of July 9 to produce a more "robust" and "plausible"
scheme. If it fails, the Government will appoint consultants to take over key
positions and up to ten top managers, including the chief executive, face the
sack... The proposals were rejected in a letter from Local Government
Minister Nick Raynsford. He said: "This is a council that is failing its
citizens on many levels. Walsall has reached the end of the line. Walsall has
a matter of days to put up a convincing case that they can change - if not, I
will direct them to make substantial changes in the way they manage the
council" ' (Walker, 2002).
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The approved plan included a management performance plan and the
recovery was defined as a reinvention of Walsall. The plan set out the journey to
convert Walsall into a showcase to be rated as an excellent performer by 2008.
A vision adopted by the council expressed high levels of desired standards,
as the 'Developing Our Vision – Corporate Assessment – Self Assessment' (p.17)
declared: '[Walsall] will be a prosperous, inclusive, and competitive Borough, in
which its diverse communities feel involved, safer, healthier, and can take pride in
its future'. The „Vision 2008? set out clear ambitions and immediate priorities for
the area, established a framework for financial and performance management, and
defined comprehensive service planning. The vision was promoted through seven
themes, which formed the standards for the community and council:
1. Raising educational standards through lifelong learning
2. Improving health, well being and social care
3. Regenerating the economy
4. Creating a better place to live and work
5. Improving community safety
6. Enhancing community participation
7. Effective and modern council
The plan was designed to ensure that all areas and concerns highlighted by
the Audit Commission and other inspection agencies would be tackled in a
systematic and coordinated way. Internal and external areas and activities were
reshaped in order to return to healthier ways of working with partners and
communities. It contained details of several projects. Each individual project
included an action plan that identified the objectives, the milestones, the outcomes,
and the public impact. Second level documentation added a Gantt chart that trailed
implementation and effective monitoring. In order to set the recovery plan projects
within a wider context, the projects were connected to the strategic vision and
linked to one of the seven themes mentioned above. In addition, the recovery plan
included the definitions of roles and responsibilities of the executive management
team, monitoring, and consultation mechanisms. As was argued in the 'Re-
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Inventing Walsall – Corporate Recovery Plan' (2003, p. 3):
• 'Re-Inventing Walsall has at its heart the recovery of the council in a
range of specific areas of activity... it does comprise projects of strategic
and operational importance for the return of the council to healthier
ways of working internally and externally, with its partners and
community...
[The plan]
• Includes transformational projects such as cultural change and
management development
• Includes other key issues such as supporting people
• Has an outward looking focus
• Has a focus on the enabling infrastructures
• Seeks to engage all employees'
The corporate recovery plan was followed by a corporate financial strategy.
According to the cabinet meeting reports and the head of finance reports, the
adopted financial strategic framework reflected the recovery plan. It defined the
highest priorities, funded them, and set a balanced budget for 2002 to 2008. One of
the sources that enabled putting into practice the planned changes was aid coming
from the central government:
'New centre scheme for Walsall. Plans for a multi-million pound revamp of
a town centre's transport system have been given the green light. Transport
Secretary Alistair Darling last week announced a £11.4 million package for
the development of a ring road to the north of Walsall town centre. Walsall
council expects the scheme to pave the way for a major reduction in traffic
congestion, which will boost regeneration and the local economy. "This is
the best news to hit the local transport infrastructure for years," said
highways cabinet member Coun Gary Clarke.' (Birmingham Post, 2002a).
Additionally, a comprehensive view over a five-year period was considered,
services objectives were linked to the budget, and headroom for investment was
created. The financial framework strategy was based on principles of financial
stability and sustainability, and it had a political impact since there was no escape
from the review of fees, charges, and council tax levels.
A move such as raising local taxes made by the council is not usual and not
taken for granted and thus, it has a political price, as the following reports describe:
'The survey of local authorities across the region puts Walsall Borough
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Council at the head of the council tax charging league. Its bills rocketed by
108 per cent between 1993/94 and 2002/03, while the RPI rose by 27 per
cent during the same period… Walsall Council spokesman Robert Blower
said the sharp increase had been necessary to bring the authority into line
with the rest of the West Midlands' (Dale, 2003).
'The leader of Walsall Council says a decision to raise council tax by nearly
20% will greatly enhance services in the borough. The vote to approve the
19.3% increase was taken by councillors on Monday. It comes after a
damning report by the Audit Commission last year that criticised the
authority's education and social services departments. Council leader Tom
Ansell said the extra money is needed to improve those services. "I am sorry
that we have had to put this increase on for the people of Walsall, but the
people of Walsall deserve a service that they haven't had for 20 years," he
said. "I am going to deliver that service. I am going to turn Walsall round.
That I promise." Some residents unhappy with the increases are now
threatening to take the issue to the government.' (BBC, 2003a).
In addition, the corporate recovery plan necessitated not only tax raises but
retrenchment, which stakeholders had paid the price for:
'Unison members at Walsall Council are threatening to strike after their
branch office was closed down and an official was suspended by the
council" ' (BBC, 2003b).
Overall, the Audit Commission, as an external auditor, perceived the
recovery plan as a great change in Walsall, both for formulating this plan and for
continuing to implement it, as will be portrayed below.
Not long after the corporate recovery plan was launched, the Audit
Commission in their annual report recognised a positive change in Walsall's
performance. A further corporate governance inspection in 2003 identified
improvement in the way Walsall was run. As was described in the Audit
Commission Annual Inspection (2003 p. 7):
'[concerning] Council performance, Walsall Metropolitan Borough Council
has made improvements to its services and its ways of working over the last
year… The Council has made significant improvements to its financial
standing... Systems of internal financial control… are sound and have
shown considerable improvement over the recent past. There has been
progress in the development of risk management and in the ability of
Internal Audit to deliver all its planned work… [in relation to] Legality of
transactions, The Council is learning from past experiences and now has in
place processes which will help ensure that its financial transactions are
within its powers.'
Alongside these changes, a package of support measures was put into place,
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including a supervisory board. The Comprehensive Performance Assessment report
in 2003 showed that indeed, there had been some progress. However, there were
still areas of concern. Walsall had to improve, as was specified at the Audit and
Inspection Annual Letter (2003, p. 8):
'The Council recognises that it still needs to make changes to its ways of
working and has sound plans for these in the form of a continuous
improvement plan and the response to the corporate governance re-
inspection. The current overarching priorities for improvement are:
• Developing the vision
• Political governance arrangements
• Human resources and organisational culture
• Performance improvement in key services.'
The next corporate assessment in 2004 concluded that Walsall had made a
long journey since the findings of the Corporate Governance Inspection in 2001.
The improvements have continued with notable achievements. For instance, the
education services were rated as „highly satisfactory?, Local Neighborhood
Partnerships that enhanced citizens? involvement were implemented; some
important achievements were made in the environmental services; the project
„putting the citizen first? achieved rapid progress; and the LA use of resources was
enhanced. Similarly, the employees? spirit was improved and visible drive and
hunger to improve was shared by most staff and councillors. In sum, the 2004 CPA
identified significant improvement in some key service areas and rated Walsall as a
„weak performer?, having improved from being a „poor performer? in 2003.
The overall corporate governance arrangements were satisfactory in most
key areas. However, further needs were identified. For instance, ensuring that the
long-term plan is followed by continuous adoption of defined priorities and
activities; ensuring greater focus on improvements of services. In other words,
varied results were identified by the Audit Commission, as was detailed in the 2004
Annual Report (p. 8):
'The council?s ability to improve and the standard of its services have both
improved significantly. Service scores improved in education, housing, and
use of resources. The council has made significant improvements to the way
it works and many of its services over the last year. .. There has been good
progress in a relatively short time, but the council and its education partner
realise that much remains to be done to improve attainment. The housing
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services, which the council still runs, are improving, with particular
improvement in services for the homeless. Environmental services have
improved significantly and are well placed to improve further as a result of
investment in road repairs, composting and recycling. Walsall again has
„one star? for its social services and they are improving steadily. The council
has improved many aspects of the way it is managed. It has set up new
arrangements for involving local communities and working with other
organisations at a local level. It has maintained its very strong focus on
improving services. Based on Walsall?s current plans, the council has the
potential to significantly improve the way it works and the services it
provides to local people.'
While according to the Audit Commission improvements were moderate,
gradual, and slow, the council leaders were more optimistic and perceived the
improvement as more significant:
'Two councils given 'weak' rating. Council services in Birmingham and
Walsall have been rated as the worst in the West Midlands region…
Birmingham City Council was rated as weak for the third consecutive year
and Walsall received the same rating… Tom Ansell, leader of Walsall
Metropolitan Borough Council said: "I am a little disappointed that the
Audit Commission has put us in that bracket because we have done enough
work and scored enough points. But I have to say the amount of work that
has gone into Walsall, to change the face of Walsall, to change around how
its servicing the people, has been phenomenal" '(BBC, 2004a).
According to the CPA report, in 2004, Walsall changed the way it worked
with the community. It used effective consultation for the development of 'Vision
2008' while striving to develop it through a full dialogue with the community. This
tendency was welcomed by the press:
'Walsall Council's planning process is to undergo fundamental change, with
members of the public to be allowed to have their say on development
applications. District committees are to be replaced by a single super
planning committee, consisting of one councillor from each of the boroughs
20 wards. The new body will meet every three weeks to consider major
development schemes. Tom Ansell, Conservative leader of the council,
explained that people attending the meetings would be allowed for the first
time to comment on applications before the committee reaches a decision.
… "The new committee will speed up and streamline the process. Local
people making planning applications will have a much more effective way
of engaging with the system." Liberal Democrat leader and Cabinet member
for regeneration Councillor Ian Shires said: The council intends that a new
system of decision-making is introduced that is transparent and will allow
individual members of the public to gain access to the decision makers and
put their case. The new set-up is intended to help Walsall meet the
Governments target of 90 per cent of planning applications being decided
by council officers rather than councillors' (Birmingham Post, 2003a).
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The council addressed the weaknesses regarding the relationship with
Strategic Partnerships. It tackled the poor performance of district committees by
creating a single development control committee and the introduction of local
neighborhood partnerships. Nonetheless, some sections of the community felt
excluded. Thus, Walsall needed to systematically engage with volunteers and
representatives of defined communities. Walsall was open and honest about the
challenges it faced. The management was flexible and imaginative when they
sought for solutions. Learning from the past was evident across Walsall although
there were small pockets of resistance, particularly amongst some councillors.
In 2004, the impressive improvements made by the Council were not
ignored by the press, who flattered the local team:
'Praise at last for council. A council once dubbed the worst in Britain was
celebrating today after it was praised in a Government report. The Audit
Commission commended Walsall Council for improving a wide range of
services for tax payers and having strong leadership. Yet in 2002 the council
was slated by the commission and came within a whisker of being taken
over by Whitehall if it did not improve. Heavily criticised for financial
mismanagement, it was £10 million in the red, delivering a poor standard of
education and social services, and with crumbling roads. But in a report
today, commission inspectors said the council had "traveled a long way"
since those dark days and now has strong finances, improved delivery of
services and better roads. They also feel staff morale is high and the
authority is ambitious and is learning from past mistakes. Council leader
Tom Ansell said: "We feel on top of the world at the moment, the Audit
Commission has recognised that we are making very strong and rapid
progress towards our goal of becoming an excellent local authority. We will
continue our momentum to become the best council that has ever been in
the history of Walsall." The council only escaped being taken over in 2002
with the introduction of a new management team headed by chief executive
Annie Shepperd, which set about reducing the deficit and improving
services. It included a 19 per cent rise in Council Tax in 2003 which has
helped put the authority back in the black with a £4 million reserve. Mrs
Shepperd said: "Where once Walsall was deemed to be the worst council in
the country, it is now being recognised for achieving perhaps the greatest
turnaround ever seen in local government" ' (Thandi, 2004).
Nevertheless, it is important to note that in the background of the recognised
improvements, there was still a serious criticism concerning the CPA test and actual
measurement. This criticism was part of conflicted and tensed central local
relations, as was reported by Thandi (2004):
'Legal threat over rating. Furious council chiefs threatening to sue a
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Government agency over their inspection rating believe they have a "strong
case". Walsall Council is locked in a battle with the Audit Commission
following a Comprehensive Performance Assessment report, which praised
the authority for making dramatic improvements after it was severely
criticised two years ago. The report saw Walsall move up from being rated
as "poor" to "weak", but council leader Councillor Tom Ansell said they had
secured enough points to be awarded a "fair" tag. He said: "We have got our
lawyers looking at the situation and they feel we have got a strong case. The
Audit Commission is entrenched in their argument that we can't jump two
places, so they won't give us the credit we deserve when they should be
celebrating with us. This stinks to high heaven as the Government set us
targets two years ago which we have more than met." A report on the
inspection results will go before Walsall Council's cabinet tomorrow.'
Swindon went through a similar process. In order to improve its poor
quality of services and improve the quality of life for the local community, the
Audit Commission inspectors recommended (2003, p. 6) that the council to adopt
various steps:
? 'In order to have a clear strategy with identifiable targets:
o build on the outline medium term strategy to establish clear,
realistic, and achievable priorities across all its activities;
o and ensure that council officers responsible for the medium-term
strategy…
? Rigorously carry through all the service option appraisals in the medium
term strategy, without further delay…
? In order to ensure that financial base is sound and measure performance:
o ensure that the current financial position is rigorously analysed to
provide comprehensive options for tackling financial difficulties…
? Build capacity in the council by:
o strengthening the corporate centre and ensuring adequate
o financial provision is made to support the improvement plan…'
In 2004 the cabinet carried out a consultation on medium-term planning and
budget. This was essential to reinforce objectives and directions. However,
significant further development was needed to build a corporate framework, which
would include effective acquisitions, corporate human resource management, and
improved communications both inside and outside the organisation. The cabinet
and the council formally recognised these needs, and in accordance to the Audit
Commission recommendations, they formulated a long-term plan. The LA
'Corporate Plan 2006-2010' (p. 3) reflected great ambitions of the leadership:
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? 'Making Swindon the UK?s best business location
? Making Swindon Borough Council one of the UK?s best local
authorities
? Making Swindon an enjoyable place to live, work and play'
Accordingly, the leadership defined in this document the following LA's corporate
priorities:
1. 'To plan and successfully manage the growth of Swindon over the next
20 years
2. To consult and ensure policies and services are highly responsive to
needs
3. To deliver excellent services...
4. To lead the community...
5. To build neighbourhood capacity
6. To transform the performance and effectiveness of the organisation
7. To make the best use of resources'
This Corporate Plan was designed to trigger a program of radical change.
Swindon?s recovery plan was to be formulated by setting out a clear direction for
the Council, by describing top priorities, and by working with partners. In contrast
to the criticism regarding central intervention, the recovery process in Swindon
demonstrates that intervention strengthened localism. Swindon?s recovery process
supplies an example to the swift between local government and local governance.
Interestingly, consultation took place even in relation to sensitive issues. As
described by the BBC (2004b):
'Swindon residents are being invited to have their say on proposed council
tax increases. The Borough Council has organised two public meetings to
debate possible increases of between 5% and 11%. Leader of the Council
Mike Bawden said: "I welcome an honest and open debate and these
meetings are an important part of the consultation process. I and other
elected members are very happy to meet with local people to answer any
questions they have" '.
In reference to these consultations, the final program was headed: 'Radical
Transformation' (p. 6) and stated that:
'In the last 12 months, Swindon Borough Council has experienced a radical
transformation. This has included new ways of working for both members
and officers. National recruitment has brought in new people to the top jobs
and we have re-organised the way we run our big services. We have also
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introduced robust medium term planning to the Council and carried out a
thorough review of the way we work with our partners…'
The LA?s priorities, as they were identified by the management, were to
ensure access to good education for all ages, good health services, decent housing,
job security, good transport systems, and to lower the levels of crime. Yet, as
described earlier, most successful recovery plans will include retrenchment
strategies, which go hand in hand with NPM and Best Value values. Consequently
some stakeholders, both consumers and employees, paid the price:
'End of the line for special needs. A total of 10 special needs units are set to
close. A decision has been made to shut a unit for children with special
needs at Wroughton Junior School in Swindon. Nine other special needs
units across the town are already due for closure in the town's infant, junior
and primary schools. The Office of the Schools' Adjudicator has now
approved the closure of the Wroughton unit because it says it is too
expensive to maintain. From September, special needs pupils will be
included in mainstream classes. This is part of a strategy to improve local
provision for children with special needs. Swindon Borough Council says it
would rather spend what money it has on serving all of its pupils in the main
schools, than managing the upkeep of the additional units. A spokesman
said they would still have additional help while in the mainstream classes.
"The benefit of this is that the funding follows each individual child." The
National Union of Teachers says many of its members are confused about
this policy of inclusion. They may not necessarily have the training or the
support they need, a spokesman said.' (BBC, 2004c).
'A document shown to the BBC apparently reveals plans to make cuts of
£10m to Swindon Borough Council's budget (BBC, 2004f).' 'Council's cost
cuts may hit jobs. Jobs could be under threat at Swindon Borough Council
as part of a new cost-cutting drive. The 8,000 workers at the authority have
been told £15m of savings must be made over the next three years. The
council is now looking at how this will be achieved and has refused to rule
out job losses. "Staff costs are an issue. I can't... say there will be no
redundancies," Cllr Mike Bawden, leader of the council, told the BBC. "It
would be totally wrong of me, because I cannot guarantee it and I am not in
the business - after being a councillor since 1967 - of making promises
which I am not sure I can keep." Cllr Bawden said the council's budget was
under pressure because local authorities were being asked by the
government to take on extra responsibilities. The government has also told
councils that it expects council tax bill hikes to be kept to a minimum.
Swindon Borough Council is looking at other areas of operations where
savings could be made, such as procurement - the purchase of goods and
services. But councillors are determined cuts will not have an impact on
public services. A letter has been sent to all council employees informing
them of the moves. One worker said: "It's a bit concerning for everyone who
works at the council. At the end of the day, we won't know anything until a
decision is made and presumably we will be told what the outcome is as
173
soon as possible' (BBC, 2004e).
Consequently, protests against local plans to reduce services and number of
positions increased pressure on local decision makers, as expressed in the following
examples:
'Protesters march against plans. Protesters have marched through Swindon
to demonstrate against planning decisions made by the borough council.
More than 1,000 people attended the event, organised by Swindonians
Together Against Planning. The group is protesting against what it says are
broken promises over proposals to develop areas such as the Shaw
Community Forest. The march included a rally outside the council's Euclid
Street offices, where a petition was handed to councillors' (BBC, 2004d).
'It has drawn up proposals which include closing some older primary
schools in the area and replacing them with a bigger 'extended' school. But
some parents fear the plans will restrict their choice of schools' (BBC,
2005a).
As part of the long-term plan, a paper called „The Promises Paper? was
published by the top management and distributed among the wide public. This
paper reflected the management accountability by including the council?s
obligations to be fulfilled by 2010. „The Promises Paper? (2005, p. 3) covered a
vision, measurable promises, and required actions in a wide range of services:
'The council – Swindon will be an excellent Council…We will provide
effective, customer focused services that represent good value for money
and are easy for everyone to access. We will build trust and confidence in
the Council by communicating and consulting openly and honestly with
local people and partners. Promise: We will establish a new Contact Centre
so that all residents can telephone us for information about council services
day or night, seven days a week with 95% of telephone calls answered
within six rings...'
Interestingly, the media welcomed this new paper, giving it wide coverage:
'Council approves shake-up plans. Radical plans to restructure Swindon
Borough Council have been official adopted by the town. A 50-point plan to
boost Swindon's fortunes by 2010 were given the stamp of approval at a
meeting on Thursday. Conservative council leader Mike Bawden told the
BBC: "It's full steam ahead now. We'll post the ad for the management team
next week, and we hope to post the promises to residents in July. I think it
will be quite effective. We want people to say they are interested in the
pledges and we'll be delighted if they are using them to hold us up and get
their argument across." Mr Bawden added that he wanted the promises to
help give residents more confidence in the council. "We have put ourselves
on the line and want people to monitor us. We are even setting up internal
processes to monitor ourselves. "This does give us a focus. We will become
and progressive council, and this will inject a 'can-do' attitude."…
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Promises on the list include:
? A "first stop shop" for council inquiries
? Reducing the number of council directors from eight to five
? Bringing in a full-time council chief executive
? More CCTV cameras to help cut crime
? No more graffiti - it will be cleaned up within 24 hours (BBC, 2005b)
The interviewees were very proud of this document, as an unusual act of
explicit obligations that could be tested by the voters. They mentioned that
politicians would usually avoid making specific and measurable obligations and
promises. Politically, the promises paper was a risk. On the other hand, it was a
sign of new commitment and honesty.
Over the years 2003 to 2004, after the recovery plan was formulated, the
Audit Commission reports pointed out a gradual improvement in Swindon's
performance. In 2003, Swindon was still rated according to the CPA as a poor
performer. A new chief executive was appointed. He restructured the departments
and appointed some new executive directors. The LA has begun to address
weaknesses in its corporate systems, such as the way it managed its performance
and staff. There was considerable energy and willingness among managers, staff,
and backbenchers to tackle the problems and achieve improvement. There were
some achievements in relation to education, community safety, and social services.
However, in 2003, other services had not yet been improved. This was because at
this stage, improvements were focused on internal management arrangements.
Swindon still needed to maintain its commitment to change and continued to
address its weaknesses. The approach to performance management and to the best
value process was still weak, as the External Annual Audit Letter (2002-3, p. 4)
demonstrates:
'…[T]he Council has yet to implement an effective system of performance
management. Resources have been invested in improving the collection of
data for the statutory performance indicators, but the embedding of a
performance management framework across the Council has yet to be
achieved… A significant amount of work has been undertaken during the
year to refine and improve the scrutiny function, although the impact has yet
to fully take effect.'
Financially, information was not linked to performance and therefore
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Swindon was unable to determine if it was providing effective services at a
reasonable cost. The LA was still dependent on external reports and associated
plans. However, some decisions of the cabinet and the council provided a formal
recognition of the financial barriers to change.
From 2004 and on, Swindon had a single party administration and some
new service directors. These factors helped to increase stability on one hand and to
introduce new blood on the other. The changes supplied a sufficient basis to move
Swindon from the poor to the weak performer category. It developed a framework
to ensure there were systematic developments, implementations, and a review of
policies. Good progress was achieved in several areas where weaknesses were
tackled and managed in a better way. The overall quality of governance
arrangements, particularly in respect to leadership and joint areas of service were
improved. However, although there had been sustained improvements in a number
of areas, the pace had been too slow and results were mixed. As the Annual Audit
and Inspection Letter (2004, p. 2) reveals:
'…[R]esponsibility for the management of the education service could be
returned to the Council?s Education Department… the Council is not
successful at communicating its aims and direction to its community and is
not exercising clear community leadership… the Council?s corporate
approach to internal control is weak with few strengths… leading members
and directors are becoming increasingly effective in leading their service
areas, but have yet to develop the mechanisms for corporate policy
development…The Council has yet to meet any of its performance
standards, although there have been sustained improvements in a number of
areas:
? Developing a framework to ensure there is systematic development,
implementation and review of policies
? The overall quality of corporate governance arrangements, particularly
in respect of leadership and joint working between service areas
? Making more support available to members engaged in the scrutiny of
services.'
In a 'Corporate Assessment – Self Assessment' report (2004, p. 3), the
Leader and the Chief Executive were trying to assess and summarise the Council
achievements over these years:
'Following the CPA inspection in 2002 the Council went from an initial
phase of „denial? through „realisation? and finally into „planning and action?
mode. The Council revised its senior management structure to make it „fit
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for purpose? and replaced its Chief Executive as well as a number of
Directors. Embedding strong organisational leadership has been at the core
of our recovery as a Council. As a result we have been able to focus our
energy on achieving improvements in key service areas, re-engaging with
the community, building and embedding management processes, re-
establishing the Council?s corporate centre and establishing the appropriate
culture both to sustain the gains we have already made and to develop our
capacity to ensure further improvement.'
Yet, the 'Corporate Assessment – Self Assessment' report (2004, p. 4)
reveals that the top management was aware it still had a long way to go ahead and
many issues to tackle:
'There is clear evidence that the Council is now ready to tackle difficult and
previously un-resolved issues with a "can do" culture in which members and
officers work closely together to deliver the Council?s ambition for
Swindon… we know that we are at an early stage on the journey with a long
way to go. We need to develop our community leadership role. We
recognise that there is more we need to do in defining and embedding new
management processes and that there is significant work still to do in
developing the "can do" culture across the organisation.'
These mixed results led the inspectors to recommend (p. 3) further attention,
which was needed to ensure that:
'the proposed framework for policy development is implemented
effectively…Clear leadership, an effective training programme and a means
of enforcement will be necessary to embed the new arrangements…the
arrangements for service and financial planning are strengthened with better
integration in the planning framework…'
Throughout 2003 to 2004, both Walsall and Swindon leaderships showed
commitment and desire to improve the LAs? performance. Therefore, an ambitious
vision and long-term comprehensive performance plans were adopted.
Consequently, the implementation of these plans involved gradual improvements
alongside other areas and missions to be fulfilled. This tendency became stronger
over the years to come.
4.1.4. Recovery
According to the 2005 annual inspection report, Walsall?s improvement was
rapid. The LA was ambitious and a visible drive was shared by most staff and
councillors. For example, better governance and councillors? managerial standards
177
were adopted. According to the report there was strong leadership, both in the
cabinet and in the new executive team, and morale was high. There were
development plans for staff, councillors, and the organisation, which had already
had a visible and positive impact on the way Walsall operated its capacity, and on
service delivery. Old-fashioned behavior was effectively changed; however, not all
councillors were tuned with the modernisation agenda. In addition, fundamental
corporate systems were established to ensure sustainable and effective management
and services. Poor performance was identified and remedial actions were taken.
The financial capacity was strong and the financial management was transparent
and effective since there was a strong process for linking priorities to budget
decisions. The above rapid improvement was straightforwardly described in the key
messages section of the Audit Commission 2005 Annual Report (p. 5):
'Overall the Council has continued to make good progress and has recently
been categorised as a three-star Council which is improving well. The
Council's previous investment in improving the way it is managed is now
delivering improved service performance, with particularly remarkable
progress in children's services. Social care received an overall two-star
rating. The Council has established a sound framework for working with
other partners, such as the Walsall Borough Strategic Partnership, the
Health and Social Care partnership, and the New Deal for Communities
Partnership. Part of the Council's overall strategy for further improvement
was entering into a strategic partnership for the provision of a wide range of
back office and customer-facing services… The Council's finances are
generally very well controlled... Weaknesses were identified in payroll,
creditor payments, debtors, and contracting. Officers acted quickly and
decisively to rectify the situation and we are happy that these weaknesses
have been or are being addressed.'
The significant improvements were covered by the press as well:
'Councils praised for better services…Walsall,… earned three stars…The
result is particularly impressive for Walsall Council, which was dubbed the
worst in Britain after a damning inspection just three years ago, but has
turned its fortunes around' (Walker, 2005).
Though there were general improvements since 2002, the 2005 CPA report
pointed out some areas that have not reached a satisfactory point of performance.
For instance, Walsall initially improved services from a low starting point, so that
although these services were improved, they did not reach the required standard. In
addition, a consistent pattern of improvement was not spotted. Similarly, education
and social services were improved; however, services performance measured by
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Best Value Performance Indicators (BVPIs) was not systematic or consistent, as
was detailed in the 2005 annual report (p. 15):
'For the year 2003/4 63 per cent of best value performance indicators
(BVPIs) remain below average, with 29 per cent in the bottom quartile.
Between 2002/3 and 2003/4 58 per cent of BVPIs did not improve, this
ranged from 90 per cent not improving in the Benefits Service to 50 per cent
not improving in Social Care. However, during 2004/5 there are signs that
this profile is beginning to positively change.'
As it appears in the reports, although improvements were achieved, the
overall service performance was not strong enough. Accordingly, the Audit
commission urged the council to take further steps, as was mentioned in the Audit
Commission 2005 Annual Report (p. 6):
'The broad message for members is to continue with the existing drive for
improvement, using the Council's performance management arrangements
to monitor and manage progress. More particular areas for action at present
are ensuring that:
? Appropriate alternative plans are firmed up for those services which
were to be part of the strategic partnership
? Action is quickly taken to improve the performance of the benefits
service
? Action is taken in response to the annual assessment of adults' services
and in particular to increase the pace of change in services for older
people
? There is adequate control over the two major areas of grant-funded
expenditure where we encountered problems this year - benefits and
Sure Start.'
In 2005, alongside the governmental bodies inspected, Walsall published a
self-report named „Corporate Assessment-Self Assessment?. According to the chief
executive's report, the overall progress pointed out strong governance, challenged
agenda, and improved services. Walsall regenerated the local community by
establishing an urban company and local neighbourhood partnerships. Areas such
as education, environment, housing, and social services were improved
significantly and showed an increasingly consistent pattern of improvement. The
corporate infrastructure and resources were sound. The key processes for finance,
performance management, and organisational development were modern and
appropriate. Walsall became a learning organisation; it had a high degree of self-
awareness and maintained the focus on performance improvement, partnership
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working and community engagement. Inter alia, the report (p. 4) details the
achievements of improvements:
'Following the establishment of the council vision and priorities... actions
were translated into pledges aimed at improving service delivery, quality of
life and the council objective of becoming excellent by 2008. Within each
of our vision strands, examples of improvement include: ...the appearance of
Walsall town centre... road conditions and quality of life for local
community... a set up of special team to tackle anti social behaviour... the
quality of Walsall's school buildings... implementation of the National
Service Framework for Older People.'
This self-report tends to be slightly more positive and favourable, compared
to the Audit Commission report published at the same period. The willingness to
impress and present success might bias some evaluations. On the other hand, the
CPA test is partly based on self-assessments and reports that LAs supply to the
Audit Commission?s representatives.
Overall, the case of Walsall portrays mixed results. Compared to its own
performance in previous years, the data analysis reveals a dramatic transformation
from being in a very poor position in 2002 to being rated as a good performer in
2005 with a potential to keep improving (see Table 8).
This impressive step can be interpreted as a recovery in performance. In
contrast, compared to ideal standards and other LAs, the data analysis reveals that it
still has a way to go in order to achieve full recovery. However, whether Walsall
recovered or only made a significant step toward a successful recovery, it is
worthwhile to explore the change strategies that led to these achievements, as will
be discussed later. Meanwhile, the description of Swindon?s recovery tends to
reveal achievements that are more moderate.
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Table 8: CPA Scores for Walsall (2002-2006)
Service Score (1 to 4 scale where 4 is best)
2002 2003 2004 2005 2006
Education 2 2 3 3 3
Social care (adults) 2 2 2 2 2
Social care (children) 2 2 2 3 3
Environment 2 2 2 3 4
Housing n/a 1 2 3 4
Libraries and leisure 2 2 2 2 2
Benefits 3 3 3 2 2
Use of resources 3 3 4 3 3
Overall Performance Poor Poor Weak Good Good
Source: Audit Commission Annual Reports (2002-2006)
In 2005, after another Comprehensive Performance Assessment test,
Swindon was rated as a fair performer. The LA has achieved significant
improvements in its priority services (see Table 9). For instance, education and
adult social care were much improved as a result of focusing on aspects that failed
in the past. Users had good access to services, good information on services, and
they have been involved in planning forums.
As the Annual Audit and Inspection Letter (2005, p. 4) indicated:
'Swindon Council continues to make good progress as shown by its CPA
score… It has achieved significant improvements in its priority services and
in areas that are important to the public... The Council has sound
improvement plans in place, at both the corporate and service-level. Key
objectives and deadlines are being achieved, and tight monitoring of
performance is helping to keep plans on track.'
The sound innovative improvement plans, emphasizing modernisation,
could be demonstrated in the following example:
'Private partner plan for council…A call centre open 24 hours a day is one
option being considered by Swindon Borough Council to help improve its
level of service. A report, due to be considered by the council in October,
suggests the centre be run by a private sector partner.
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Table 9: CPA Scores for Swindon (2002-2006)
Service Score (1 to 4 scale where 4 is best)
2002 2003 2004 2005 2006
Education 2 3 3 n/a n/a
Social care (adults) 2 1 2 2 2
Social care (children) 2 2 1 2 2
Environment 2 1 2 2 3
Housing 2 2 2 2 4
Libraries and leisure 3 3 3 3 3
Benefits 1 1 1 3 3
Use of resources 3 3 3 2 3
Overall Performance Poor poor weak Fair Fair
Source: Audit Commission Annual Reports (2002-2006)
It also looks at making cost savings through new IT systems, re-structuring,
and "streamlining back office systems". Council leader Mike Bawden said:
"The private sector can help us make changes quicker and more cost-
effectively." The call centre would be a one-stop-shop to help Swindonians
with their enquiries about council services. The private sector company
would also take responsibility for a new drop-in centre, and the council's
HR and finance departments, plus some of its IT systems' (BBC, 2005d).
Over 2005, one of the council achievements concerned its relationship with
external players, which positively affected the corporate governance and the
leadership's perceptions, status, and extent of involvement in partnerships. The LA
had a history of successful long-term partnerships and was increasingly aware of
the need to build newer ones. For instance, there were positive outcomes for
vulnerable people as a result of successful multi-agency work between social
services and housing. Another example could be drawn from the following
newspaper article:
'Council bids for centre overhaul. A spokesman said the council had
ambitious plans for the centre Swindon Borough Council is seeking a
commercial partner to help regenerate the town centre. A spokesman said
the council had ambitious plans for a quality development on the site. "As
well as shopping and leisure, the council is encouraging potential partners to
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consider options for homes, car parking and a cinema," he said. The
development is a key element of The Hub part of the Regeneration
Framework set out by The New Swindon Company. Roderick Bluh, of
Swindon Borough Council said: "I'm keen to get started on this scheme.
We've got some really exciting ideas for the area which responds to issues
raised by the people of Swindon." Philip Watkins of the New Swindon
Company added: "We're delighted that progress is being made on this key
area within The Hub" ' (BBC, 2005c).
As the Annual Audit and Inspection Letter (2005, p. 4) indicated:
'The Council is also working well with partners to deliver shared priorities
and is actively strengthening its community leadership role… Substantial
change has been implemented at the top of the organisation.'
Financially, some areas were improved while others were still needed to be
addressed, as the Annual Audit and Inspection Letter (2005, p. 5) indicated:
'… the Council is developing fresh structures and arrangements to ensure
that good value for money is delivered for all of its services…The Council
is fundamentally reviewing its business and financial planning processes. A
new corporate plan, introduced mid-way through the financial
year…Tighter budget monitoring arrangements are being introduced by the
Council…The Council needs to build upon its recent initiatives to evaluate
and deliver value for money in its services. In particular, benchmarking data
should be utilised more extensively across all service directorates.
Efficiency targets should be more focused.'
Alongside considerable improvements made by Swindon, a significant
amount of work was still required. The top management of Swindon recognised
that it still had more to do in areas such as waste management and children?s social
care. Thus, corporate recovery plans continued to be focused on initiatives that
would improve access to services and value for money. Accordingly, while reports
indicated satisfaction with areas, which were improved, they indicated other areas
to be further developed, as the 2005 Annual Audit and Inspection Letter pointed out
(pp, 4-7):
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'Councillors and senior managers recognise that further cultural change is
needed throughout the organisation to ensure that this trend of improvement
continues…[therefore,] The Council should:
• further integrate corporate, service and financial planning
• develop risk management arrangements both corporately and across all
service areas
• improve the preparation and reporting of its annual accounts
• continue to address the weaknesses identified by audit in core systems
• produce better evidence that it is managing and achieving value for money
across all of its services, based on better benchmarking against
other councils and evidencing of efficiency gains.'
Overall, the Audit Commission reports indicate a broad shift in Swindon's
performance, from being in a very poor position in 2002 to a fair performer in
2005. Yet, results are mixed, recovery is not conclusive, and it is hard to judge what
its extent is.
In sum, the overall recovery of both Walsall and Swindon since the 2002
CPA report was substantial though this change is not perfect. In both cases, there is
still work to be done in order to achieve a full recovery and before the quality of
services will reach the expected level compared to excellent LAs and ideal
standards. Progressions and improvement alongside continuous efforts to keep
improving may be demonstrated in the following example:
'Private sector companies which have taken over failing Local Education
Authorities (LEAs) are improving school results faster than the national
average, a new report shows…Analysis of 2004 figures from the
Department for Education and Skills (DfES) showed that in the nine
outsourced LEAs (…Swindon, Walsall…) the proportion of pupils
obtaining five or more A*-C grade went up by 6% year on year, more than
twice the national average over the same period. But although reports from
the schools inspectorate Ofsted on LEAs in Walsall and Leeds found that
private sector involvement had been beneficial, educational attainment still
lagged behind the average' (Bawden, 2005).
On the other hand, it seems that in both cases the senior management led a
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positive change in the organisational culture and climate. This change stimulated
both internal and external stakeholders and resulted in improved areas of action.
Cooperation and partnerships with employees, external public agencies, and private
players were reshaped and strengthened, and the quality of performance was
improved within both governance and services. These changes supply a worthwhile
basis for the exploration of the change strategies that led from one point to another.
Nevertheless, the Audit Commission reports describe only four points in time, once
a year, without exposing the continuous occurrences or the full story. They clarify
the changes in the quality of performance but skip the process behind the scenes,
the 'black box'. The managerial aspect and the change strategies that were employed
during this recovery process are not covered in the reports. As previously discussed,
the reason for this omission is rooted in the government policy and predominant
ethos which is focused on excellence, and consequently the Audit Commission has
a tendency to deal with outcomes and performance, rather than process and
strategies (see Chapter 2.5.). Therefore, the following description, which covers the
actual implemented change strategies, is mostly based on information gathered
during the interviews.
4.1.5. The 'Black Box' - Turnaround Management Strategies
The interviews with Walsall?s leaders were focused on the "Black Box".
The interviewees were asked to provide their insights regarding the actual
managerial process, carried out from 2002 to 2006. With the intention of exposing
strategies implemented to bring about a turnaround in LA's performance, the major
question the interviewees were asked was: "What have you actually done in order
to improve the LA's status from being a poor performer to being a good
performer?" (for the full questionnaire, see Appendix 4).
Prior to attacking the failure itself and planning the recovery of Walsall, the
management conducted two actions that were the starting point for the recovery
process:
1. The management conducted a brave diagnosis of Walsall?s strengths and
weaknesses, while mapping the causes of failure and their symptoms. For
instance, a Finance Self-Assessment Report (2002, p. 8) written by the finance
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executive director, described some of Walsall?s weaknesses:
"[Walsall] suffered from Organisational total crisis, poor reputation,
departure of entire top team, initial denial and disbelief, [negative] national
spotlight, low morale, member resistance, financial crisis…, avoiding
unpopular cuts…, innovative but expensive policy choices (e.g., local
committees, decentralisation)…, avoidance of problems as redundancy/
early retirements…, political reluctance to set higher tax increases, increase
fees and charges..., not funding inflation/pay awards/pension increases,
unavoidable pressures …"
2. The management formulated a recovery plan (see Chapter 4.1.3.).
From that point and onward, leaders, managers, and departments
implemented a wide range of strategies that were carried out over a period of
several years. The following description does not necessarily follow their
chronological occurrence but describes the implemented strategies according to
their objectives, as portrayed by the interviewees.
First, the management chose to tackle the failure internally, which means, to
focus on the council as an organisation, to solve internal work relationships and
conflicts before dealing with consumers. The interviewees described the
management?s first steps of the recovery process as being aimed at stabilising
Walsall. One of the aspects of stabilisation included halting climate deterioration,
reversing it into a positive climate, and creating greater organisational trust. This
step created general cooperation that was essential even for pre-recovery actions
such as diagnosis and recovery plan formulation. Recovering the organisational
climate and trust was mainly accomplished by the management?s efforts to rebuild
communication mechanisms that professionally and emotionally supported the
employees. As one of the interviewees stated:
"The managers wanted to be involved in the employees? organisational life
and by doing so, to increase the employees? confidence in their abilities…
We were talking and listening to employees? emotions and needs. We held
one-on-one conversations and discussions with small and large groups of
subordinates. There were no planned points to go through in those
conversations. However, they were very important for building bridges, for
understanding the problems that employees faced… for creating a culture of
commitment… [and] for motivating the employees."
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Next to reversing the climate, it was necessary to financially stabilise and
managerially control the LA. In other words, stabilisation was aimed at preventing
further financial deterioration that could lead to bankruptcy, and at rectifying the
lack of leadership. The management wanted to show the stakeholders that
something big is happening in the council: there is new leadership with new
intentions, or as one of the interviewees phrased it: "there is a new sheriff in town".
Thus, in order to achieve the objective of the first group of strategies: stabilisation,
the management implemented a reduction in expenditures. Through this act,
significant poor performing institutions, departments, and services were abolished.
For instance, the management eliminated backroom services (e.g., decreasing
payroll office opening hours), which served employees and not consumers. These
services were eliminated first for two reasons: they were not cost-effective, and
external stakeholders had not been directly affected by these eliminations so they
did not resist them. Yet, resistant and protest were announced by officers and local
unions. On the other hand, further straightforward reductions in expenditures,
which were not popular among consumers, were carried out as well. The
management closed up non cost-effective public organisations, which as estimated
by the management, performed poorly and their contribution to the community was
not worth the price. For instance, the management completely exited from services
given by a golf club. In this case, Walsall did not supply an alternative service.
Yet, the most radical example for cuts made was closing down four local
schools. The extreme decision was taken because the four schools performed poorly
compared to others. Additionally, the management thought it was a proportional
reaction to the severe condition of the education system. In this case, the consumers
were transferred to other local schools. The school services, therefore, were not
eliminated but delivered by different suppliers, in a more efficient and effective
way. According to the interviewees, since the above abolishment of services
hindered the quantity and quality of services, consumers protested and opposed
these strategies.
While tackling internal aspects of the failure, the management tackled its
external aspects as well. Alongside stabilisation, there was a need for a dramatic
comprehensive improvement of many services delivered by the council. The
objective of the second kind of strategies was to provide excellent services, both in
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existing and brand new areas, and both to existing and new communities. For
example, as the interviewees reported:
"[A]s part of being focused on high performance standards, the management
invested in training of employees who gave front line services… In order to
give the end-users the best possible services, some of the services were
completely privatised, or transferred to external suppliers, e.g., educational
services… Under the umbrella of "Investing in people" and in order to reach
new communities, new programs like a program for disabled people, and a
brand new program for young people, were developed and funded."
In addition to investment in people, Walsall invested in facilities. An
important element of the recovery included changing the face of the environment
the citizens were living in. The management invested money in areas that were
neglected for years. For instance, massive investments were made in road
maintenance; a lighting project was accomplished in the LA?s geographical area;
and brand new recycling sites were launched.
Prior to the recovery process Walsall had experienced bankruptcy. The new
programs and investments that were about to bring higher standards of performance
required further resources. These resources were far from being covered by
reductions in expenditures alone. Thus, although the decision was unpopular, the
cabinet decided and the council members approved a tax increase, after many years
of avoiding such a decision. Additionally, the council changed its policy
dramatically with regard to LA assets. After gathering services under one physical
roof, some of Walsall?s assets were sold, rented, or mortgaged. Consequently, these
strategies increased the LA income by millions of pounds per year. In addition, new
opportunities for investments and the funding of projects and plans such as a
special program for single parents, were now available.
The second group of strategies described above was directed toward
Walsall?s environment and external stakeholders. However, an authentic,
fundamental, and comprehensive recovery required internal changes within the LA
as an organisation and among staff members. In other word, there was a need to
support the stabilisation and renewal strategies with internal organisational
strategies. The management had to assure that the recovery process would be
managed and maintained by the best staff-members and that they had the
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appropriate tools for it. Thus, the objectives of the third kind of strategies were to
reorganise the LA, support other strategies, and generally contribute to recovery.
One of the drastic reorganisation strategies was implemented at the
beginning of the recovery process. Managers, who had a lack of capacity, did not
feel part of the new spirit, and did not fit the atmosphere or the general will, were
asked to resign. Most of the senior officers in the management team were replaced.
In 2003, a new Chief Executive and five Executive Directors were employed. Each
Executive Director carried a portfolio of corporate responsibilities and provided
strategic leadership for a range of metropolitan services. By appointing a new Chief
Executive and Executive Directors, a new leadership was born. Yet, parallel with
this, as a result of employing replacement strategy, contracting services, and closing
down public agencies, some employees lost their position and their co-workers?
morale was harmed. In the view of some employees, these strategies contradicted
the managerial efforts to „invest in people? and enhance organisational trust.
Though the disadvantages of these strategies were known to the management, one
of the interviewee claimed that:
"[The top managers] decided to take those difficult decision and actions,
pay the price in the short run, but provide better services in the long run.
You see… organisational trust therefore was at the same time hard to
achieve, fragile, and necessary for continuous cooperation."
Additionally, reorganisation strategies such as investment in people were
employed. In order to achieve the recovery goals, it was necessary to get to the
point at which senior management and all other employees would have the
appropriate skills. Thus, the management made great efforts to follow the concept
of a learning organisation: a new comprehensive training program was launched;
the management team made trips to well performing LAs and explored their
experience; the management consulted and was trained by private organisational
advisors; and the employees improved their services skills after participating in
training sessions.
In sum, the senior management of Walsall explained in detail the various
and gradual strategies used to turnaround the LA's performance. Some strategies
were directed toward achieving better internal steadiness and control by stabilising
managerial, cultural, and financial problems. Numerous strategies were directed
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toward external partners such as reshaping priorities and efforts to rehabilitate
services. To support those, a set of strategies was directed toward reorganising the
council. The next Chapter follows the case of Swindon. Since each organisational
failure is unique, the interactions and occurrences of each recovery process are
probably different. Nevertheless, as will be described next, some elements and the
general format of strategies implemented by the senior management in Walsall
were repeated in Swindon.
As in the case of Walsall, the Audit Commission reports pointed out that
significant progress was made in some areas in Swindon. Overall, Swindon was
transformed in about three years from being a poor to being a fair performer. In
order to track the way these achievements were managed, we conducted face-to-
face semi-structured interviews. As in Walsall?s case, the interviews with
Swindon?s leaders were focused on the "Black Box", the strategies that were
implemented in order to bring about a recovery.
As a first step, the management in Swindon concentrated on stabilising the
organisation. The leaders mentioned three actions that contributed to stabilisation
and avoided further climate deterioration.
1. The leadership tried to improve the organisational climate by creating a positive
atmosphere. As one of the leaders stated: "we wanted to show our commitment
to radical changes so we could expect the employees to show organisational
commitment as well."
2. As part of the demand for commitment, the leadership was able to recognise
partners and dismissed those who did not follow this criterion: "we could easily
recognise who was not with us... Staff members who were not committed to the
new regime were asked to leave, or alternatively, left under their own
initiative." While this radical and not common strategy was employed, the
supportive organisational climate was again under threat, this time by the new
top team. However, in the long run, for personnel who kept working under the
authority of the new top management, commitment and job security were more
certain than before.
3. Although it was clear to all that the general performance was poor, in order to
improve the organisational climate and promote commitment to the
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organisation, the leadership recognised and flattered employees who had shown
good will.
In order to achieve financial stabilisation and to increase efficacy, the
management decided to retrench expenses. The decision where to cut was
influenced by political considerations, as was explained by one of the interviewees:
"At this point, we wanted to avoid conflicts... [thus,] we retrenched services that
were not supplied directly by the LA. We decreased the financial support in
external organisations that were traditionally annually funded by the LA." These
external organisations were usually non-profit and non-governmental organisations,
which were run for the common wealth. The interviewees emphasised that this
decision was taken and implemented with care and not as a blind crosscut.
Consequently, the decreased financial support in external organisations has saved
money from the year the decision was made and on.
Next to stabilising the LA, there was a need for innovative and renewal
actions to improve dramatically the performance within most of the areas. The
objectives of the second kind of strategies were "to deliver excellent services... For
instance, the management invested in modernising services by making them
available online." In addition, one of the main changes was reconstruction of the
relationship with stakeholders. This was achieved by implementing three major
actions:
1. The 50 promises and the vision were perceived as a renewed contract between
the elected members and the voters. In addition, it helped to push the staff
forward in a wide area of activities. However, the LA website detailed the 50
promises and stated that up to mid 2006 only four of the promises were
fulfilled. This evidence reflects the mixed results previously reported.
2. Another aspect of the improved relationships with stakeholders relates to
external organisations, traditionally funded annually by the LA. The decreased
funding of these organisations was followed by increased involvement in their
activities. Since the LA was their major financier, the management demanded
participation in the organisations? policy making, by appointing representatives.
The leaders claimed that "in that way, the management could effectively
control, direct, and follow its policy implementation through other supported
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organisations."
3. The third aspect of renewing relationships, which was emphasised by
interviewees, was enhancing relationships between Swindon and private
organisations. The management examined and redefined their financial
capacities and priorities. The LA strengthened its cooperation with existing
businesses and made efforts to attract new businesses to its area. A
comprehensive corporate cultural improvement plan was formulated. This plan
included activities and objectives related to the needs of mapping, improving
private sector services, and identifying outcomes in the area of corporate
capability.
Due to the previous poor norms and standards within the LA?s staff, there
was a need to support the radical changes by reforming the council as an
organisation. Thus, the management implemented reorganisation strategies that
enabled the use of relevant, updated, and available tools. Some of the organisational
mechanisms were changed in order to carry out the recovery process. For instance,
the management changed the face of human resources management, as stated by
one of the leaders: "Instead of an average of one day of training per person per year,
the management developed training programs and provided courses for individual
councillors and teams... The training was designed to inform on specific key
aspects of local governance such as effective member/officer relationships,
performance management, and leadership." Additionally, as part of officers?
replacement, the council approved hiring top managers and paying top salaries, as
in the best performing English LAs.
With the new management team, it was possible and realistic to shape a new
positive organisational climate. The management had a will to create a culture of
commitment and motivation to hard work. They had created mechanisms that
regulated top-down and bottom-up communication. As described by the
interviewees "the new atmosphere enabled us to demand results from subordinates
with no apologies when we knew it was the right thing to do." This supported the
movement toward performance orientation. In addition, the healthier organisational
climate influenced the senior management. One of the most interesting and
fundamental changes in Swindon was the change in the management?s own self-
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perception. According to the leaders' perception, the senior management
recognised, redefined, and perceived themselves not just as council leaders but as
community leaders. This change of self-perception symbolises the high level of
recovery the management was willing to achieve.
Overall, the senior management of Swindon used numerous strategies for
LA recovery. The earliest strategies were directed toward stabilising the climate by
declaring and demanding organisational commitment. Then, financial stabilisation
of the LA required acts of retrenchments. A second set of strategies was directed
toward dramatically improving services and performance, which was promoted by
modernising services and reconstructing the relationship with stakeholders. The
third set of strategies was designed for the recovery of the LA as an organisation:
training for staff, rebuilding positive organisational climate and replacing the top
management team while applying higher standards of recruitment enabled the
recovery of LA performance. This was achieved by creating a positive
organisational climate, assimilating professional norms, and using effective
mechanisms.
In sum, both in Swindon and Walsall the recoveries were achieved by
implementing strategies aimed at three kinds of objectives: stabilisation, delivering
excellent services, and reorganisation. As the analysis of the cases showed, the
change strategies employed by senior management follow the basic structure of
TMS and the 3Rs, as suggested by Boyne (2004). From the interviews, we can
learn that both LAs first made efforts to stabilise the council by halting
organisational climate deterioration and financial deterioration. These efforts
indicate and supply evidence for the use of retrenchment. Interestingly, while
governmental agencies demanded recovery plans and cutbacks, they also provided
aids for improving services. In order to halt organisational climate deterioration, the
management held different kind of communications with employees; rebuilt trust,
confidence and commitment among employees; closed up unnecessary/poor
services; mortgaged assets; and decreased financial support in non-governmental
organisations.
Then, a second set of strategies was aimed at renewal and delivery of
excellent services. These strategies created the core change from the external
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stakeholders? perspective. For instance, the management swapped services
suppliers; invested massively in facilities; increased taxes; implemented new
programs for specific communities; made services more modern and accessible;
influenced the policy of other organisations; and created new alliances with private
businesses. Hence, this evidence reveals the use of the second R, repositioning
strategies.
The third set of strategies was aimed at reorganising the LAs. These
strategies created the core change within the management and employees. They
enabled the LAs, as organisations, to implement other strategies and to maintain the
recovery process. For example, the management replaced the senior staff; they were
trained by organisational advisors; carried out training for councillors and officers;
altered the human resources management style; and reshaped a productive
organisational climate.
In order to better conceptualise these strategies, the interviewees were asked
to point out their characteristics. The description the interviewees provided
supported the previous argument concerning the characteristics of TMS (see
Chapter 2.6.3.). As previously noted, the implemented TMS were carried out by
new leadership (i.e., elected, recruited, or promoted during 2002). According to the
interviewees, the strategies used were a planned radical act since they were aimed
at deep changes and comprehensive recovery. The interviewees approved TMS
were examined, supervised, and therefore implemented under pressure from
external stakeholders (e.g., the press, the wide public and governmental officers),
and were expected to be effective for a limited period. Some strategies were
planned to be completed in the long run, by 2008/10, and others up to the next
audit. During this period, the leaders themselves were under pressure of takeover
threats. However, according to the interviewees, after pockets of resistance were
dealt with, the management?s moves became legitimate: "changes were easy to
implement since it was already known that there was a mess… it was unarguable
that a transformation is needed so changes were easily accepted because the crisis
was visible…" Additionally, the implemented strategies were described by the
interviewees as urgent because they were implemented as a reaction to a crisis or as
an attempt to prevent a forthcoming crisis. As was stated by one of the
interviewees: "When it was clear that the present route has an uncertain end, we had
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to decisively introduce necessary changes to reduce the need for later painful
actions". Concerning the last point, as previously detailed by the interviewees, the
organisational climate during the opening stage was negative.
While generally, both leadership teams implemented all three types of
strategies: retrenchment, repositioning, and reorganisation, each one of them
emphasised different aspects and recovery process. At this point the discussion
turns to present a comparison of Walsall and Swindon, particularly in relation to
differences from which a lesson can be drawn about TMS and the recovery
processes in public organisations. Although this study was not designed as a
comparative research, the semi-structured interviews employed similar questions
and were conducted by the same interviewer. Thus, there is a reasonable
methodological basis for a comparison of the cases.
One of the main differences between Walsall and Swindon relates to the
severity of the negative organisational climate. While the interviewees of both
Walsall and Swindon reported that their LA had experienced negative
organisational climate, it seems that Walsall suffered from a more severe situation,
which had greater influence on the interviewees? own impression. This is not
surprising since the interviewees of Walsall had served on the council since the late
1980s as middle managers, prior to the recovery process and during the negative
climate deterioration. In 2003, these middle managers became senior managers and
led the recovery process. Given that, they personally experienced and suffered from
the negative climate. Since Walsall?s interviewees had greater sensitivity to the
organisational climate, they tended to consider it as a more central issue. They
expressed harsher feelings and opinions regarding the managers? personal failure,
the LAs? negative reputation and image, the employees? distresses, and the political
conflicts. As a consequence, when they chose strategies to tackle the failure,
Walsall?s leaders invested more energy in improving the organisational climate.
They made massive efforts to create personal and safe relationship with employees
while encouraging the employees? confidence and trust in the management.
Moreover, Walsall?s leaders considered the improved climate as a fundamental
achievement, emphasising its contribution to the recovery process as a whole.
By contrast, Swindon?s interviewees began serving the LA in 2003 as the
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recovery pioneers. They were aware of the negative organisational climate and
dealt with it as well, although less vigorously. Swindon's leaders tended not to deal
with the organisational climate as a personal mission, nor as the target, but as a tool
that contributes to the recovery. In addition, they demanded the employees?
organisational commitment rather than emphasising the trust the employees could
give their managers. Overall, it can be argued that the fact that Walsall?s leaders
had been personally under the influence of negative organisational climate probably
shaped their perspectives regarding the needs of the employees. Thus, it seems that
being part of a deterioration process may influence the profile of the reorganisation
strategies implemented. Where the management is involved in the period of failure,
even though it is not necessarily directly responsible for it, such experience
influences the management?s perceptions regarding the organisation.
In addition, the difference in the leadership employment backgrounds might
be a possible explanation for some of the observed differences between the two
cases. Prior to their current position, Swindon?s interviewees were working in the
private sector. Consequently, the knowledge and experience of the leaders probably
influenced their perceptions and thus, their preferences regarding repositioning
strategies. It seems that, relatively to Walsall, a greater proportion of the
repositioning strategies was oriented toward businesses and was focused on the
private sector stakeholders? needs and interests. For instance, along with the
formulation of a comprehensive recovery plan, Swindon?s leadership formulated a
comprehensive corporate-cultural improvement plan. This plan stated the objectives
and included the activities the LA intended to implement. In practice, Swindon
mapped the needs of private businesses, identified the expected outcomes of
corporate capability, and improved the services given to private organisations. The
interviewees highlighted ongoing efforts to rebuild the relationship and
communication mechanisms with businesses. These efforts created new co-
operations both with existing and new businesses. The interviewees claimed the
primary goal of this plan and strategies was to encourage investments in the LA
geographical area. In contrast, Walsall?s interviewees? employment background
was the public sector. These leaders did not mention a similar plan or intentions.
Nor did they report that they had implemented a set of strategies directed in
particular toward private stakeholders? needs. The lesson we can draw from this
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comparison reveals that a private employment background of the leaders may lead
to greater implementation of repositioning strategies emphasising the needs of
private stakeholders.
Alongside repositioning, evidence was found for the impact of the
employment background on reorganisation strategies and exclusively on
replacement strategies. While both Walsall and Swindon?s leaders implemented
replacement strategies and managed human resources, they preferred different
recruitment strategies. This point refers to non-elected members only, since
personnel changes among councillors are due to democratic processes (i.e., local
elections) and the wide public choice. In Walsall, the leaders preferred to replace
some of the senior dismissed officers with their subordinates, who were promoted.
These nominated officers might not have been experienced in their new position,
yet they were likely to be thoroughly familiar with Walsall, its failure, and
especially the causes and symptoms that led to it. By contrast, in Swindon, the
leaders preferred to replace the senior dismissed officers with externally hired top
managers. These nominated officers were most likely to have rich experience
relevant to their new position; yet they were not familiar with Swindon. In order to
attract the best available managers, top salaries (i.e., equal to the highest quarter in
other LAs) were offered. In general, this evidence gives the impression that
employment background impacts reorganisation. The tactics used to manage human
resources in Swindon were less traditional and more similar to the private sector.
As a result, these techniques attracted managers from the private sector to work in
the LA.
Therefore, though this comparison is not conclusive, there is evidence to
show that Walsall?s leaders had a tendency to deal with internal factors while
Swindon?s leaders had a tendency to deal with external factors. Relatively, the
leaders of Walsall paid larger attention to internal issues (e.g., the organisational
climate); they chose to implement fewer repositioning strategies directed to external
markets (e.g., private businesses), and they preferred reorganisation and
replacement tactics that took into account internal resources (promoting middle
managers to senior managers). In contrast to this, the leaders of Swindon paid
relatively greater attention to external issues and interests (e.g., development of
business plan), and preferred replacement tactics that took into account external
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resources (recruiting top managers from the private sector).
4.2. North East Lincolnshire and Sunderland
The case studies presented above provide a descriptive account of recovery
process of two failing LAs: Walsall and Swindon. Though neither persistently
failing nor well performing LAs, may supply an example of successful recovery
process, exploring these organisations may provide a counter example for the case
studies. Therefore, the following chapter makes an effort to expose the major events
and developments within two LAs: North East Lincolnshire Council, a persistently
failing LA, and Sunderland a well performing LA from 2002 to 2005. The scope of
the description of these LAs is limited to supply a control referent, which may
enlighten Walsall and Swindon and by no means to further evaluate two additional
case studies. The following description is based on Audit Commission reports and
contemporary newspaper accounts.
North East Lincolnshire is relatively isolated locality situated on the south
Humber coast having 156,000 inhabitants. According to the 2002 Audit
Commission Corporate Assessment report, most of the population live in the three
major towns and while only under one per cent of its population is from minority
ethnic communities. Historically, the local economy was based on the fishing
industry which suffered a major decline in the 1980s. Now the community depends
heavily on traditional manufacturing industry and tourism. Its port is the largest in
the country, making the area internationally important for freight distribution.
While unemployment has reduced over the early 2000s, North East Lincolnshire
still has the second highest unemployment rate in the region. There are significant
levels of deprivation as 75 per cents of the population live in wards that are among
the 30 per cent most deprived in England.
The North East Lincolnshire Council was established as a unitary authority
in 1996 which is under Labour control from the beginning. The current political
balance is 23 Labour members, 11 Conservative, 5 Liberal Democrat and 3
independent. The new democratic structure, effective from January 2002, is based
on a six member, one-party cabinet with each cabinet member being the portfolio
holder for one of the major service blocks. There are three scrutiny commissions.
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The council has faced major financial pressures, with year-on-year budget cuts over
a long period. Consequently, in 2001, while approximately 6,500 people were
employed by the council, making it the largest employer in the area, the council
restructured its organisation reducing the number of directorates from sixteen to
eight. The net revenue budget for 2002/03 was £163 million.
The case of North East Lincolnshire Council is similar to Walsall and
Swindon with one difference: between 2002 and 2005 North East Lincolnshire
Council had not recovered. The 2002 Audit Commission Corporate Assessment
report points out that beside attempts of improvement, the pace of fundamental
change is slow and the council has not fully aligned its energy and resources behind
a clear vision and a strategic focus on the key priorities for improvement (p. 4):
'The council made an uncertain start as a unitary authority and struggled
with financial difficulties. It was slow to identify a strategic direction and
introduce sound management. However, over the last two years it has
achieved stability and constructed many of the key building blocks that are
required to secure future improvement. The council has been unclear about
its long-term ambitions for itself and the area… it is less clear what the key
priorities for improvement are. The council has introduced a number of
strategies, plans and procedures that cover the key areas of the council's
activities; however, the challenge is to implement these effectively to make
a real impact on the lives of people…'
Not long after the first CPA report published, the BBC (2002d) reflected
the poor performance achieved by North East Lincolnshire Council:
'The Yorkshire and Humber region has the highest proportion of councils
given a rating of "poor" in a new national survey. Hull council was put in
the lowest bracket of the Comprehensive Performance Assessment (CPA)
along with…North East Lincolnshire. "Poor" rating did not surprise them
after their heavy criticism from Corporate Governance Inspection (CGI)
earlier in the year. But the authority has stressed they would be continuing
with their improvement plan. Audit Commission Chairman James Strachan
said: "Some… councils can be proud of what they're achieving for local
people, but for others, improvement is desperately needed" '.
The Audit Commission inspection report: progress assessment report 2003
emphasised the main difficulties the council faced (p. 3):
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? The council was unclear about its long term aims or its priorities for
improvement.
? The council had introduced a number of strategies, plans and procedures
but not implemented them.
? A performance management framework was in place but a culture was
not yet embedded.
? There was too great an emphasis on process and insufficient attention to
how the culture of the organisation can be changed.
? Community leadership by councillors was underdeveloped although
partnership working by the council was strength.
? There were achievements in some priority services such as education and
regeneration but a failure to achieve in others, particularly children?s
services and crime prevention.
The overall analysis of the council revealed a triple failure: failure in
service provision, failure in corporate management, and failure in finances. Limited
progress in managing performance has been made since the previous report in
2002. The Council had a severe budget crisis and a overloaded agenda. According
to the Audit Commission inspection report (2003), in order to recover, the council
(p. 4):
'…needs to focus on developing its corporate capacity and focus and
implementing proposed changes before there can be any sustainable
improvement in the services it provides to local people. The council must
develop a coherent overall programme to do this.'
Consequently, efforts have been made to increase revenues:
'Council gets tough over debts. Debt collectors will recover the council's
money. A new tougher approach to collecting outstanding rent from ex-
council tenants is being taken by North East Lincolnshire Council. With
almost £1m owed to the authority by former tenants the council now plans
to use a debt collection agency to claw back the cash' (BBC, 2003e).
The progress assessment reported in 2004 concluded that the Council
needed to focus on developing its corporate capacity and on developing a coherent
overall programme to address identified weaknesses. The program was aimed at
tackling lack of clarity about how the council has to change; lack of clear
managerial leadership and capacity to focus on the right things; continuing reliance
200
on process to deliver culture change; limited progress in managing performance;
and a severe budget crisis. The major breakdown in the Council?s financial
management was caused by a lack of leadership; a shortage of qualified finance
staff; ineffective organisation of the finance function; a weak financial management
system; and generally ineffective budgetary control and reporting.
In late 2003 and in 2004, the Council made the first steps on the road to
recovery, yet, results were mixed and the Audit Commission reports seem
confusing. According to the Audit Commission reports
„changes at executive level are providing clearer leadership to the
organisation and more capacity to drive improvement… There was now
greater clarity about what needs to change and a consistency of purpose in
making it happen. With the benefit of external support, the Council has
worked hard to stabilise its finances and to invest in the building blocks for
a more secure future… [However], progress since the corporate assessment
in 2002 was slow and lacked clear direction. The impact of these efforts is
not proven and the effects are not yet visible to the public but the early
indications are encouraging. There are some key areas for the Council to
address as it moves forward. Yet, priorities, necessarily, have been
internally driven and relate only to the short-term, the links to resource
planning have not been established, communication with staff is improving
but externally it is weak, and communities and partners have not been
effectively engaged in developing a clear set of priorities for the locality.?
Alongside this analysis, contradicting reports in the media also reflect
improvement alongside stagnation. Additionally, the following reports demonstrate
the mistrusted and tensed relationship between the council and governmental
agencies:
'Housing service 'improving'. North East Lincolnshire Council has almost
9,000 houses. Council tenants in North East Lincolnshire have seen
significant improvements in the way their houses are maintained - but much
more still needs to be done, a report says… But the report highlights a
number of problems that still need to be addressed to make the service
better. It says staff efforts to make appointments are being undermined by
poor IT systems and customer feedback is not being used to make
improvements to the service. Repair staff are also missing appointments and
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there is a backlog of jobs waiting to be completed. Housing inspector Nick
Atkin said: "we are worried that much recent improvement has relied on the
work of external consultants, and we are not yet convinced the council's
permanent staff have the necessary resources, skills and experience to build
on what has already been achieved" ' (BBC, 2003f).
'Council lashed by watchdog. Mistakes have been made, but changes are
being made. North East Lincolnshire Council has again come under fire
from a government watchdog. The Audit Commission says financial
management at the authority has been inadequate. Despite making
substantial cutbacks, the council has had to borrow more than £12m to pay
for day-to-day services. In its response, the council admits that mistakes
have been made, but says changes are already being made to ensure
mistakes are not be repeated' (BBC, 2004g).
In reference to these mixed results, it is worth mentioning that successes
were partly based on external financial resources:
'Lifeline issued to crisis council. Mistakes have been made, but changes
are being made. A lifeline has been thrown to North East Lincolnshire
Council, which is facing the worst financial crisis of its history. In a unique
move the Deputy Prime Minister's office has confirmed the authority will
get a grant of between £4m and £5m to help modernise it. It follows
damning criticism of the authority by the government last year. Plans
include 15 targets to turn the council around including a possible move to
new headquarters. Proposals unveiled in June confirmed a reorganisation
which will lead to 170 job cuts. It followed an audit commission report
describing financial management of the council was "weak". The authority
has had to borrow £12m to pay for day-to-day services' (BBC, 2004h).
Additionally, successes were not free of retrenchments, criticism, and
prices to be paid, which resulted in protests of residents:
? 'Jobs axed at cost cutting council. North East Lincolnshire Council was
described as "weak" in January. Major cuts to public services provided
by North East Lincolnshire Council are in the pipeline, along with the
loss of 20 jobs, it has been announced. Almost all public toilets in the
area will be closed along with four branch libraries. There will also be
cuts in social services and education, and an increase in car parking
charges' (BBC, 2004i).
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? „Protest against library closures. The council has had 'inadequate'
financial management. A council is coming under fire from residents
over its cost-cutting plans. North East Lincolnshire Council is to discuss
proposals to close libraries and public toilets in the area in a bid to save
£5m. Several petitions have been started against the plans and Grimsby
MP Austin Mitchell has also spoken against the proposals' (BBC,
2004j).
? 'Parents to fight school closures. Primary schools face mergers across
the county. Parents in North East Lincolnshire are preparing to fight
plans to close primary schools in the region. Councillors say up to five
schools must close to reduce 3,500 surplus places - a figure which could
rise to 4,500 by 2009 unless action is taken… Although there will be a
public consultation, parents are angry by the timing of the
announcement. Father-of-three Mark Baxter, who has two children at
Bursar, told BBC News: "They have just gone ahead with this and
dropped it on us. We want to make them aware that we plan to highlight
the fact we don't want this school to close and that we are going to fight
it" ' (BBC, 2005e).
By the end of 2004, things went even worse, as the powers to control
North East Lincolnshire Council education departments were taken. This move may
be perceived as one of the most radical governmental intervention in English local
government:
'Council blasted in Ofsted report. School standards and attendances have
come under attack. An outside team is to take over the running of North
East Lincolnshire's education department after a damning report by
inspectors. The Ofsted report published on Thursday said the local
education authority's performance was "unsatisfactory". The council,
which runs schools in Grimsby, Cleethorpes and Immingham, said the
study was "very disappointing" and "made very uncomfortable reading".
The authority said its director of education would take early retirement…
Ofsted said the savings the council is required to make "are so great that in
reality there is only one immediate corporate priority, the resolution of the
financial crisis" ' (BBC, 2004k).
Twelve months later, the 2005 Audit Commission progress assessment
report exposed again mixed results while some areas continuously performed
poorly and some even deteriorated (p. 7):
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„…[T]he Council?s performance has improved since the last Progress
Assessment but not adequately. The Council has clarified its priorities and
has moved on from the financial difficulties by which it had been
dominated but progress towards improved service delivery has been slow.
The performance of some services has deteriorated and the poor quality of
its information systems is reducing the Council?s ability to make informed
decisions about the action which is needed to secure improvement.
Political stability has increased and the capacity of the Council has been
enhanced by the contribution of several new officers. Staff at all levels in
the organisation have a clearer understanding of what the Council is trying
to achieve… But the Council still faces significant challenges.
Over the last twelve months, the Council has delivered key projects… but
improvements in a number of areas are not being secured at a sufficient
pace and in a number of areas such as asset and risk management standards
have slipped. The pace of change over the broad range of services that the
Council provides is not sufficient to meet the needs of the local
community. Project management skills across the Council are limited and
some projects are not being implemented in a structured and timely
manner. Interim management and external consultancy have helped the
Council to deliver some of its major projects but the need to develop in
house skills has not been addressed.'
The situation during 2005 did not change much. Articles published in 2005
by the media revealed improvements alongside stagnation and deteriorations, which
in turn, resulted in mistrustfulness of governmental agencies:
? 'Council 'put on road to recovery'. The Audit Commission will continue
to monitor progress in 2005. A Lincolnshire authority once branded
poor is now "on the road to recovery", according to government
inspectors… a new report, it says leadership has improved and the
council's finances are looking healthier…But it added that progress had
been slow and the council faced "significant challenges in modernising
its culture"… Steps had been taken to improve the quality of the public
sector housing stock and to drive the council's approach to regeneration
but these were not yet making "a tangible difference to local people".
Financial management was better although the council had failed to
produce an accurate set of accounts for the second year running. Deputy
council leader Keith Brookes said: "Many will remember my words
describing the situation like turning round a battleship. It will take many
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years" ' (BBC, 2005g).
? 'Doubts raised on council accounts. The authority was heavily criticised
in its last report. North East Lincolnshire Council is again under fire
from government inspectors over its finances. The Audit Commission
has refused to sign off the authority's accounts for two financial years
because of doubts about their accuracy. This is despite the council being
given time to sort out a "major breakdown" in financial controls
revealed in a report last year, the watchdog said… The Audit
Commission issued a Public Interest Report (PIR) in March 2004
highlighting poor financial controls at the council which had left it with
a £9m deficit' (BBC, 2005f).
Unfortunately, even at the end of the year, on December 2005, the
performance assessment was likely to be not significantly far from reports
published four years before (see Table 10): 'Council declared worst in country.
North East Lincolnshire has been rated as the worst council in the country, the only
authority to be awarded no stars in a national survey. The annual Audit
Commission review can give up to four stars. It gave the council none, saying it
was performing "well below minimum requirements" ' (BBC, 2005h).
While the case of North East Lincolnshire Council provided an example for
unsuccessful recovery attempts, the case of Sunderland Council provides an
example of a well performing LA, which a recovery process was not required.
Accordingly, the central-local relations, the Audit Commission reports, and the
media coverage tend to be more positive.
Sunderland is a new city (since 1992 situated on the north-east coast of
England and comprises three main elements: a metropolitan area on both sides of
the River Wear; the large new town of Washington; and a number of smaller,
former coal mining settlements separated by countryside. The city has good
transport links, a recently opened Metro, local rail service, and a modern broadband
cable network. The city has a population of 290,000 of whom only 1.1 per cent are
from ethnic minority communities. According to the Audit Commission corporate
assessment 2002, the average gross domestic product is the lowest for any city in
the UK. Sunderland is ranked as the 15th most deprived district in England out of
354 districts and has a relatively low proportion of residents working in managerial
and professional occupations.
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Table 10: CPA Scores for North East Lincolnshire (2002-2006)
Source: Audit Commission Annual Reports (2002-2006)
Unemployment, whilst falling, remains higher than the national average at 5.6 per
cent. The city has a history of poor health and in some local communities,
educational attainment is low.
The city has undergone major changes with the loss of its traditional
shipbuilding, mining and heavy engineering industries. Within the last ten years
there has been a renaissance, with significant inward investment and a major shift
towards the automotive manufacturing, telecom service based sectors, the new
National Glass Centre, the establishment of Sunderland University, the Stadium of
Light, home of Sunderland football club, and a new business park housing a
number of call centers and high-tech businesses.
The city has ambitious plans involving the arts, culture, heritage,
development and leisure. Major plans are underway to modernise the city centre,
including developing an evening economy. It has recently achieved Beacon status
for its efforts to regenerate tourism and culture and also in respect of libraries as a
community resource.
The council has 75 members, 62 Labour, 11 Conservative and 2 Liberal
Democrat Members. The political organisation is based on a cabinet plus six policy
and review committees. In addition, there are six area committees. The council has
Service Score (1 to 4 scale where 4 is best)
2002 2003 2004 2005 2006
Education 3 3 3 2 2
Social care (adults) 2 2 2 2 2
Social care (children) 1 2 2 1 2
Environment 2 2 3 2 2
Housing 1 1 1 1 2
Libraries and leisure 2 2 2 2 2
Benefits 1 3 3 3 3
Use of resources 2 3 2 1 2
Overall Performance Poor Week Week Poor Fair
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a gross annual expenditure of £535m. The council is based on a Chief Executive?s
Department and five directorates: corporate services, education; social services;
community and cultural services; and development and regeneration.
The Audit Commission corporate assessment in 2002 rated Sunderland
Council as an excellent performed and revealed that the Council has a clear and
ambitious vision for the city, shared and owned by partners, stakeholders, and the
community. These ambitious are set together with partners priorities. The council
provides clear and visible leadership to its community. It has successfully engaged
with partners, area committees, and area regeneration frameworks that ensure that
the council can respond to local needs. As the Council proved abilities to leads it
local community and supply its needs, the central government supplied more lax
treatment. According to the BBC (2002e) reports Sundwell is 'one of the top
performers, 22 councils that have been promised new freedoms from government
control'.
According to the Audit Commission corporate assessment 2002
performance management, which is a key stone in the Best Value regime, is
encouraging (p. 4):
'The council manages performance well and is clear about what it has
achieved against its priority areas. Planning processes are robust and
ensure a clear focus on priorities and that resources are in place to deliver.
The council is developing and strengthening its approach to measuring and
monitoring performance both internally and in its partnership working and
is moving towards a more outcome driven approach… The council has a
record of significant achievement against its key priorities, most notably
regeneration. Development of the city centre, success in attracting inward
investment, the development of new social and cultural facilities, re-
development of former colliery sites and falling levels of crime have
resulted in recognisable and positive change to the quality of life for local
people. Social and health services have improved and the city now has a
highly performing social services department, although many deep seated
health problems remain.'
Alongside these impressive statements, The Audit Commission corporate
assessment 2002 stated the council recognises that it needs to develop its
engagement with some sections of the community and increase their effectiveness
in providing civic leadership. There is evidence this area was at least partly
improved.
'Plans for city's future unveiled. People living in Sunderland are coming
together on Monday to debate the future of their city. Residents will join
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business, retail and industry leaders and MPs for the third state of the city
debate. The aim of the open forum is to attract interest from city residents,
generate new ideas and involve more people in the city's future. Sunderland
City Council leader Bob Symonds said: "We have been encouraged by the
success of the previous open forums and the debate is now a regular feature
of Sunderland's calendar. We would like as many people as possible from
all who live and work in Sunderland to take part in this exchange of ideas.
This is a chance for everyone to come and join in to hear the debate first
hand and have their say" ' (BBC, 2004l).
In conjunction with these strengths, the most significant area where the
council had to improve its performance was education where results were
substantially below national averages. Yet, the council was self aware, and its self-
assessment included an improvement plan that addressed many of the key actions
that the council and its partners intended to implement.
Interestingly, though the general assessment of Sunderland is impressive
and positive, central policies still created pressures for retrenchment:
'Threatened schools 'will close'. The children will have to transfer to new
nursery schools. Campaigners battling to save three Wearside schools from
closure have received mixed news in their long-running fight. Councillors in
Sunderland decided on Wednesday afternoon to close Usworth
Comprehensive School, in Washington, along with Cork Street Nursery in
Sunderland… Education bosses said the closures were needed as part of a
wide-ranging review of services. Usworth Comprehensive faces the axe
because of the need to cut thousands of surplus school places' (BBC,
2003g).
'Council staff face £4,500 pay cut. Angry union leaders on Wearside are
warning of a "winter of discontent" over plans which could see some city
council salaries cut by £4,500 a year. Sunderland City Council is amending
pay scales following a nationally-agreed job evaluation exercise. But while
some will see a boost in their pay packets, others will face a staggered pay
cut of up to 33%. Unions are balloting on the city council's proposals, but
union leaders are warning of possible strike action. Along with other local
authorities, Sunderland council has spent months carrying out job
evaluations, designed to ensure staff receive equal pay for work of equal
value' (2005i).
The Annual Audit and inspection Letter 2004-2005 under the CPA
framework (see Table 11), declared the Council to be four-stars, to be improving
well, and performing well in its use of resources.
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Table 11: CPA Scores for Sunderland (2002-2006)
Source: Audit Commission Annual Reports (2002-2006)
The Council has a good track record of improving its priority services and in
providing value for money.
This is supported by a robust strategic framework to ensure that sufficient
future progress capacity exists and to sustain improvement.
For example, the media reflected the satisfying performance in the social
care area (BBC, 2004m):
'Councils awarded top star ratings. Newcastle, Sunderland and Gateshead
councils have been rated among the top 20 in the country for social care. A
report by the Commission for Social Care Inspection awarded them a three-
star rating for their social care provision for adults and children…
Sunderland was one of the first authorities to be given the coveted three
stars when the performance tables were introduced three years ago. Cllr Eric
Timmins, cabinet member with responsibility for social services said: "The
Government has taken a rounded view of social services based on all areas
of performance, and we have come out in the top 20 again" '.
The Annual Audit and inspection Letter 2004-2005 revealed that financial
management arrangements remained sound and the Council recognised the need to
maintain its prudent approach to managing its finances given future financial
pressures, including single status, increasing pension costs and the costs of social
services' modernisation.
Service Score (1 to 4 scale where 4 is best)
2002 2003 2004 2005 2006
Education 3 3 3 3 3
Social care (adults) 3 3 3 3 3
Social care (children) 3 3 3 3 3
Environment 3 2 3 2 2
Housing 3 3 3 3 4
Libraries and leisure 4 4 4 4 3
Benefits 4 4 4 4 4
Use of resources 4 4 4 3 4
Overall Performance Excellent Excellent Excellent Excellent Excellent
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Overall, corporate governance arrangements remain sound, with some
scope for improvement in certain areas. In particular, the Council recognises the
need to develop its approach to project management, respond to recent guidance,
and undertake a robust assessment of ethical performance across the Council. Next
to these strengths, 'recycling and planning continue to represent recognised areas
for improvement and plans are in place to address these. There is a need to review
how targets are set to ensure they are stretching but achievable' (p. 19).
4.3. Summary
In sum, the cases of Swindon and Walsall reflect narratives of recovery
processes. In both cases, the LAs faced organisational failure and their poor
performance damaged internal and external areas of activity. In both LAs, the
senior management was put under pressure by consumers and official governmental
auditors to bring about a recovery, which stimulated organisational diagnosis and
formulation of comprehensive recovery plan. The narratives used for the
description of North East Lincolnshire though somehow similar, illustrate a more
pessimistic view. In this case, despite efforts were made to recover the council, the
performance remained poor demonstrating that recovery is not a trivial outcome
and implementation of change strategies does not necessarily lead to recovery.
Despite the differences between the cases and the council?s level of
performance, all four LAs implemented change strategies directed towards
achieving significant improvements. Interestingly, even when a recovery processes
was not required, planed or implemented retrenchment strategies were in use. As a
consequence, protest and tensions between the councils, consumers and employees
emerged in all four cases. In addition, in all the cases in which low performance
was perceived tensions aroused also between councils and the central government,
and within the council?s leadership. Nevertheless, despite the tensions, from all
cases we can learn that cooperation between central and local government existed.
In addition, the conflict between the government and County Council
highlights the intractable problem of who in a democracy should have the final say
on local issues. Handing over experts the political problems, decisions, and
210
priorities renders the results somewhat dry and leaves a series of logistical
requirements. Elected members, as political representatives of the people, have an
unqualified right to decide on services within their jurisdiction (Guilfoyle, 2004).
"A core principle of local government is that local councillors, 'members', are
accountable to the local electorate for the decisions made by the council. As a
result, within councils a complex committee structure existed through which
members made decisions based on the advice provided by professional officers"
(Murray, 2007).
This argument leads us back to the simple question: who should/does lead
the recovery process? According to the Best Value principles, both leading
politicians and managers are responsible for reconstructing the whole nature of
state/civil society relationships. Yet, responsiveness to electorate desires and
commitment to users cannot be left to professionals or managers. Users have a
distinctive stake in service quality and bring an important voice to it judgment.
Thus, services need to be evaluated with a direct input from users and then changed
according to this input, subject to the political direction of elected representatives
(Murray, 2007). In a broader sense, Gordon suggests officers should define
outcomes, determine plans, map strategies, and evaluate/review delivery options. In
parallel, executives should challenge desired outcomes, issue authority for plans,
and approve strategies.
Within our case studies, the analysis has not distilled the role definition and
division of labor between elected members and officials since we were mostly
interested in the LA as a unified unit of research. Overall, all four LAs showed
cooperation within the senior management, meaning, between politicians and
professionals. Nevertheless, cooperation was not free of conflicts. As was
mentioned earlier, since professionals are a parameter of policy formulation
alongside policy implementation (Laffin, 1986), naturally, they have been also part
of organisational conflicts. The evidence has not revealed these conflicts are rooted
in professional matters. Accordingly, the narratives did not point out a role conflict
or dual orientation of professionals, to their professional and to their organisational
position, as was suggested by (Dunleavy, 1980). In contrast, the four narratives
followed the British traditional system, whereas officers' responsibility is to the
whole council, not to particular party, no matter who has the majority control
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(Wilson et al., 2006). In accordance to this view, the four cases of LAs
demonstrated professionals who stood behind the politicians as one team and even
sometime in front of governmental agents.
Governmental intervention was presence in all cases described. However,
the level of intervention changed according to the level of performance. The better
performance the council showed, the less governmental intervention was imposed
and greater flexibility characterised the relationship.
In the cases of Swindon and Walsall recovery plans were formulated.
According to these plans, wide recovery attempts were made while various TMS
were employed, including retrenchment, repositioning and reorganisation strategies.
Yet, though improvements were made, comprehensive, full recoveries in
performance were yet to be completed. Additionally, the extent to which TMS
contributed to these improvements is not yet clear. Hence, these questions remain
open. Nevertheless, employing further and different tools may provide answers to
these questions. Therefore, the next chapter would make the attempt to answer
these questions while employing a survey and quantitative tool distributed among
senior leaders.
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CHAPTER 5: RESULTS AND DISCUSSION
The following chapter aims at presenting the main arguments developed in
this thesis while relying on the survey conducted by senior managers in conjunction
with the Audit Commission's data, reports, and interviews. This study was designed
to discover the practical managerial route taken by the leadership of public
organisations that were faced with organisational failure and went through a
recovery process. According to this view, and as demonstrated by the case studies,
this managerial route is based on the implementation of TMS. The analysis of the
cases showed that TMS were employed by senior managements, and that although
this was not carried out conclusively, they were effective in making important steps
toward recovery. Yet, in order to draw a more general picture, a more
representative sample was required. Thus, the survey was conducted. The
quantitative empirical results, which are based on the survey, provide an extra
insight into the managerial actions taken in turnaround situations. These insights
cover three main fields that will follow a subsequent order. First, the way TMS
should be measured and the construction act of TMS measurement tool. Second, an
evaluation of the popularity of TMS within LAs. Third, an evaluation of the
relationship between TMS and recovery.
5.1. Measuring Turnaround Management Strategies in the Public Sector
5.1.1. TMSLA Construction
This chapter is an important part in the development of this thesis. While the
literature review and case studies contributed to the conceptualisation and content
of the variable 'Extent of Implementation of TMS', this chapter will construct and
validate a new scale, which will be used later in various tests directed to evaluate
the extent TMS were in use and their relationship with recovery. As previously
discussed (see Chapter 2.6.) the tool for measuring TMS in the public sector used
by Boyne and Meier (2007) was found to be inappropriate and biased. Therefore,
since the theoretical roots of TMS lie in the private sector, the discussion goes
through the private literature to find the basis for a new measurement tool. As far as
known, there is one existing scale designed to measure TMS that has been
213
developed by Barker and Duhaime (1997). According to them, most of the large-
scale studies on corporate Turnaround Management (e.g., Arogyaswamy, 1992;
Kasimoglu, 2006; Schendel and Paton, 1976; Hambrick and Schecter 1983;
Ramanujan, 1984; Robbins and Pearse, 1992; Thietart, 1988) did not measure the
strategic change made by the management, but most of them relied on restricted
changes in macro financial ratios (e.g., cost/sale ratio, investments/assets ratio,
inventory/sales ratio, assets/cost reductions ratio, and employees/sales ratio). It is
understandable that the research on TMS mostly uses methods based on financial
ratios since those are published and easy to access (Grinyer and Spender, 1979).
However, Barker and Duhaime (1997) suggested the use of field data rather than
secondary/archive data such as annual financial reports. According to them, field
data would better uncover the actual managerial acts conducted to achieve an
organisational recovery.
Barker and Duhaime (1997) recognised a gap between recovery theory and
empirical measurement tools. According to the authors, measuring the management
response to a failure through changes in financial ratios obscures the ability to
determine what actions the managers actually took during recovery attempts. The
ability to follow management strategies is limited because financial ratios capture
only what financial statements can reflect: changes in the amount or productivity of
funds expended for some activity. Nevertheless, successful recoveries may include
qualitative changes in policy and strategies that may affect performance but may
not be reflected in financial ratios (e.g., reshaping the organisational climate,
training employees). Thus, they conclude that even in the private sector financial
ratios alone are not appropriate measures for the exploration of a managerial
process.
As a consequence, Barker and Duhaime (1997) developed a scale named
„Extent of Strategic Change?, based on field data concerning the actual actions
taken by the management (see Table 12). The authors described the „Extent of
Strategic Change? as a "list of management actions commonly taken by firms
during their turnaround efforts", or as a "broad base measure of the actions that
managers actually undertook during their recoveries…in order to measure
accurately…whether managers initiated a large number of actions and policy
changes during their firm turnaround." The scale covers two main areas:
214
Table 12: The ‘Extent of Strategic Change’ Scale (Barker and Duhaime, 1997)
A Acquiring firms or units of other firms competing outside historical lines of business
B Acquiring firms or units of other firms competing within historical lines of business
C Divesting organisational units intact (e.g., selling them as going entities)
D Harvesting or liquidating the assets of units not divested
E Establishing of new internal ventures or start-ups
F Entering into joint ventures outside traditional lines of business
G Contracting, expanding or simultaneously contracting and expanding (by region) the scope of the
corporation?s domestic operations
H Contracting, expanding or simultaneously contracting and expanding (by region) the scope of the
corporation?s foreign operations
I Changing priorities among the corporation?s traditional set of businesses
J Eliminating entire product or service lines from continuing businesses
K Eliminating particular product or service from within the remaining lines
L Introducing completely new products or services (outside those created by acquisitions or joint
ventures)
M Expanding marketing efforts to new segments of customers, eliminating certain segments of
customers, or both
N Increasing the average prices of the company?s products in conjunction with increasing customer
service and sales-related expenditures
O Increasing the average prices of the company?s products in conjunction with decreasing customer
service and sales-related expenditures
P Expanding the average scope of product distribution to a greater number of outlets
Q Selling or closing inefficient or underutilized plants
R Relocating existing manufacturing capacity to geographic regions where production would be less
costly
S Centralisation or decentralisation the corporation?s manufacturing capacity
T Modernizing manufacturing capacity with equipment utilizing new technologies
U Contracting for components, subassemblies, and products that were previously manufactured by the
corporation
V Beginning to manufacture components, subassemblies, and products that were previously purchased
W Spreading the purchases of materials, components, and subassemblies across a greater number of
suppliers
X Increasing or decreasing (as compared to historic levels) the capital available for research on new
products or manufacturing processes
Y Increasing or decreasing (as compared to historic levels) the capital available for the commercial
development of new products
Z Filing a bankruptcy petition for reorganisation purposes
AA Liquidating major assets other than plants and production equipment such as office buildings, land
holdings, and blocks of securities in order to raise capital
AB Suspending capital expenditures for (what the respondent judged to be) a significant period of time
1. Corporate-level management actions- domain-changing actions (A to I).
2. Business level management actions- changes in competitive decisions at the
product market level (J to AB).
The „Extent of Strategic Change? scale measures the number and extent of strategic
215
changes, policy changes, and actions initiated by managers during a firm?s
recovery. It relies on the managerial aspects of recovery and not on financial ones.
The measurement of TMS in LAs can be based on the same concept.
Measuring managerial actions instead of basing the scale on financial ratios is
crucial, especially while dealing with the public sector that is not profit-oriented
(Scharitzer and Korunka, 2000) but performance-oriented (Baker, 1995). Therefore,
the criticism of Barker and Duhaime (1997) regarding methodological
imperfections in the measurement of TMS in previous studies will guide us in the
construction of the scale to be used in this study.
Although Barker and Duhaime?s (1997) scale would be a guideline, a start-
point, and a basic source for the construction of a measurement tool of TMS in
LAs, the content of „Extent of Strategic Change? scale is appropriate for measuring
the private sector only. Its items mostly refer to a corporate environment (e.g., item
(J): Eliminating entire product or service lines from continuing businesses); they do
not capture the performance-oriented nature of a public organisation, its everyday
activities, and its applicable terminology. Thus, adjustments are required. With the
intention to adapt Barker and Duhaime?s scale (1997) and construct an appropriate
measurement tool for TMS in LAs we employed two main sources: the relevant
literature and the qualitative data. Table 13 contains the final suggested alternative
scale appropriate for TMS measurement in LAs (Beeri, 2009a).
This measurement tool is labeled as TMSLA (Turnaround Management
Strategies in Local Authorities). The TMSLA scale was created by:
1. Twenty-three items based on the „Extent of Strategic Change? scale, which were
adjusted to reflect the public sector environment and the local authorities?
context. For example, „The local authority established new services? (item 10).
2. Eighteen additional items, which reflect the conclusions from the qualitative
data analysis. For example: „Replaced senior and middle managers? (item 30).
Some items from the „Extent of Strategic Change? scale were irrelevant to
the TMSLA scale and were left out as for example, 'Acquiring firms or units of
other firms competing outside historical lines of business? (Item A). According to
the concept of TMS and Boyne's suggestion (2004), the new 41 TMSLA items
216
were classified into three sets of strategies: retrenchment, repositioning, and
reorganisation. Note that this classification is theoretical and to some extent even
artificial, and is therefore temporary. A more accurate classification of TMSLA was
based on factor analyses procedures.
The distributed questionnaire was designed as a multiple-choice, closed,
Likert scale. The participants were asked to evaluate the extent to which their LA
had implemented (over the last four years) the strategies mentioned by scoring each
item from 1 (Hardly at all) to 5 (To a very large extent) (see Appendix 5). The
variable „Implementation of TMSLA? was created by the average score that each
manager gave to the relevant questions. It reflects the top management perspective
and evaluations regarding the actions taken in their LA over the last four years. The
variable is not dichotomous since managers could choose the extent of
implementation of TMS in their LA.
217
Table 13: The Turnaround Management Strategies in Local Authorities Scale
Over the last 4 years the Local Authority:
? Contracted activities and services? scope
R
e
t
r
e
n
c
h
m
e
n
t
? Eliminated particular services
? Decreased some services expenditures
? Partially / Temporarily exited from specific services
? Liquidated assets in order to raise capital
? Reduced / suspended capital expenditures
? Closed down public organisations
? Created stronger financial control
? Decreased financial support to other organisations
? Established new services
R
e
p
o
s
i
t
i
o
n
i
n
g
? Entered into joint activities/cooperated with other agencies
? Extended activities? and services scope
? Changed the priorities of traditional activities
? Rented / Sold /Mortgaged assets
? Extended services? availability
? Extended marketing efforts (reaching out) to new segment of consumers
? Increased services expenditures
? Modernized services capacity with equipment utilizing new technologies
? Began to give services / internal services that were previously purchased
? Loaned money / asked for subvention for reorganisation purposes
? Privatised services
? Increased average price of services / levying money
? Redefined core missions
? Ensured high quality of services
? Improved the local authority?s internal and external image
? Introduced new ways of implementation
? Rebuilt stakeholders? trust in the Local Authority
? Replaced the Chief Executive Officer
R
e
o
r
g
a
n
i
s
a
t
i
o
n
? Changed the internal local authority?s structure
? Replaced senior and middle managers
? Took centralisation steps
? Took decentralisation steps
? Increased time and efforts in researching the consumers needs
? Increased time and efforts in becoming a learning organisation
? Made changes in human resources management style
? Reshaped and improved the organisational culture and climate
? Invested in staff skills training
? Defined a common vision of the Local Authority
? Diagnosed the Local Authority?s strengths and weaknesses
? Formulated an organisational working plan
? Fought the denial and resistance of employees
? Items that were adjusted to the LAs? context based on the „Extent of Strategic Change? scale
? Items that were added, reflecting the relevant literature and the qualitative data analysis
218
The Likert scaling system is an accepted and broadly used method to gather
information in large samples since it is easily distributed to many participants and
understood. On the other hand, Likert scaling also has some limitations. Likert
scale has three potential problems (Bryman, 2004; Field, 2005; Pallant, 2001;
Neuman, 2003):
1. Misleading interpretation of items- The TMSLA items are closed
questions with limited possibilities for clarifications. Consequently,
participants may interpret strategies incorrectly, consider two strategies
as identical, or mistakenly find strategies as irrelevant. This may affect
the ability of the TMSLA scale to accurately reflect the actual actions
taken by the LA management.
2. Biased evaluations of ranks- respondents to Likert scales are exposed to
(i) central tendency bias: avoid using extreme response categories and
using a set response in order to abstain radicalism, (ii) acquiescence
bias: employing a habit to report that strategies were employed due to
the assumption that if they appear in the questionnaire they should have
been implemented, and (iii) social desirability bias: trying to portray
themselves or their organisation in a more favorable light. As a result,
participants might report they extensively implemented strategies
perceived as innovative and positive or strategies which are normatively
expected to be implemented.
3. Scaling- since all strategies have the same weight (though not
necessarily in the respondents view) and final scores are calculated by
simple mean of items evaluations, different combinations of several
items can result in the same score. Hence, final scores may not reflect
distinctions of different TMS combinations.
Overall, like in any other study in social sciences, research methods are not
perfect However, although this problem cannot be completely solved, some
methods were taken to diminish their influence. First, validity and reliability tests
were run (see Chapter 5.1.2.). Second, the contact details of the research were
supplied and participant could contact him with questions (this option was used by
some participants). And finally, the use of large samples was aimed, inter alia, at
219
reducing these biases.
Despite the potential problems, the new measurement tool enables
measuring TMSLA not only as a general set of strategies but also to gauge the
extent of implementation of internal dimensions of TMS, such as aspects of
retrenchment, repositioning, and reorganisation (this, according to clusters
determined by factor analysis). Additionally, the measurement tool enables the
measuring of separate and single strategies and their extent of implementation.
The internal dimensions and single strategies make this variable more
flexible. It allows us to test the impact of different aspects and single strategies on
recovery. Yet, before employing this tool and testing some of the research
questions, its readiness for use, which means, its validity and reliability must be
examined.
5.1.2. Testing and Evaluating the Validity and Reliability of TMSLA
5.1.2.1. Evaluating the Content Validity
With the aim of ensuring a high level of content validity of the TMSLA
scale, a three-step mechanism of judgement was applied (Beeri, 2009a). First, the
author constructed the preliminary draft of the proposed questionnaire, as detailed
in Chapter 5.1.1. This draft contained questions aimed at measuring as accurately as
possible the extent of TMS implementation in LAs. This initial draft was based on
literature and qualitative data. After the interviews had been carried out and
analysed, an input that enabled a better focus on the TMS area was achieved.
Second, the draft was presented to two experienced researchers from the public
sector field who were familiar with LAs complexity and difficulties. This panel of
experts acted as independent judges in evaluating the tool. Their comments and
suggestions were taken into account and the tool was upgraded. Third, a pilot
research project was executed, the questionnaires were sent to 30 randomly
sampled senior managers. According to their answers, responses, and comments,
the final version of the TMSLA scale (see Table 11) was slightly adjusted. The
reliability of the overall TMSLA scale and the three subscales were tested within
the pilot project as well. The results of the reliability tests are presented in Chapter
220
5.1.2.3.
The adaptations made in the above process simultaneously took into account
characteristics and the general nature of the public sector. Thus, the above
mechanism of judgment assured an adjusted tool for TMS? measurement in the LA
context. Since the new TMSLA scale reflects the actions made by a council to bring
about a recovery, the concept and the operative definitions are coordinated, and the
experts? panel reshaped and approved the scale?s content, it is possible to conclude
that the TMSLA scale has both face and content validity.
5.1.2.2. Testing the Construct Validity
Following Field (2005) and Pallant (2001) recommendations, and Vigoda-
Gadot et al. (2007) procedures, an Exploratory Factor Analysis (EFA) was
employed. This technique is applied in exploratory research for the development
and evaluation of new scales, identifying clusters of variables, understanding the
structure of a scale, and constructing a questionnaire. The items of TMSLA scale
were subjected to Principal Component Analysis (PCA) - Direct Oblique Rotation.
This method goes hand-in-hand with the assumption that the factors might be
dependent. Since all the strategies might lead to recovery, we can expect them to be
correlated linearly and positively.
The data was found as having good factorability. Kaiser-Meyer-Oklin value
was high (KMO = .810) and exceeded the recommended value of .6. Bartlett?s Test
of Sphericity reached statistical significance (p < .001), indicating relatively
compact patterns of correlations and analysis that should yield distinct and reliable
factors. The items had roughly normal distributions. An inspection of the
correlation matrix revealed the presence of significant inter-correlation coefficients
of .3 and above (p < .001 to p < .05) between the items. This supports the
assumption that the items measured the same dimensions of content. However, the
inter-correlations were not too high (e.g., r > .9) so multi-co-linearity and
singularity were avoided. Only 27% of the residuals were greater than .05,
indicating a good fit to the model.
221
Table 14 presents the EFA results. It includes the loading of factors,
Eigenvalues, percent of variance, and cumulative percent of variance (the numbers
of the items were kept the same as in Table 13). Items 3, 5, 14, 20, 22, and 28 were
excluded from the analysis due to low Measure of Sampling Adequacy (MSA < .5).
Two other items: 18 and 41 could not be classified under any of the factors due to
low loading (< .40), so these items were omitted from the final scale.
The analysis shows that generally, the proposed scale comprised three major
areas of content, as was suggested by Boyne, (2004): retrenchment, repositioning,
and reorganisation, although it revealed that they were split into eight factors,
reflecting internal dimensions of these areas. These eight factors had Eigenvalues
exceeding one, explaining in total 69.8% of the variance. The contents of the factor
are explained next.
Retrenchment Factors
? Retrenchment of Services (Factor 2) includes three items; all of them
represent reduction in the scope of Services and activities directed toward releasing
resources and enabling other activities. These items differ one from each other by
the manner and the extent of reduced services.
? Retrenchment of Expenditures (Factor 6) is the complementary
factor of retrenchment of Services (Factor 2). Originally, item 17 (Increased
services expenditures) was classified into the repositioning area. In fact, in this
retrenchment factor the items reflect a cost-effective process: cutting expenses on
one hand in order to release resources for the sake of other services. The cost-
effective process may take place according to new considerations like common
vision, newly changed priorities, research needs, and an organisational working
plan.
222
Table 14: Exploratory Factor Analysis for the Turnaround Management Strategies in Local Authorities Scale (N = 85)
Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8
Reorganisation
- Institutional
Level
Retrenchment
of Services
Repositioning
as Reaching out
Reorganisation
as Extent of
Centralisation
Repositioning as
Innovative
Services
Retrenchment
of Expenditures
Repositioning
as Renewed
Relationship
Reorganisation -
Personnel
Level
39. Diagnosed the Local Authority's strengths and weaknesses .818
37. Invested in staff skills training .796
40. Formulated an organisational working plan .751
38. Defined a common vision of the Local Authority .696
36. Reshaped and improved the organisational culture and climate .643
35. Made changes in human resources management style .641
8. Created stronger financial control .496
2. Eliminated particular services .821
1. Contracted activities and services' scope .786
4. Partially / Temporarily exited from specific services .639
19. Began to give services / internal services that were previously purchased .809
34. Increased time and efforts in becoming a learning organisation .572
33. Increased time and efforts in researching the consumers needs .565
16. Extended marketing efforts (reaching out) to new segment of consumers .545
31. Took centralisation steps .816
32. Took decentralisation steps .788
13. Changed the priorities of traditional activities .770
26. Introduced new ways of implementation .726
11. Entered into joint activities/cooperated with other agencies .725
12. Extended activities' and services scope .704
15. Extended services' availability .571
10. Established new services .438
23. Redefined core missions .401
6. Reduced / suspended capital expenditures .742
17. Increased services expenditures .621
9. Decreased financial support in other organisations .484
7. Closed down public organisations .752
21. Privatised services .613
24. Ensured high quality of services .525
27. Rebuilt stakeholders' trust in the Local Authority .464
25. Improved the local authority's internal and external image .444
30. Replaced senior and middle managers .838
29. Changed the internal local authority's structure .815
Eigenvalues 9.706 3.963 2.276 1.852 1.537 1.384 1.205 1.159
% Variance 29.410 11.920 6.890 5.610 4.650 4.190 3.650 3.510
Cumulative % 29.412 41.339 48.237 53.850 58.508 62.703 66.354 69.865
223
Repositioning Factors
? Repositioning as Reaching Out (Factor 3) includes four items that
point out repositioning strategies as an innovative act of the LA. This factor reflects
an intended organisational learning and researching that results in providing and
distributing new services. Two of the items (33, 34) were originally classified into
the reorganisation area and the other two items (16, 19) into the repositioning area.
It appears that this factor demonstrates the earlier claim that reorganisation
strategies support the implementation of repositioning strategies. Thus, in reality,
these strategies may occur simultaneously and not separately.
? Repositioning as Innovative services (Factor 5) gathered seven
items, which reflect the core aspect of repositioning. This factor reveals several
ways through them the LA could grow. For example, increasing the variety and
accessibility of services, or, reforming the services? aims, priorities, and methods of
execution.
? Repositioning as Renewed Relationship (Factor 7) includes five
items, which point a tendency to reconstruct relationships with external
stakeholders. For instance, while demanding unbending standards of performance
from public organisations operating under the council authority, the council
reconstructs new relationship with private suppliers. In addition, reconstruction of
relationship with the employees and the consumers could appear as reshaping the
organisational image in their eyes, or generally strengthening the trust of
stakeholders. The seventh factor is relatively contaminated and raises some
questions. Item 24 (Ensured high quality of services) contributes to trusting,
confident, and positive relationship with stakeholders and that might be the reason
this item loads this factor. However, theoretically it suits the fifth factor as well:
repositioning as Innovative Services. Item 7 (Closed down public organisations)
was originally part of the retrenchment subscale, as a strategy designed to avoid
inefficiency in LAs. According to the respondents, closing down public
organisation was more a statement of policy regarding the unbending performance
required from other public organisations.
224
Reorganisation Factors
? Reorganisation at the institutional level (Factor 1) includes seven
items, which refer to strategies that deal with the organisation as a whole, as a unit.
According to the interviewees, many of these strategies are very basic; they were
implemented in order to stabilise the organisation and as initial solutions for failure.
Item 8 (Created stronger financial control) was originally classified as a strategy in
the retrenchment area. Apparently, the participants considered financial control as a
reorganisation strategy that contributes to the organisational resources management
rather than a technique to decrease expenditures.
? Reorganisation at the Personnel Level (Factor 8) includes two items.
These reorganisation strategies are the complementary aspect of reorganisation at
the Institutional Level (Factor 1). Item 30 indicates a complete discharge or
encouraged resign of individuals. Item 29 focuses on changes within the
organisational structure that may result in promotion of personnel, transfer of
responsibilities from one position/department to another, and new required
accountability by key leaders.
? Reorganisation as Extent of Centralisation (Factor 4) includes two
items that measured the aspect of concentration. These two items are not
necessarily opposed to each other and might occur simultaneously, for instance, in
different departments.
Overall, the results supply strong evidence that the three major sets of
strategies: retrenchment, repositioning, and reorganisation were the base for TMS
in LAs. All the clusters were classified into one of the 3Rs and reflected internal
dimension of them. In addition, although all items were reclassified, most of them
(85%) have not leaked from their original R to another R (i.e., an item that was
originally classified under the retrenchment category stayed in one of the new
internal dimensions of retrenchment). In reality, the separation between individual
TMS is complex. Each factor reflects a blend of strategies that were implemented
as a package, which influenced each other. However, although these factors are not
as "clean" as the theoretical structure suggests, they still reflect the nature of
retrenchment, repositioning, and reorganisation.
225
To support the convergent validity (as part of the construct validity) of the
scale the internal correlations among the various factors of TMSLA were examined.
Overall TMSLA and the eight factors were created by the average score that each
respondent gave to the relevant questions (see Table 12). These final variables were
employed for the convergent validity test and all the comparisons, correlations, and
predictions that will be presented later on this chapter. As shown in Table 13, many
of the Pearson?s correlation coefficients amongst the factors were significant,
positive, and ranged between r = .23 and r = .67. Each factor is significantly
correlated with at least two and up to six other factors. The fact that these
correlations are not very high (beyond .7) also indicates the lack of multi-co-
linearity between the factors.
5.1.2.3. Testing the Reliability
With the intention of assessing the scale?s reliability, several tests were
conducted. The reliability tests were run using Cronbach?s alpha scores within two
samples: first, internal consistency was tested within the pilot project of randomly
sampled senior managers (N =30). Second, internal consistency was tested within
the final sample of senior managers (N = 126). In the pilot project, since the factor
analysis using the Principal Component Analysis (PCA) was yet to be conducted
and the eight factors were yet to be constructed, the internal consistency was tested
for the original Overall TMSLA scale (41 items) and the original three subscales:
retrenchment (9 items), repositioning (18 items), and reorganisation (14 items). The
alpha scores were found as high and above the minimum required value of .7
(Neuman, 2003) [Overall TMSLA scale ? = .93, retrenchment ? = .73,
repositioning ? = .92, and reorganisation ? = .73]. None of the results pointed out
significant higher Cronbach?s alpha score in cases of deleted items, so no changes
within the scale were required.
Within the final sample of senior managers (N = 126), the Overall TMSLA
(33 items) Cronbach?s alpha score was high (? = .89) and most of the factors had
reasonable scores, ranged between .69 and .87 (see Table 15).
226
Table 15: Correlation Matrix for TMSLA Factors (Cronbach’s alpha in parentheses) (N = 83-85)
Factor
#
Mean S.D. 1 2 3 4 5 6 7 8
1.Reorganisation at the Institutional Level (7 items) 4.08 .71 (.87)
2.Retrenchment of Services (3 items) 2.58 .89 .015 (.74)
3.Repositioning as Reaching out (4 items) 3.35 .79 .541** .018 (.82)
4.Reorganisation as Extent of Centralisation (2 items) 2.90 .63 .099 .196 .385** (.62
†
)
5.Repositioning as Innovative Services (7 items) 3.64 .73 .544** .231* .673** .356** (.86)
6.Retrenchment of Expenditures (3 items) 2.70 .61 .047 .353** .057 .047 .283** (.56
†
)
7.Repositioning as Renewing Relationship (5 items) 3.22 .58 .626** .210 .685** .257* .599** .157 (.54
†
)
8.Reorganisation at the Personnel Level (2 items) 4.00 .89 .239* .192 .155 .294** .204 .180 .189 (.69)
* p<.05, ** p<.01
† = Cronbach?s alpha was calculated after one item was reversed
227
Regarding factors 4, 6, and 7, although all the strategies constituting each factor can
coexist and be implemented simultaneously, the respondents have probably
perceived some of the strategies as conflictive and this evaluation dropped down
the Cronbach?s alpha scores. First, „Taking decentralisation steps? may have been
perceived as opposed to „Taking centralisation steps? (Factor 4), particularly if they
were implemented in the same time or unit. Second, the strategy „Increasing
services expenditures? may have been perceived as opposed to „Reducing /
suspending capital expenditures? (Factor 6), although in a recovery process one
could lead to another. Third, „Closing down public organisations? may contribute to
recovery; however, it could have been perceived as contradictory to „Rebuilding
stakeholders' trust in the Local Authority? (Factor 7).
If these items were actually perceived as contradictory to other items, we
cannot expect high levels of internal consistency for their factors. Note that the
original negative effect did not influence the EFA and contributed to the factors as
negative loadings. Yet, in reliability, they did make a difference (Field, 2005).
Thus, in order to avoid this problem we recoded items 7, 17, 32 (for internal
consistency tests only). Then, the Cronbach?s alpha scores for these factors were
more reasonable and ranged between .54 and .62 (see Table 14).
The split-half method was employed in order to test the equivalence
reliability. A consistent scale should provide large correlations between halves of
the scale, which randomly split the data into two. The split-half results (see Table
14) point out that TMSLA scale has equivalence reliability [Overall TMSLA
Spearman-Brown correlation = .88. and .45 to .87 for the factors]. In addition, to
examine the representative reliability of the TMSLA scores, we analysed its
characteristics across various demographic groups. As shown in Table 16, the
overall scale and the eight factors were compared between groups of genders, ages,
levels of education (in years), and periods of tenures in the current position (in
years). The gender was dichotomous and the groups were defined by categories.
The other continuous variables: age, education, and tenure were split into groups
based on the Medians.
228
Table 16: Equivalence Reliability and Representativeness Reliability tests
for TMSLA Factors
Equivalence
Reliability
Representative Reliability
Variable Spearman-Brown
Correlations
Category Category Mean S.D. T-test df P
Overall TMSLA .88 Gender Male
Female
3.40
3.60
.44
.46
1.515 77 N.S.
Age ? 55
> 55
3.42
3.43
.47
.47
.182 83 N.S.
Education (in years) ? 16
> 16
3.41
3.44
.44
.49
.249 83 N.S.
Tenure (in years) ? 4
> 4
3.43
3.41
.46
.48
.216 83 N.S.
Reorganisation at the
Institutional Level
.84 Gender Male
Female
4.05
4.21
.70
.59
.789 77 N.S.
Age ? 55
> 55
4.06
4.09
.68
.74
.161 83 N.S.
Education (in years) ? 16
> 16
4.05
4.10
.66
.75
.353 83 N.S.
Tenure (in years) ? 4
> 4
4.07
4.08
.72
.69
.098 83 N.S.
Retrenchment of
Services
.71 Gender Male
Female
2.50
3.16
.85
.86
2.644 77 P < .05
Age ? 55
> 55
2.49
2.66
.74
1.01
.899 83 N.S.
Education (in years) ? 16
> 16
2.73
2.43
.97
.79
1.518 83 N.S.
Tenure (in years) ? 4
> 4
2.53
2.64
.87
.92
.578 83 N.S.
Repositioning as
Reaching out
.82 Gender Male
Female
3.28
3.71
.76
.65
1.957 77 N.S.
Age ? 55
> 55
3.36
3.34
.72
.86
.122 81 N.S.
Education (in years) ? 16
> 16
3.34
3.37
.74
.84
.191 81 N.S.
Tenure (in years) ? 4
> 4
3.41
3.28
.74
.87
.726 81 N.S.
Reorganisation as
Extent of
Centralisation
.45 Gender Male
Female
2.93
2.85
.53
.69
.490 77 N.S.
Age ? 55
> 55
2.83
2.98
.55
.71
1.101 81 N.S.
Education (in years) ? 16
> 16
2.89
2.92
.61
.66
.271 81 N.S.
Tenure (in years) ? 4
> 4
2.85
3.00
.56
.73
1.046 81 N.S.
229
Equivalence
Reliability
Representative Reliability
Variable Spearman-Brown
Correlations
Category Category Mean S.D. T-test df P
Repositioning as
Innovative
Services
.87 Gender Male
Female
3.57
3.98
2.037 77 N.S. 2.037
? 55
> 55
3.62
3.67
Age ? 16
> 16
3.53
3.75
.289 81 N.S. .289
? 4
> 4
3.61
3.70
Education (in years) Male
Female
3.57
3.98
1.390 81 N.S. 1.390
? 55
> 55
3.62
3.67
Tenure (in years) ? 16
> 16
3.53
3.75
.572 81 N.S. .572
? 4
> 4
3.61
3.70
Retrenchment of
Expenditures
.49 Gender Male
Female
2.72
2.71
.52
.69
.086 77 N.S.
Age ? 55
> 55
2.69
2.72
.66
.57
.227 83 N.S.
Education (in years) ? 16
> 16
2.64
2.76
.49
.71
.933 77 N.S.
Tenure (in years) ? 4
> 4
2.77
2.60
.54
.69
1.214 83 N.S.
Repositioning as
Renewing
Relationship
.65 Gender Male
Female
3.22
3.22
.56
.50
.024 77 N.S.
Age ? 55
> 55
3.20
3.24
.54
.62
.292 83 N.S.
Education (in years) ? 16
> 16
3.26
3.19
.48
.66
.537 83 N.S.
Tenure (in years) ? 4
> 4
3.23
3.21
.55
.62
.146 83 N.S.
Reorganisation at the
Personnel Level
.69 Gender Male
Female
4.12
3.64
.78
1.18
1.451 77 N.S.
Age ? 55
> 55
4.14
3.86
.80
.96
1.418 81 N.S.
Education (in years) ? 16
> 16
4.02
3.98
.89
.90
.184 81 N.S.
Tenure (in years) ? 4
> 4
4.13
3.81
.88
.89
1.566 81 N.S.
230
T-tests showed that in 97% of the comparisons the TMSLA scale and
internal dimensions remained stable across the groups, and no significant
differences were found for them (with one exception that is a significant difference
was found between males and females regarding the factor „retrenchment of
Services?). As a whole, these findings support and confirm that TMSLA is reliable
as it has good internal consistency, equivalence reliability, and representative
reliability.
In sum, we have shown that TMSLA is an appropriate, valid, and reliable
measurement tool for TMS within the public sector. As this study attempted to
clarify the concept of TMS (i.e., definition, actual activities, classification, and the
characteristics), this concept is reflected and expressed in the newly developed
measurement tool. Overall, the new TMSLA scale suggests an operational
definition and interpretation (Beeri, 2009a) to Pandit?s TMS? definition (2000).
Additionally, the new classification keeps Boynes? theoretical structure of the 3Rs,
while suggesting a new internal classification of eight dimensions. Since the
TMSLA measurement tool was found as valid and reliable, it is ready to be used.
Thus, the new scale will be applied in the next chapter for testing and exposing two
main areas: first, the extent to which TMS were familiar, known, and in use within
LAs; second, the relationship between TMS? extent of use and recovery. In this
sense, this thesis fills the gap in this area and paves the way to future studies, which
could make use of the TMSLA scale.
5.2. The Extent of Implementation of Turnaround Management Strategies
As previously noted, the English case points out that the NPM reforms
among failing LAs created new conditions, motivations, and expectations. These
conditions and expectations along with the involvement of the Audit Commission
encouraged under-performing LAs to take managerial actions directed at bringing
about a recovery in their performance. These managerial strategies were
conceptualised and named TMS. This chapter shows that TMS is a useful way of
coceptualising the managerial action undertaken to improve LAs performance.
Moreover, as expected, while TMS were known, familiar, and employed by LAs,
they were particularly employed to a large extent within failing LAs. The following
231
part describes the extent of implementation of TMS within the whole sample
(N=126) and within failing LAs only (N=85) while presenting a general overview
of TMS tendencies. In addition, the chapter compares and tracks possible
differences in the extent of implementation of TMS in failing versus well-
performing LAs. The arguments are based on both descriptive statistics (central and
dispersion measures) and on inferential statistics (T and Mann Whitney U tests).
The results point out that within the whole sample, TMS were implemented
at various levels and ranged between low and high extents.
17
The distribution of
Overall TMSLA was skewed to the left (see Figure 18) indicating that most LAs
chose from moderately to highly implement TMS while the minority implemented
TMS to a lower extent. The results also show that reorganisation strategies tended
to be widely used while retrenchment strategies were less popular managerial
actions. The central and dispersion measures of Overall TMSLA and the eight
factors are presented in Table 17. The variables? dispersions are portrayed in the
boxplot (see Figure 19) and the mean values are portrayed in Figure 20. Next to
evaluating the extent of implementation of TMS within the whole sample of LAs,
the extent of implementation of TMS will be evaluated within failing LAs.
17
For the correlation matrix of TMSLA individual strategies, please see Appendix 7.
232
Table 17: Central and Dispersion Measures of Overall TMSLA and the Eight Factors for the Whole Sample (N = 123 – 126)
Overall
TMSLA
Retrenchment
of Services
Retrenchment
of
Expenditures
Repositioning
as Reaching
out
Repositioning
as Innovative
Services
Repositioning
as Renewed
Relationship
Reorganisation
- Institutional
Level
Reorganisation
- Personnel
Level
Reorganisation
as Extent of
Centralisation
Mean 3.39 2.56 2.68 3.34 3.64 3.20 4.00 3.84 2.81
Median 3.45 2.67 2.67 3.50 3.71 3.20 4.14 4.00 3.00
Mode 3.61 2.67 2.67 3.50 3.71 3.40 4.43 4.00 3.00
Std. Deviation .46 .91 .61 .74 .71 .61 .72 .98 .69
Range 3.09 4.00 3.33 4.00 3.86 3.20 3.71 4.00 4.00
Minimum 1.55 1.00 1.00 1.00 1.14 1.80 1.29 1.00 1.00
Maximum 4.64 5.00 3.39 2.56 2.68 3.34 3.64 3.20 4.00
233
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Overall TMSLA
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Std. Dev. = 0.46312
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Overall TMSLA
Figure 18: Overall TMSLA for the Whole Sample (N = 126)
Figure 18 shows that Overall TMSLA distribution was skewed to the left.
Figure 19: Overall TMSLA and the Eight Factors
for the Whole Sample (N = 123 - 126)
Figure 19 shows that most TMSLA factors were implemented to moderate and
high extent.
234
Figure 20: Mean Values for Overall TMSLA and the Eight Factors for the
Whole Sample (N = 123 - 126)
Similar to the entire sample, within failing LAs the extent of
implementation of TMSLA and most of the factors showed a skewed to the left
distribution, that means that most of the participants lay right to the center
tapering out toward the left extreme (Figures 21 to 23). However, in this case the
range of the distribution was smaller indicating that most participants
implemented TMS to a large extent. The central and dispersion measures, which
are presented in Figure 21 and Table 16, indicate that 50% of the participants
reported they implemented Overall TMSLA above the level of 3.55 and 75%
above the level of 3.00 (i.e., the middle way of the range of the scale). In
accordance to these findings, high central measures for individual strategies
were found (see Table 18 and Figure 24). 61% of the individual strategies were
implemented to a very large extent by at least half of the participants.
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235
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Mean = 3.4334
Std. Dev. = 0.47404
N = 85
Overall TMSLA
Figure 21: Mean Values for Overall TMSLA and the Eight Factors
for Failing Local Authorities (N = 83 - 85)
Figure 22: Overall TMSLA in Failing Local Authorities (N = 85)
Figure 22 shows that Overall TMSLA distribution in failing LAs was skewed to
the left.
3.43 2.57 2.70 3.37 3.65 3.24 4.08 4.01 2.92
236
Table 18: Central and Dispersion Measures of Overall TMSLA and the Eight Factors for Failing LAs (N = 83 - 85)
Overall
TMSLA
Retrenchment
of Services
Retrenchment
of
Expenditures
Repositioning
as Reaching
out
Repositioning
as Innovative
Services
Repositioning
as Renewed
Relationship
Reorganisation
- Institutional
Level
Reorganisation
- Personnel
Level
Reorganisation
as Extent of
Centralisation
Mean 3.43 2.57 2.70 3.37 3.65 3.24 4.08 4.01 2.92
Median 3.55 2.67 2.67 3.50 3.71 3.40 4.29 4.00 3.00
Mode 3.61 2.67 2.33 3.50 3.71 3.40 5.00 4.00 3.00
Std. Deviation .47 .91 .61 .82 .73 .61 .72 .90 .65
Range 2.48 4.00 3.33 4.00 3.86 3.20 2.57 4.00 4.00
Minimum 2.16 1.00 1.00 1.00 1.14 1.80 2.43 1.00 1.00
Maximum 4.64 5.00 4.33 5.00 5.00 5.00 5.00 5.00 5.00
237
Replaced senior & middle managers
Changed the internal local authority's ...
Took decentralization steps
Took centralization steps
Formulated an organizational working plan
Diagnosed the Local Authority's strength...
Defined a common vision of the Local ...
Invested in staff skills training
Reshaped and improved the organization...
Made changes in human resources ...
Created stronger financial control
Improved the local authority's internal and...
Rebuilt stakeholders' trust in the Local ...
Privatised services
Ensured high quality of services
Closed down public organizations
Redefined core missions
Extended services' availability
Introduced new ways of implementation
Changed the priorities of traditional ...
Extended activities' and services scope
Entered into joint activities/cooperated wit...
Established new services
Increased time and efforts in becoming a ...
Increased time and efforts in researching...
Began to give services / internal services...
Extended marketing efforts (reaching out...
Increased services expenditures
Decreased financial support in other ...
Reduced / suspended capital expenditures
Partially / Temporarily exited from specific...
Eliminated particular services
Contracted activities and services' scope
0 1 2 3 4 5
Median
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4.00
5.00
Figure 23: Overall TMSLA and the Eight Factors
in Failing Local Authorities (N = 83 - 85)
Figure 23 shows that most TMSLA factors were implemented to
moderate and high extent in failing LAs.
Figure 24: Medians of Individual Strategies for
Failing Local Authorities (N = 81 - 85)
238
Table 19: Central and Dispersion Measures of Individual TMSLA Strategies for Failing LAs (N = 81 - 85)
Factor Strategy Mode Median Range Min Max
Retrenchment
of
Services
2. Eliminated particular services 2 2 4 1 5
1. Contracted activities and services' scope 4 3 4 1 5
4. Partially / Temporarily exited from specific services 3 2 4 1 5
Retrenchment of
Expenditures
6. Reduced / suspended capital expenditures 1 2 4 1 5
17. Increased services expenditures 3 3 4 1 5
9. Decreased financial support in other organisations 2 3 4 1 5
Repositioning
as
Reaching
Out
19. Began to give services/internal services that were previously purchased 1 2 4 1 5
34. Increased time and efforts in becoming a learning organisation 4 4 4 1 5
33. Increased time and efforts in researching the consumers needs 4 4 4 1 5
16.Extended marketing efforts (reaching out) to new segment of consumers 4 4 4 1 5
Repositioning
As
Innovative
Services
13. Changed the priorities of traditional activities 4 4 4 1 5
26. Introduced new ways of implementation 4 4 4 1 5
11. Entered into joint activities/cooperated with other agencies 4 4 4 1 5
12. Extended activities' and services scope 3 3 4 1 5
15. Extended services' availability 4 4 4 1 5
10. Established new services 3 3 4 1 5
23. Redefined core missions 4 4 4 1 5
Repositioning
as
Renewed
Relationship
7. Closed down public organisations 1 2 4 1 5
21. Privatised services 1 2 4 1 5
24. Ensured high quality of services 4 4 4 1 5
27. Rebuilt stakeholders' trust in the Local Authority 4 4 4 1 5
25. Improved the local authority's internal and external image 4 4 4 1 5
Reorganisation
at the
Institutional
Level
39. Diagnosed the Local Authority's strengths and weaknesses 5 4 3 2 5
37. Invested in staff skills training 4 4 4 1 5
40. Formulated an organisational working plan 4 4 3 2 5
38. Defined a common vision of the Local Authority 5 4 4 1 5
36. Reshaped and improved the organisational culture and climate 4 4 4 1 5
35. Made changes in human resources management style 4 4 4 1 5
8. Created stronger financial control 5 4 4 1 5
Reorganisation as Extent of
Centralisation
31. Took centralisation steps 3 3 4 1 5
32. Took decentralisation steps 3 3 4 1 5
Reorganisation at the
Personnel Level
30. Replaced senior and middle managers 4 4 4 1 5
29. Changed the internal local authority's structure 5 4 4 1 5
239
While the above described the extent of implementation within a defined
group of LAs (all LAs/failing LAs only), the next chapter goes one step ahead
and provides a comparison between two groups of LAs. The second set of
analyses compared mean scores of factors of TMS for failing versus well-
performing LAs using Independent Samples T-tests. Comparisons of individual
strategies based on median scores employed Mann-Whitney U tests. The main
tendency points to a greater extent of implementation of TMS within failing
LAs. Two reorganisation factors (i.e., at the Personnel Level and as Extent of
Centralisation) and eight reorganisation and repositioning individual strategies
were significantly implemented to a larger extent in failing LAs (see Tables 20,
21, and Figures 25, 26). Accordingly, a similar pattern was found for Overall
TMSLA, for an additional reorganisation factor (i.e., at the institutional level),
and for three reorganisation and repositioning individual strategies, which were
marginally significantly (p < .10) implemented to a larger extent in failing LAs.
On the other hand, two individual strategies (i.e., „Contracted activities and
services' scope? and „Ensured high quality of services' scope?) pointed to the
opposite pattern.
These results confirm patterns already identified in the case studies cases.
As described in the case studies, the results indicate that TMS were widely used
in change situations. One possible explanation for their extensive use in failing
LAs may be rooted in their characteristics. As described in Chapter 2.6.3, TMS
are strategies used in radical situations, which require a quick, urgent, and short
response. Hence, LAs, which experience failure and suffer from poor to weak
performance, are more likely candidates for the implementation of such
strategies. In contrast, in cases that a crisis was not an issue and recovery was
irrelevant, TMS were used to lower extent. Furthermore, an additional
characteristic of TMS is that the strategies are usually implemented by a new
management. The results confirm this assumption by showing that
reorganisation at the Personnel Level, which includes replacement of senior and
middle managers, was implemented to a larger extent within poor performers.
240
Table 20: T-Tests for TMSLA Scores for Failing and
Well-Performing Local Authorities
The findings also support Boyne's model (2006). According to the
model, after a declining public organisation pronounces a turnaround situation,
searches, and selects new strategies, the management implements TMS.
Similarly, according to our findings, organisations with low CPA ranking,
implemented TMS to a larger extent. It may be argued in this context, that the
CPA rank triggered the recovery process by accelerating the recognition of the
failure, the search, selection, and then the use of TMS.
Dependent Variable Comparison
Group (N)
Mean S.D. T (Sig) D.F. Eta
Squared
Overall TMSLA
F. LAs (85) 3.43 .47 1.662
(.099)
123
.02
W.P. LAs (40) 3.29 .43
Retrenchment
of Services
F. LAs (85) 2.57 .91 .199
(.842)
123
.0003
W.P. LAs (40) 2.54 .94
Retrenchment of
Expenditures
F. LAs (85) 2.70 .61 .673
(.502)
123
.004
W.P. LAs (40) 2.62 .60
Repositioning as
Reaching out
F. LAs (83) 3.37 .82 .720
(.473)
106.88 .004
W.P. LAs (40) 3.28 .56
Repositioning as
Innovative Services
F. LAs (83) 3.65 .73 .261
(.795)
121
.0006
W.P. LAs (40) 3.61 .67
Repositioning as
Renewed Relationship
F. LAs (85) 3.24 .61 1.130
(.261)
123
.01
W.P. LAs (40) 3.11 .60
Reorganisation at the
Institutional Level
F. LAs (85) 4.08 .72 1.820
(.071)
123
.03
W.P. LAs (40) 3.83 .71
Reorganisation at the
Personnel Level
F. LAs (83) 4.01 .90 2.767
(.007)**
121
.06
W.P. LAs (40) 3.50 1.06
Reorganisation as
Extent of Centralisation
F. LAs (83) 2.92 .65 2.410
(.017)*
121 .05
W.P. LAs (40) 2.60 .74
F. LAs= Failing Local Authorities, W.P. LAs= Well Performing Local Authorities,
*p < .05 , ** p < .01
241
Figure 25: Mean Values of TMSLA Scores for Failing versus
Well-Performing Local Authorities (N = 123 - 126)
The extensive use of these strategies within LAs generally, and within
poor performing LAs especially, may reject the arguments made by scholars
(Cornforth and Paton, 2004; Mellahi, Jackson, and Sparks, 2002; Melahi and
Wilkinson, 2004; Paton, 2003) regarding the existence of a lacuna in the
knowledge and experience of managers in situations of failure. However, the
findings do not necessarily support this argument.
To this point, the results only describe the extent of use of the strategies
where the knowledge and experience of managers dealing with failing
organisations should be assessed according to qualitative parameters. In other
words, the fact that managers did apply the strategies to a large extent does not
necessarily points to the quality of their implementation. Strategies could have
been implemented in an ineffective or inappropriate way. Such implementation
would support the arguments presented by scholars.
242
F. LAs = Failing Local Authorities WP. LAs = Well-Performing Local Authorities
* = p < 0.05 ** = p < 0.01
Table 21: Mann-Whitney U Tests for Individual TMSLA Scores for Failing versus Well-Performing Local Authorities
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Retrenchment
of
Services
2. Eliminated particular services F. LAs (84) 2 1457.0 -1.034
.301
.09
W.P. LAs (39) 2
1. Contracted activities and services' scope F. LAs (83) 3 1267.5 -1.986 .047* .18
W.P. LAs (39) 4
4. Partially / Temporarily exited from specific services F. LAs (84) 3 1407.5 -1.506
.132
.14
W.P. LAs (40) 2
Retrenchment
of
Expenditures
6. Reduced / suspended capital expenditures F. LAs (85) 2 1646.5 -.293 .769 .03
W.P. LAs (40) 2
17. Increased services expenditures F. LAs (83) 3 1593.0 -.374
.709
.03
W.P. LAs (40) 3
9. Decreased financial support in other organisations F. LAs (84) 3 1514.5 -.920 .357 .08
W.P. LAs (40) 3
Repositioning
as
Reaching
out
19. Began to give services/internal services that were previously
purchased
F. LAs (81) 2 1127.0 -2.835
.005**
.26
W.P. LAs (40) 2
34. Increased time and efforts in becoming a learning organisation F. LAs (83) 4 1495.0 -.880
.379 .08
W.P. LAs (40) 4
33. Increased time and efforts in researching the consumers needs F. LAs (84) 4 1435.5 -.984 .325 .09
W.P. LAs (40) 4
16.Extended marketing efforts (reaching out) to new segment of
consumers
F. LAs (85) 4 1535.5 -.712
.477 .06
W.P. LAs (40) 4
243
Table 21: Mann-Whitney U tests for Individual TMSLA Scores for Failing versus Well-Performing Local Authorities (continuance)
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Repositioning
As
Innovative
Services
13. Changed the priorities of traditional activities F. LAs (83) 4 1486.0 -1.003
.316
.09
W.P. LAs (40) 4
26. Introduced new ways of implementation F. LAs (83) 4 1574.5 -.501 .616 .05
W.P. LAs (40) 4
11. Entered into joint activities/cooperated with other agencies F. LAs (83) 4 1562.5 -.578
.564
.05
W.P. LAs (40) 4
12. Extended activities' and services scope F. LAs (83) 3 1488.0 -.970 .332 .09
W.P. LAs (40) 3.5
15. Extended services' availability F. LAs (83) 4 1233.5 -2.226
.026*
.20
W.P. LAs (39) 3
10. Established new services F. LAs (82) 3 1327.5 -1.772 .076
.16
W.P. LAs (40) 3.5
23. Redefined core missions F. LAs (83) 4 1056.5 -3.387
.001** .31
W.P. LAs (40) 3
Repositioning
as
Renewed
Relationship
7. Closed down public organisations F. LAs (82) 2 1419.5 -1.076 .282
.10
W.P. LAs (39) 1
21. Privatised services F. LAs (81) 2 1357.5 -1.288
.198 .12
W.P. LAs (39) 2
24. Ensured high quality of services F. LAs (83) 4 1206.0 -2.442 .015*
.22
W.P. LAs (39) 5
27. Rebuilt stakeholders' trust in the Local Authority F. LAs (82) 4 127.0 -1.697
.090 .15
W.P. LAs (38) 4
25. Improved the local authority's internal and external image F. LA. (81) 4 1393.5 -1.328 .184 .12
W.P. LA. (40) 4
F. LAs = Failing Local Authorities WP. LAs = Well-Performing Local Authorities
* = p < 0.05 ** = p < 0.01
244
F. LAs = Failing Local Authorities WP. LAs = Well-Performing Local Authorities
* = p < 0.05 ** = p < 0.01
Table 21: Mann-Whitney U tests for Individual TMSLA Scores for Failing and Well-Performing Local Authorities (continuance)
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Reorganisation
at the
Institutional
Level
39. Diagnosed the Local Authority's strengths and weaknesses F. LAs (81) 4 1616.5 -.021
.983
.00
W.P. LAs (40) 4
37. Invested in staff skills training F. LAs (83) 4 1474.0 -1.106
.269 .10
W.P. LAs (40) 4
40. Formulated an organisational working plan F. LAs (82) 4 1634.0 -.035 .972
.00
W.P. LAs (40) 4
38. Defined a common vision of the Local Authority F. LAs (83) 5 1242.0 -2.460
.014* .22
W.P. LAs (40) 4
36. Reshaped and improved the organisational culture and climate F. LAs (83) 4 1173.5 -2.775 .006**
.25
W.P. LAs (40) 4
35. Made changes in human resources management style F. LAs (82) 4 1361.0 -1.401
.161 .13
W.P. LAs (39) 4
8. Created stronger financial control F. LAs (85) 5 1403.0 -1.680 .093
.15
W.P. LAs (40) 4
Reorganisation
as Extent of
Centralisation
31. Took centralisation steps F. LAs (83) 3 1132.5 -2.949
.003**
.27
W.P. LAs (40) 2
32. Took decentralisation steps F. LAs (81) 3 1569.5 -.288 .773 .03
W.P. LAs (40) 3
Reorganisation
at the
Personnel Level
30. Replaced senior and middle managers F. LAs (83) 4 1192.5 -2.620 .009** .24
W.P. LAs (40) 3
29. Changed the internal local authority's structure F. LAs (83) 4 1301.0 -2.071 .003**
.19
W.P. LA. (40) 4
245
Figure 26: Medians of Individual TMSLA Strategies Scores for Failing
versus Well-Performing Local Authorities (N = 121 - 126)
The next point intends to clarify whether within failing LAs particular
TMS were more popular than others. To do that, one-way repeated measures
ANOVA tests and a series of Post-hoc tests, which tracked significant
differences between the mean scores of the factors, were conducted. The test
revealed that although TMS were generally implemented in failing LAs to a
large extent; not all the different strategies were implemented to the same extent.
For instance, reorganisation strategies (except „reorganisation as extent of
centralisation?) were the most employed strategies while retrenchment strategies
were the least employed [Wilks? Lambada = .182, F
(7, 76)
= 48.882, p < .001, Eta
Squared = .82].
The rationale for the relatively small use of retrenchment strategies may
be rooted in several reasons. First, NPM and the Best Value policies that
emphasised the 3Es: Economy, Efficiency, and Effectiveness (Stewart, 2003)
246
resulted in massive budget reductions (Martin, 2002). These reductions
consequently, damaged the ability of LAs to supply minimal standards of
services. Thus, further retrenchments might have been perceived by managers as
impossible or as the least desirable solution. Furthermore, NPM imposed a
standard of continuous adaption to customers? needs (Skelcher, 1992) and
consequently customers increased their expectations regarding the level of
services they expected to receive. Given the cutbacks made in LAs budgets, the
higher expectations of customers created a gap between the supplied and
expected service levels. Hence, further retrenching services may impose on
managers a political price. In other words, retrenchment strategies involve
cutbacks in public services and expenditures. Thus, benefits are taken from
consumers. Taking previously supplied benefits creates a negative image among
citizens and a negative political impact within potential voters. Refraining from
the implementation of strategies that might trigger resistance from external
stakeholders was also noted during the interviews. In the case of Walsall, the
leaders reported they favoured strategies that were expected to result in low
resistance of external stakeholders. According to Boyne?s model (2006), the
selection of new strategies is a political process (Boyne, 2002), which may
require internal democratic procedures and external-system actors? support.
Since retrenchment may contradict some interest groups, external support might
be hard to find. Moreover, retrenchment of services might damage managers'
political capital and popularity, thus, LAs? senior managers might avoid it.
On the other hand, reorganisation strategies mostly affect internal
stakeholders and policy issues, which do not necessarily require formal approval
procedures (e.g., increasing time and efforts in becoming a learning organisation
and investing in staff training can be implemented internally by the cabinet).
Consequently, the outcomes of reorganisation strategies influence internal
members, who formally do not take part in the political game (e.g., changing the
internal LA?s structure and reshaping the organisational climate is mostly
directed towards non-elected managers and employees). Therefore, LAs? senior
managers may prefer reorganisation strategies that are more controlled, less
complex, less difficult, and involve a lower political price. Hence, reorganisation
strategies scored the highest levels of execution.
247
Similar outcomes were obtained in previous research. Boyne?s review
(2006) indicated that reorganisation was the only R implemented in all eight
cases of success stories. According to him, the wide use of reorganisation
mirrors the public sector limitations in quitting areas (i.e., implementing
retrenchment strategies) or entering new areas (i.e., implementing repositioning
strategies), which makes reorganisation the default strategy.
The interviews and reports may provide two further explanations for the
popularity of reorganisation strategies. First, the LAs' formal self-evaluations
and interviewees mostly pointed out decreased internal resources as causes of
failure (e.g., poor leadership, internal conflicts, inadequate financial control, and
deficient organisational learning process). The perception of failure as an
outcome of internal procedures might lead the management to employ strategies
applied internally. Second, the timing of the survey might have influenced the
results. Both Walsall and Swindon?s interviewees reported the use of internal
reorganisation strategies (e.g., replacement of senior and middle managers,
improving internal work relations) as preliminary steps, which were essential for
the implementation of later strategies. Since the survey was conducted in a
specific time and we have no evidence regarding the recovery stage at which the
surveyed LAs had arrived, it may be argued that LAs had not yet reached
advanced stages of the recovery process. Therefore, reorganisation strategies
were commonly used.
In sum, the evidence presented above portrayed an interesting view. TMS
were found to be employed to a large extent within all LAs and particularly
within failing LAs. In addition, within TMS, reorganisation strategies were the
most popular implemented strategies. While these findings involved one main
variable, extent of implementation of TMS, the next chapter will employ two
variables: extent of implementation of TMS and extent of recovery. Therefore,
the next chapter intends to follow and test whether there is a relationship
between the two phenomena and whether one of them impacts the other.
248
5.3. The Relationship between Turnaround Management Strategies and
Recovery
Given the theory of cycles of Turnaround (Boyne, 2006; McKiernan,
2003), and the analysis of the qualitative data, it could be expected that an
implementation of TMS would contribute to organisational recovery. This
chapter shows that, surprisingly, a greater extent of employment of TMS did not
result in recovery; most TMS were implemented to the same extent in
persistently failing and recovered LAs. Nevertheless, a moderate use of some
TMS may be more effective for achieving recovery. This chapter tested the
relationship between TMS and recovery within failing LAs while employing
three sets of analyses and two operational measures of recovery: 1. Recovery as
a Dichotomous Variable and 2. Extent of Recovery (ordinal level of
measurement) (see Chapter 3.3.5.2.). Tests that were based on comparison
perceived persistently failing LAs as LAs that had been rated as poor or weak
performers in 2002 and in 2005 (see Table 4). Recovered LAs were perceived as
so if they had been rated as poor or weak performers in 2002 and two to three
categories higher in 2005 (e.g., from poor to fair, from poor to good) (see
Chapter 3.4.1.).
The first set of analyses compared mean scores of factors of TMS within
persistently failing and recovered LAs, which employed Independent Samples T-
tests. Comparisons of individual strategies, which were based on median scores
employed Mann-Whitney U tests. The analysis revealed mixed results. Most
TMS were implemented to the same extent in persistently failing and recovered
LAs. Yet, reorganisation at the personnel level and four more individual
strategies were significantly implemented to a higher extent in persistently
failing than in recovered LAs (see Tables 22, 23 and Figures 27, 28).
18
Overall
TMSLA, retrenchment of expenditures, and four more individual strategies
followed the same trend and were marginally significantly (p < .10)
18
For further central and dispersion measures of individual strategies according to level of
performance please see Appendix 8.
249
implemented to higher degrees in persistently failing LAs.
19
While the first set of tests were based on comparisons between groups of
LAs, the next set of tests correlates extent of implementation of TMS and extent
of recovery. The correlation analyses examine whether there is a common trend
within these phenomena (i.e., positive relationship), opposite trend (i.e., negative
relationship), or no trend (i.e., no relationship).
19
In order to uncover whether persistently failing, recovered, or both groups differed from well-
performing LAs and in order to explore whether there is a linear trend in the extent of
implementation of TMS, further analyses were conducted. One-Way ANOVA tests including
Tukey Post-Hoc tests (when appropriate) and trend analysis were employed. Individual strategies
were compared using Kruskal-Wallis tests and Mann Whitney U tests as Post-Hoc tests. The
results indicated similar tendencies to those found previously. The rank of performance of LAs
was not found as a significant factor that influenced the extent of implementation of most TMS.
Additionally, no linear trends were found. Within TMS that were significantly different (mostly
reorganisation strategies), the highest extent of implementation was found within persistently
failing LAs. For the detailed results see Appendix 9.
250
Table 22: T-Tests for TMSLA Scores for Persistently Failing and
Recovered Local Authorities
Dependent Variable Comparison
Group (N)
Mean S.D. T (Sig) D.F. Eta
Squared
Overall TMSLA
P.F. LAs (48) 3.52 .38 1.774
(.081)
60 .04
R. LAs (37) 3.33 .56
Retrenchment of Services P.F. LAs (48) 2.63 .84 .604
(.547)
83 .00
R. LAs (37) 2.50 1.00
Retrenchment of Expenditures P.F. LAs (48) 2.81 .57 1.822
(.072)
83 .04
R. LAs (37) 2.57 .65
Repositioning as Reaching out P.F. LAs (47) 3.45 .65 1.005
(.319)
57 .01
R. LAs (36) 3.26 .99
Repositioning as Innovative
Services
P.F. LAs (47) 3.72 .63 .973
(.334)
62 .01
R. LAs (36) 3.56 .84
Repositioning as Renewed
Relationship
P.F. LAs (48) 3.28 .47 .610
(.544)
56 .00
R. LAs (37) 3.19 .76
Reorganisation at the
Institutional Level
P.F. LAs (48) 4.17 .66 1.340
(.184)
83 .02
R. LAs (37) 3.96 .77
Reorganisation at the
Personnel Level
P.F. LAs (47) 4.21 .66 2.328
(.024)*
81 .06
R. LAs (36) 3.74 1.09
Reorganisation as Extent of
Centralisation
P.F. LAs (47) 2.95 .53 .498
(.620)
81 .00
R. LAs (36) 2.88 .78
P.F. LAs= Persistently Failing LAs, R. LAs= Recovered LAs,
* p < .05
251
Figure 27: Mean Values of TMSLA Scores for Persistently Failing versus
Recovered Local Authorities (N = 83 - 85)
Figure 27 shows that most TMS were implemented to the same extent in
persistently failing and recovered LAs.
252
Table 23: Mann-Whitney U Tests for Individual TMSLA Scores for Persistently Failing and Recovered Local Authorities
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Retrenchment
of
Services
2. Eliminated particular services P. F. LAs (47) 2 816.5
-.500
.617
.05
R. LAs (37) 2
1. Contracted activities and services' scope P. F. LAs (47) 3 837.5 -.081 .936 .01
R. LAs (36) 3
4. Partially / Temporarily exited from specific services P. F. LAs (47) 3 762
-1.002
.317
.11
R. LAs (37) 2
Retrenchment
of
Expenditures
6. Reduced / suspended capital expenditures P. F. LAs (48) 2 884.5 -.032 .974 .00
R. LAs (37) 2
17. Increased services expenditures P. F. LAs (47) 3 623.50
-2.107
.035*
.23
R. LAs (36) 2
9. Decreased financial support in other organisations P. F. LAs (47) 3 706.5 -1.529 .126 .17
R. LAs (37) 2
Repositioning
as
Reaching
out
19. Began to give services/internal services that were previously purchased P. F. LAs (46) 2 748.5
-.562
.574
.06
R. LAs (35) 2
34. Increased time and efforts in becoming a learning organisation P. F. LAs (46) 4 805.5 -.228 .819 .03
R. LAs (36) 4
33. Increased time and efforts in researching the consumers needs P. F. LAs (47) 4 657.5
-1.649 .099 .18
R. LAs (35) 4
16.Extended marketing efforts (reaching out) to new segment of consumers P. F. LA. (47) 3 817.5 -.274 .784 .03
R. LAs (36) 4
P. F. LAs = Persistently Failing Local Authorities R. LAs = Recovered Local Authorities * = p < 0.05
253
Table 23: Mann-Whitney U tests for Individual TMSLA Scores for Persistently Failing and Recovered Local Authorities (continuance)
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Repositioning
As
Innovative
Services
13. Changed the priorities of traditional activities P. F. LAs (47) 4 817
-.282
.778
.03
R. LAs (36) 4
26. Introduced new ways of implementation P. F. LAs (47) 4 794
-.515
.606
.06
R. LAs (36) 4
11. Entered into joint activities/cooperated with other agencies P. F. LAs (47) 4 83.5
-.155
.877
.02
R. LAs (36) 4
12. Extended activities' and services scope P. F. LAs (47) 4 675
-1.644
.100
.18
R. LAs (36) 3
15. Extended services' availability P. F. LAs (47) 4 776
-.679
.497
.07
R. LAs (36) 4
10. Established new services P. F. LAs (46) 3 785.5
-.412
.680
.05
R. LAs (36) 3
23. Redefined core missions P. F. LAs (47) 4 757
-.855
.392
.09
R. LAs (36) 4
Repositioning
as
Renewed
Relationship
7. Closed down public organisations P. F. LAs (47) 2 626
-1.972
.049*
.22
R. LAs (35) 1
21. Privatised services P. F. LAs (45) 2 706
-1.023
.306
.11
R. LAs (36) 2
24. Ensured high quality of services P. F. LAs (47) 4 817.5
-.286
.775
.03
R. LAs (36) 4
27. Rebuilt stakeholders' trust in the Local Authority P. F. LAs (47) 4 764
-.573
.567
.06
R. LAs (35) 4
25. Improved the local authority's internal and external image P. F. LAs (47) 4 755 -.448 .654 .05
R. LAs (34) 4
P. F. LAs = Persistently Failing Local Authorities R. LAs = Recovered Local Authorities * = p < 0.05
254
Table 23: Mann-Whitney U tests for Individual TMSLA Scores for Persistently Failing and Recovered Local Authorities (continuance)
Factor Strategy Comparison
Group (N)
Median U Z Sig Effect
size- r
Reorganisation
at the
Institutional
Level
39. Diagnosed the Local Authority's strengths and weaknesses P. F. LAs (45) 5 744.5
-.671
.502
.07
R. LAs (36) 4
37. Invested in staff skills training P. F. LAs (47) 4 795
-.506
.613
.06
R. LAs (36) 4
40. Formulated an organisational working plan P. F. LAs (47) 4 820
-.025
.980
.00
R. LAs (35) 4
38. Defined a common vision of the Local Authority P. F. LAs (47) 5 758
-.901
.368
.10
R. LAs (36) 5
36. Reshaped and improved the organisational culture and climate P. F. LAs (84) 4 647
-1.943
.052
.21
R. LAs (39) 4
35. Made changes in human resources management style P. F. LAs (47) 4 59.5
-2.291
.022*
.25
R. LAs (35) 3
8. Created stronger financial control P. F. LAs (48) 5 712.5
-1.691
.091
.18
R. LAs (37) 4
Reorganisation
as Extent of
Centralisation
31. Took centralisation steps P. F. LAs (47) 3 789
-.544
.587
.06
R. LAs (36) 3
32. Took decentralisation steps P. F. LAs (46) 3 686.5
-1.168
.243
.13
R. LAs (35) 3
Reorganisation at
the
Personnel Level
30. Replaced senior and middle managers P. F. LAs (47) 4 614
-2.236
.025*
.25
R. LAs (36) 4
29. Changed the internal local authority's structure P. F. LAs (37) 5 752 -.941 .347 .10
R. LAs (36) 4
P. F. LAs = Persistently Failing Local Authorities R. LAs = Recovered Local Authorities * = p < 0.05
255
Persistently Failing LAs Recovered LAs
group
1
2
3
4
5
M
e
d
i
a
n
Increased services expenditures
Closed down public organizations
Reshaped and improved the
organizational culture and climate
Made changes in human
resources management style
Replaced senior & middle
managers
Figure 28: Medians of Individual TMSLA Strategies Scores for Persistently
Failing versus Recovered Local Authorities (N = 81 - 85)
The second set of analyses tested the linear relationship between extent of
implementation of TMS and extent of recovery. In this case, TMS were perceived as
the independent variables and extent of recovery as the dependent variable.
Spearman? correlation coefficient was used to calculate the strength of relationships
between Overall TMSLA, the eight factors, individual strategies, and extent of
recovery (see Tables 24, 25 and Figures 29, 30). The analyses revealed again mixed
results. The extent of implementation of TMS was not related in most cases to the
extent of recovery. However, a significant moderate negative correlation was found
between reorganisation at the Personnel Level and extent of recovery [r
s
= -.286, p <
.01]; the greater extent to which a LA implemented reorganisation at the Personnel
level the less it recovered. Five individual strategies (mostly under reorganisation
factors) were significantly negatively related to extent of recovery. Similarly, Overall
TMSLA, reorganisation at the institutional level, and further one individual strategy
had a marginal significantly (p<0.1) negative relationship with extent of recovery.
The second set of tests correlated the main two variables, TMS and recovery,
while assuming these variables lie on the same level. Yet, the next test assumes there
256
could be causality where TMS are the cause and recovery is the effect. Thus, this
possible causality is tested.
257
Table 24: Spearman Rho Correlation Matrix for the Relationship
between TMSLA Scores and Extent of Recovery (N = 83 – 85)
Extent of
Recovery
Overall TMSLA Spearman -.206
Sig (two tails) .059
Retrenchment of Services Spearman -.040
Sig (two tails) .720
Retrenchment of Expenditures Spearman -.150
Sig (two tails) .171
Repositioning as Reaching out Spearman -.045
Sig (two tails) .686
Repositioning as Innovative Services Spearman -.093
Sig (two tails) .402
Repositioning as Renewed Relationship Spearman -.100
Sig (two tails) .363
Reorganisation - Institutional Level Spearman -.204
Sig (two tails) .061
Reorganisation - Personnel Level Spearman -.286 *
Sig (two tails) .009
Reorganisation as Extent of Centralisation Spearman -.174
Sig (two tails) .116
* p < .01,
258
Figure 29: Matrix Scatter Plot for the Relationships of TMS and Extent of
Recovery (N = 83 - 85)
259
Table 25: Spearman Rho Correlation Matrix for the Relationship between
Individual Strategies and Extent of Recovery (N = 83 – 85)
Extent of
Recovery
Retrenchment
of
Services
2. Eliminated particular services
Spearman -.068
Sig (two tails) .537
1. Contracted activities and services' scope Spearman .003
Sig (two tails) .976
4. Partially / Temporarily exited from specific services Spearman -.066
Sig (two tails) .550
Retrenchment
of
Expenditures
6. Reduced / suspended capital expenditures Spearman .005
Sig (two tails) .962
17. Increased services expenditures
Spearman -.249 *
Sig (two tails) .023
9. Decreased financial support in other organisations Spearman -.117
Sig (two tails) .289
Repositioning
as
Reaching
Out
19. Began to give services/internal services that were
previously purchased
Spearman -.023
Sig (two tails) .836
34. Increased time and efforts in becoming a learning
organisation
Spearman -.044
Sig (two tails) .691
33. Increased time and efforts in researching the
consumers needs
Spearman -.192
Sig (two tails) .084
16.Extended marketing efforts (reaching out) to new
segment of consumers
Spearman .029
Sig (two tails) .793
Repositioning
as Innovative
Services
13. Changed the priorities of traditional activities Spearman -.033
Sig (two tails) .769
26. Introduced new ways of implementation
Spearman -.090
Sig (two tails) .420
11. Entered into joint activities/cooperated with other
agencies
Spearman -.026
Sig (two tails) .813
12. Extended activities' and services scope Spearman -.148
Sig (two tails) .182
15. Extended services' availability
Spearman -.119
Sig (two tails) .284
10. Established new services Spearman -.071
Sig (two tails) .529
23. Redefined core missions Spearman -.105
Sig (two tails) .345
* p < .01
260
Table 25: Spearman Rho Correlation Matrix for the Relationship between
Individual Strategies and Extent of Recovery (N = 83 – 85) (continuous)
Extent of
Recovery
Repositioning
as Renewed
Relationship
7. Closed down public organisations
Spearman -.117
Sig (two tails) .293
21. Privatised services Spearman -.057
Sig (two tails) .614
24. Ensured high quality of services
Spearman -.051
Sig (two tails) .647
27. Rebuilt stakeholders' trust in the Local Authority Spearman -.128
Sig (two tails) .252
25. Improved the local authority's internal and external
image
Spearman .001
Sig (two tails) .991
Reorganisation
at the
Institutional
Level
39. Diagnosed the Local Authority's strengths and
weaknesses
Spearman -.167
Sig (two tails) .137
37. Invested in staff skills training Spearman -.133
Sig (two tails) .230
40. Formulated an organisational working plan Spearman -.040
Sig (two tails) .722
38. Defined a common vision of the Local Authority
Spearman .016
Sig (two tails) .886
36. Reshaped and improved the organisational culture
and climate
Spearman -.299 *
Sig (two tails) .006
35. Made changes in human resources management style Spearman -.279 *
Sig (two tails) .011
8. Created stronger financial control Spearman -.243 *
Sig (two tails) .025
Reorganisation
as Extent of
Centralisation
31. Took centralisation steps
Spearman -.024
Sig (two tails) .830
32. Took decentralisation steps Spearman -.087
Sig (two tails) .439
Reorganisation
at the
Personnel
Level
30. Replaced senior and middle managers Spearman -.342 *
Sig (two tails) .002
29. Changed the internal local authority's structure
Spearman -.135
Sig (two tails) .224
* p < .01
261
Extent of
Recovery
Increased
services
expenditures
Reshaped and
improved the
organizational
culture and
climate
Made changes
in human
resources
management
style
Created
stronger
financial control
Replaced
senior & middle
managers
R
e
p
l
a
c
e
d
s
e
n
i
o
r
&
m
i
d
d
.
.
.
C
r
e
a
t
e
d
s
t
r
o
n
g
e
r
f
i
n
a
n
c
i
.
.
. M
a
d
e
c
h
a
n
g
e
s
i
n
h
u
m
a
.
.
. R
e
s
h
a
p
e
d
a
n
d
i
m
p
r
o
v
e
.
.
.
I
n
c
r
e
a
s
e
d
s
e
r
v
i
c
e
s
.
.
.
E
x
t
e
n
t
o
f
R
e
c
o
v
e
r
y
Figure 30: Matrix Scatter Plot for the Relationships of Individual Strategies and
Extent of Recovery (N = 83 - 85)
262
The revealed significant negative relationships between (i) Extent of recovery
and Reorganisation at the personnel level, (ii) Extent of recovery and Reorganisation
at the institutional level, and (iii) Extent of recovery and Overall TMSLA supplied a
base for testing the ability of TMS implementation to predict recovery. The third set
of analyses included Binary Logistic regression while the eight TMS factors were
employed as predictors and recovery was employed as the predicted variable (see
Table 26).
20
The model indicates that the extent of reorganisation at the personnel
level can significantly predict 5% to 9% of the chances to recover a LA (? = -.638, p
< .05). In statistical terms, according to the regression line, a LA which increases the
extent of implementation of reorganisation at the Personnel Level in one degree (on a
scale of 1 to 5) has a greater chance of .6 to recover. Other TMS were excluded from
the model since they were not found as significant contributors for prediction.
Overall, the findings expose an interesting relationship between TMS and
recovery in failing LAs. TMS were in a wide use and were implemented to a large
extent in failing LAs. Some of these failing LAs recovered and others kept failing
persistently. LAs, which recovered, implemented most TMS to a similar extent as
those who kept failing. Alongside this similarity, recovered LAs implemented
reorganisation at the personnel level to a smaller extent than persistently failing LAs.
Nonetheless, it will not be accurate to claim that the less a LA employed TMS the
better chances it had to recover. Recovered LAs implemented lower levels of TMS;
yet, they had not avoided their implementation. Within recovered LAs, the mean
scores of TMS? factors ranged between 2.50 and 3.96 and (in a 1 to 5 scale, where 5
represented a very large extent) (see Tables 21 and 22).
20
There was no fear of multicollinearity and biasing the results since the correlations between the
eight factors did not exceed the level of .7 (see Table 12 and Chapter 3.6.2.) with r = .9 being the
lowest boundary for multicollinearity (Field, 2005; Pallant, 2001); Overall TMSLA was completely
omitted to prevent singularity; and, outliers were taken into consideration. An explorative approach
required to follow Field (2005) recommendation and use the stepwise Forward Wald method, which
automatically excludes the variables not explaining the dependent variable and presents the best
possible predicted model.
263
Table 26: Logistic Regression Report for Recovery (as dichotomy)
Predicted by TMSLA in Failing LAs (N = 85)
Outcome Predictors
Included Predictors 95% CI for exp ?
? (SE) Lower Exp ? Upper
Recovery
as
Dichotomy
Reorganisation at the Personnel Level -.638 (.276) * .308 .528 .908
Constant 2.283 (1.130) * 9.804
Excluded Predictors
Retrenchment of Services .013
Retrenchment of Expenditures 1.807
Repositioning as Reaching out .409
Repositioning as Innovative Services .290
Repositioning as Renewed Relationship .383
Reorganisation at the Institutional Level .790
Reorganisation as Extent of Centralisation .051
R
2
= 0.05 (Hosmer & Lemeshow), 0.07 (Cox & Snell), 0.09 (Nagelkerke). Model Chi
2
(1)
= 5.981*
* = p < 0.05
In sum, according to the results, a significant positive relationship between
extent of implementation of TMS and recovery was not found; hence, extreme
employment of TMS had not led to recovery. There are numerous theoretical and
methodological possible explanations for such results. While reviewing all the
possible intra-organisational factors (e.g., the size of the LA, the causes and
symptoms of the failure, the available human resources in the LA, the leadership
qualities of management) and ex-organisational factors (e.g., eligibility for national
grants and plans, regional labour market, the socio- economic status of residents in
the LA geographical area, and pressure of stakeholders) that might differentiate
persistently failing and recovered LAs, is beyond of the scope of this study, the next
paragraphs may supply some theoretical and methodological explanation for the
results.
Theoretically, although TMS were implemented in persistently failing LAs to
a large extent, it might be argued that they might have been inappropriately
implemented and consequently had not led to the expected outcomes. Inappropriate
264
implementation of TMS might be caused by three types of mismanagement.
First, persistently failing LAs might have implemented TMS that were
unsuitable for the particular failures it wished to tackle, or alternatively, the strategies
were implemented to an inappropriate degree (i.e., too radically). Such
mismanagement may be a result of omitting the diagnosis stage, a stage regarded as
critical for the recovery process (see Figure 2) (McKiernan, 2003). This active
analytical tool helps in identifying suitable strategies to deal with failure. Even
though the repertoire of TMS is wide and management might be familiar with it, a
recovery process should not be based on a random eclectic collection of the entire
available strategies. Extreme TMS, which are not related to a recognised cause of a
failure and are not directed to fulfill a recognised need, would not necessarily lead to
recovery and they may even damage the process. For instance, increasing the budget
of a department that suffers from an unproductive climate, lack of managerial skills,
enthusiasm, or cooperation from subordinates, would probably not lead to its
recovery. In addition, since resources are limited, increasing the budget for an
inefficient department might prevent other areas from being effectively recovered.
As suggested by Arogyaswamy, Barker, and Yasai-Ardekani (1995), difficulties in
diagnosing the causes of a failure, recognising their symptoms, and spotting the
differences between the two, may cause recovery attempts to fail. Boyne and Meier
(2007), who received similar results (i.e., in some cases increased implementation of
TMS was not effective and prevented recovery), suggested that better matching
between causes and TMS were required to deal with different dimensions of failure.
Therefore, it might be suggested that, despite the importance of an accurate
diagnosis, this tool was not employed by persistently failing LAs.
Second, persistently failing LAs might have implemented TMS in the wrong
timing or wrong order. These problems might originate in the lack of an appropriate
comprehensive recovery plan, which should coordinate, balance, and prevent
accidental implementation of strategies. According to Boyne (2006), the planning
process (i.e., the fourth and the fifth stages: search for new strategies and selection of
new strategies) is essential for recovery (see Figure 3). When generating a recovery
plan the relevant strategies are transformed into operative actions (McKiernan, 2003)
and positively correlated with performance (Pearce, Robbins, and Robinson, 1987).
Thus, implementing TMS without prior formulation of a recovery plan decreases the
265
chances to execute them in a gradual, well-ordered, and balanced manner. For
instance, increasing marketing efforts for a new service to new consumers before the
recruitment and training of staff would probably result in poor outcomes.
Third, a large extent of TMS implementation does not ensure that strategies
are implemented by ideal or, at least, satisfactory personnel. TMS might have been
implemented in persistently failing LAs by unskilled, new, or inexperienced
management and staff. According to results explained in the former chapter,
reorganisation strategies and especially „reorganisation at the personnel level? (i.e.,
replaced senior and middle managers and changed internal organisational structure)
were broadly used within failing LAs. Implementation of „reorganisation at the
personnel level? is especially important due to the broader accountability and high
performance public managers are expected to demonstrate under NPM reforms
(Denhardt and Denhardt, 2000; Hall and Holt, 2002; Nutley, 2000; Sanjay and
Bradley, 2006). However, despite the fact that new managers often bring a new spirit
and they are freer to introduce radical changes (Schendel et al, 1978), and that
replacement of the leadership is regarded as a precondition for successful recoveries
(Hofer, 1980), this replacement should be executed in a proper and balanced way.
Implementation of TMS following too wide, too quick, too often, or unsuccessful
changes within the personnel might supply a possible explanation for low extent of
recovery. Thus, in order to successfully implement TMS, personnel changes should
be balanced with other reorganisation tactics. While doing so, the management
should make efforts to create and maintain a stable productive organisational climate,
in which new roles and authorities are internalised and assimilated, and new
managers earned the trust of their subordinates.
Overall, the results suggest that the extent of TMS implementation has no
significant influence on the extent of recovery. As noted by scholars, recovery is not
a granted outcome and intra-organisational dysfunction might damage recovery
prospects (see Figure 3). While the extent of implementation of TMS only gives a
quantitative guideline to the existent and use of TMS, it seems that the quality of the
process in which strategies are implemented might have a broader effect on recovery.
The quality of the process might be affected by the suitability of the strategies used,
their degree, timing, or order of implementation, and the skills, experience, and
motivation of management, which employs them. These results further enhance the
266
previous claim for further research on failing organisations, since they strengthen the
need to fill the existing lacuna in management knowledge and experience in turning
around failing public organisations, (Mellahi, Jackson, and Sparks, 2002; Melahi and
Wilkinson, 2004; Paton, 2003).
However, intra-organisational dysfunction supplies only one possible
explanation for the results. A second set of theoretical explanations lies in the extra-
organisational field. These explanations include possible independent intervening
variables, which might affect the extent of recovery. These environmental elements
provide further explanations for the ineffective deployment of high levels of TMS,
which the management is less capable of controlling. One of the main interventional
bodies is The Audit Commission. The official role of the Audit Commission includes
inspection, auditing, and supervision of the LA and its senior management (Audit
Commission, 2005). Nevertheless, some scholars (e.g., Cornforth and Paton, 2004;
Stewart, 2003) attribute a much more invasive role to it. According to them,
supervisory and audit regimes stimulate the growth of unnecessary organisational
measurement, stimulate artificial reporting practices that are misleading, obligate a
wasteful use of resources, and largely transfer attention from task execution to focus
on figures and reports. However, whether the Audit Commission has a contributory
role or just imposes additional burdens on LA management, its official role places it
under continuous conflicts of interest. On one hand, as a quasi-governmental body
(Jas and Skelcher, 2005) and as a non-interested party, the Audit Commission
measures and reports LAs performance. On the other hand, it inspects and advises
failing LAs (Stewart, 2003; Turner et al., 2004) and thus, it is partially and indirectly
in charge of their recovery. This double role might bias the CPA reports since they
might be motivated to report improvements in performance of LAs acting according
to their guidance. These motivations might influence the reliability of the CPA
ranking and, therefore, influence our results.
The reliability of the rankings might be further influenced by the personal
differences and variety of the Audit Commission staff. As a broad based national
authority, the Audit Commission consists of a CEO, managing directors, county and
district auditors, and lower level employees that comprise a workforce of around
2,500 staff (Audit Commission, 2005). Since this national body consists of a diverse
personnel profile that suffers from incomplete knowledge and experience (Boyne,
267
2004; Cornforth and Paton, 2004), and has yet formed a systematic doctrine to deal
with failing LAs, it can be argued that individual auditors interpret data and judge
circumstances differently. Variance in the interpretation of LAs performance directly
influences the reliability of the CPA ranking, since what can be seen as a minor
improvement to one evaluator might be seen as a major improvement to other.
The duality in the role of the Audit Commission might affect not only the
reliability of the ranking but might also influence the way strategies are implemented
within LAs. As noted during the interviews, the Audit Commission takes on different
roles in different situations. When Swindon?s interviewees were asked to describe
their relationship with the Audit Commission they reported that "[The Audit
Commission representatives] approved or disapproved our plans… they did not
recommend or suggest specific strategies… they were advising, not deciding for us."
By contrast, Walsall?s leaders reported that "[The Audit Commission representatives]
threatened to take the power, replace the management and the politicians…" These
different roles might lead to different ways to act. While LAs for which the Audit
Commission acted as an advising body could operate in a planned way using the
support of the Audit Commission, LAs that felt threatened by the Audit Commission
might have applied TMS in a rushed or radical way which did not contribute to their
recovery.
Alongside those theoretical explanations, some methodological decisions,
which were taken in this study, might explain the results as well. Due to limitations
in resources and in available time, the research was conducted based on three
underlying methodological assumptions: first, that recovery could be achieved within
a timeframe of four years; second, that LAs began their recovery process right after
the first CPA report publication in 2003, and finally that TMS could impact the level
of performance right after their implementation. Obviously, challenging each one of
these assumptions may supply a valid explanation of the results. First, since
organisational change in large public organisations might be continuous with no
accurate borders, the starting point and the endpoint of a recovery process in a
specific LA is difficult to recognise and measure. However, scholars suggest that
recovery processes last for several years (Schendel, Patton, and Riggs, 1976).
However, since participants were asked to report in July 2006 strategies taken from
mid 2002 to mid 2006, the timeframe available for this study was limited to four
268
years. It might be suggested that the timeframe required for a successful recovery
exceeded the period of time that passed from the first CPA report to the current
survey. Thus, the results might illustrate an intermediary stage in which recovery had
not yet been completely achieved. Second, it might be suggested that LAs did not
enter into a recovery process right after the publication of the CPA report. LAs might
have ignored the report or might have launched their recovery process a few years
later. Therefore, even though they reported the execution of TMS, they may only be
taking their first steps toward complete recovery. And finally, it may be argued that
even in cases in which TMS were implemented right after the publication of the CPA
report, they did not have an instant impact on performance in all cases, and recovery
should not be expected. Thus, in order to verify the validity of this assumption,
further research in the coming years is required.
In sum, this chapter shows that no significant relationship between the extent
of TMS implementation and recovery exists. Nevertheless, a moderate use of
reorganisation at a personal level may be effective as it initiates, leads, and predicts
successful recoveries. The data shows that extreme extent and greater extent of
implementation of TMS do not lead to recovery. There are theoretical and
methodological possible explanations for these results. Theoretically, intra-
organisational dysfunction and extra-organisational factors may influence the
recovery ability of a LA. Thus, it is not the extent but the quality of the strategies
employed that influences the ability of an organisation to recover. Methodologically,
limitations in time and resources caused the research to be conducted according to
presumptions that concern the length of recovery and its start point. Challenging
these presumptions could supply alternative explanations for the results (see further
discussion on this point in the Conclusion chapter). Thus, further research in the area
is required to better illustrate the characteristics of the recovery process.
269
CHAPTER 6: CONCLUSIONS
This research deals with the linkage between public performance, public
management, and public failure in the context of English local government. In this
sense, it makes a significant step towards a better understanding of failing public
organisations and the processes they undergo to improve their performance. This
study has been designed as an exploratory research that moves the discussion from
the commercial recovery area, which was widely investigated, to the public failure
and recovery area, which was rarely explored and for which information is still
largely unavailable. The scope of this research was limited to LAs due to a special
interest in investigating organisations with a unique composition of leadership,
elected members and officers, which creates further complexities when dealing with
performance failure and recovery. Additionally, the scope was limited to the British
context and to a conflicted central local relationship in a centralised political system.
The research reflects on the social, economic and political background that
may have influence the perception of failure. The research reviews the evolvement of
the local government in England from the 18
th
century to present days while pointing
out the different ideologies which influences its development. Similarly, the research
focuses on the influence of ideological streams on the development of public
administration and the perception of performance.
Public performance has changed its face during the last three decades. In
response to demands placed on the traditional public sector to supply basic services
to all citizens, based on Neoliberal views, NPM reforms and the Best Value regime
encouraged efficiency, effectiveness, and economy while importing managerial
methods and values from the private sector. Within this environment, LAs have been
subjected to repeated efforts designed to improve their performance. Nonetheless,
these efforts have not accomplished the expected ideal results and LAs kept
struggling with the increasing gap between customer expectations created by the
NPM environment and cutbacks in services caused by budget reductions imposed by
the central government. Alongside financial pressures, increased roles and functions
of LAs were followed in some cases by massive control and restrictions of powers.
These gaps resulted in the failure of several LAs to supply minimal services. This
research characterises these organisations and investigates TMS as an optional
managerial tool to deal with failing LAs.
270
The two followed case studies of failing LAs, the analysed reports and
documents, and the face-to-face interviews, supported by the description of two
additional cases of a consistently failing LA and a consistently well performing LA,
served as a basis of knowledge to develop the concept of TMS appropriate to the
public sector. While the evidence revealed that up to 2005 the two case studies of
failing LAs, Walsall and Swindon, had not accomplished full or perfect recoveries,
significant shifts in performance were recognised. Since these cases reflect public
recovery processes and TMS were employed by their leadership, the concept of TMS
was observable and carefully built up. Though this was initial empirical work it
emerged that the concept of TMS could be useful for clarifying the tasks,
complexities, considerations, and organisational environment that leaders face during
a recovery process. This work expands the existing work done on TMS in two ways.
First, the existing general classification of TMS into the 3Rs is supplemented by
eight sub-areas. The sub-areas do not contrast the 3Rs but give a more precise
understanding regarding TMS. The specification and division of TMS into groups
and sub-groups make observations, analyses, and, selections of TMS for
implementation purposes more available. Second, this study takes the existing work
one step ahead as it highlights the characteristics of TMS and emphasises six of their
nuances: 1. The aim, scope, and proportionality, 2. Timing and Time restriction, 3.
Urgency, 4. Inspection and examination, 5. Management, and 6. Organisational
climate. Doing so makes the task of matching strategies to causes of failure more
accessible for managers.
The conceptualization of TMS was very useful for constructing the new
measurement tool. Since the literature in this field is limited, and given that this
study was designed as exploratory research, the creation of such a tool was required.
Accordingly, a measurement tool for TMS was created and validated. This tool is
more accurate and much more comprehensive than the existing tools. The new tool
enables researchers, for the first time, to comprehensively explore whether TMS
were used in LAs, their extent of implementation, and their relationship with
recovery.
While using this tool a preliminary investigation was conducted, which
explored whether TMS were used in LAs, their extent of implementation, and their
relationship with recovery. The results challenge assumptions concerning the linear
271
relationship between TMS and recovery. The results show that TMS were
extensively employed by LAs. Nonetheless, surprisingly, such strategies were
executed by both persistently failing and recovered LAs and no significant
relationship between extent of implementation of TMS and recovery was found.
21
While the extent of implementation of TMS does not determine whether a recovery
will be achieved or not, other alternative possible explanations like the match
between TMS and causes of failure, the order and timing TMS were employed, the
degree of suitableness, and the staff involved in their implementation might better
distinguish between persistently failing and recovered cases. These alternatives
should be examined within the public sector. Yet there is evidence to show that in the
private sector, strategic choices of particular strategies, timing, and intensity of
implementation determine whether a turnaround may be successful (Sudarsanam and
Lai, 2001).
Given these results, it may be suggested that it is not the quantity but the
quality of the strategies used that influences recovery. Accordingly, in practical
terms, it can be concluded that while dealing with failing organisations, senior
managers should pay attention not only to the kind of strategies implemented but also
to the way in which these strategies are employed. In other words, this study argues
that TMS should be applied while taking into account not only their extent of
implementation, but also their suitability, timing, order, and the personnel that
employ them.
Based on the combination of the case studies with the quantitative results, it
can be concluded that TMS should be used after conducting a reliable diagnosis of
organisational strengths, weaknesses, opportunities, and threats, and a fair ranking of
the causes of the failure. Such a diagnosis would provide an accurate picture of the
reality in which the organisation is performing and supply the basis for matching the
required TMS to the specific causes of failure. Choosing the adequate strategies
should be done after considering whether the set of strategies has the best chances to
solve the organisation's problems after coordination of their order, time, and extent of
implementation. While doing so, special attention should be given to the
21
With the exception of 'Reorganisation at the personnel level'. For a more extensive explanation see
Chapter 5.
272
implementation of reorganisation strategies. Since statistically significant negative
correlations between extent of implementation of reorganisation strategies and
recovery were found, replacements of staff and organisational restructuring should be
done wisely. Radical changes in the structure of an organisation may lead to a
negative organisational climate, lack of stability, mistrustfulness, and insecurity of
positions. Nevertheless, it should be noted that the negative relationships found do
not necessarily indicate that reorganisation strategies should be avoided.
Reorganisation was broadly used within successfully recovered LAs as well. Thus, in
our view, gradual implementation of reorganisation combined with complementary
strategies might avoid their negative effect and contribute to the recovery process.
However, as in any other research, this study is not free from limitations and
weaknesses. First, since this is an exploratory study, it comprehensively measured
TMS for the first time. Thus, it may be argued that the developed measurement tool
has limited validity, or, in other words, does not accurately measure implementation
of TMS. In this context, further research using this tool, in different samples,
countries, and public agencies might increase the credibility of this tool, make
adjustments, and eliminate imperfections.
Second, since the research resources available to this study were limited, the
study relied on the annually published Audit Commission CPA test and league table
of performance ratings in its classification of LAs. The Audit Commission data
supplied the basis for the identification of suitable LAs for the case studies, for the
categorization of the different LAs according to levels of performers, and for tracing
the extent of recovery. However, scholars have continuously criticised the concept of
performance measurement in the public sector. These arguments may weaken the
ability of the CPA to reflect the actual performance and recovery levels of LAs, and
consequently weaken the findings of this study. However, even if some managers
invest efforts in improving their ranking, such improvement cannot be done without
improving performance to some extent. Thus, the influence of such bias on the
results will not be significant.
To conclude, this study makes a step towards dealing with the existing lacuna
of knowledge and experience in the management of a failing public organisation.
This research pointed out the characteristics of a failing LA, supplied a better
273
understanding of TMS, adapting their content to the public sector environment so
that a measurement tool could be developed, and the relationship between TMS and
recovery could be explored. However, as was previously suggested, borrowing
managerial practices is not always appropriate and helpful (McNulty and Ferlie,
2004). Nonetheless, in our view interdisciplinary research has the potential to supply,
or at least test, innovative solutions to known problem. Thus, using practices and
ideas originating in one discipline, while sensitively adjusting them to another
discipline, may enrich the available arsenal of solutions. As recognised by Robertson
and Seneviratne (1995) there is a growing recognition of the fact that distinctions
between the two sectors are becoming blurred, and organizational change
interventions are just as successful in both sectors.
Given that, we have ensured that TMS would be adaptable to the public
sector context in a nuanced manner: the conceptualisation of TMS was subject to
careful examination, while political, democratic, and public issues were considered;
the applicability of each of the 3Rs was discussed while being evaluated according to
public managers' perspective; the measurement tool items were subject to careful
examination of relevant experts; and statistical procedures were aimed at ensuring
that the measurement tool is reliable and valid. These cautious steps promised a sane
use of ideas borrowed from the private sector.
These cautious adaptations enable this study to effectively deal with
questions regarding public failure and make a contribution to the area in various
aspects. Firstly, this study highlights the ongoing conflict between increased
demands and decreased resources that characterises NPM. Secondly, it highlights the
phenomenon of public failure and persistent failure of some LAs, the efforts made by
the English government and the Audit Commission to recover them, and the partial
success of these efforts. Thirdly, this study makes a preliminary, systematic attempt
to evaluate the causality of managerial change strategies used in failing LAs and
recovery. Fourthly, the contributions portrayed are the point of departure for
continuing development of theory in this area.
Overall, in contrast to the predominant ethos that emphasises excellence, this
study opens the door for further investigation of cases of failure. As this study shows,
further research in this area is required. While this study focused on the extent of
274
TMS implementation, future studies should search further for the factors that may
influence recovery processes by comparing successful and unsuccessful recovery
attempts. In order to explore these possible factors, future research could deal with
questions as to whether a professional diagnosis was conducted; it could investigate
the extent to which strategies were matched and directed to overcome specific causes
of failure; it may evaluate whether a recovery plan was formulated, how TMS were
planned to be executed, and how they were implemented in practice. In addition, it
would be important to figure out how recovered cases dealt with the possible
disadvantages and difficulties that were caused by reorganisation strategies.
Exploring and testing these future directions of research may pave the way for a
deeper and improved understanding of the strategies public managers should employ
in turnaround situations.
275
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CHAPTER 8: APPENDICES
Appendix 1: Local Government Act, 1999
Note: the following table includes parts of the Local Government Act, 1999. (For the
full version please see http://www.opsi.gov.uk/acts/acts1999/199900 27.htm#4)
PART I
BEST VALUE
Best value authorities
Best value
authorities.
1. - (1) For the purposes of this Part each of these is a best value authority-
(a) a local authority;
(2) In relation to England "local authority" in subsection (1)(a) means-
(a) a county council, a district council, a London borough council, a parish council
or a parish meeting of a parish which does not have a separate parish council;
Duties
The general
duty.
3. - (1) A best value authority must make arrangements to secure continuous
improvement in the way in which its functions are exercised, having regard to a
combination of economy, efficiency and effectiveness.
(2) For the purpose of deciding how to fulfil the duty arising under subsection (1)
an authority must consult-
(a) representatives of persons liable to pay any tax, precept or levy to or in respect
of the authority,
301
(b) representatives of persons liable to pay non-domestic rates in respect of any
area within which the authority carries out functions,
(c) representatives of persons who use or are likely to use services provided by the
authority, and
(d) representatives of persons appearing to the authority to have an interest in any
area within which the authority carries out functions.
(3) For the purposes of subsection (2) "representatives" in relation to a group of
persons means persons who appear to the authority to be representative of that
group.
Performance
indicators and
standards.
4. - (1) The Secretary of State may by order specify-
(a) factors ("performance indicators") by reference to which a best value
authority's performance in exercising functions can be measured;
(b) standards ("performance standards") to be met by best value authorities in
relation to performance indicators specified under paragraph (a).
(4) In specifying performance indicators and standards, and in deciding whether to
do so, the Secretary of State-
(a) shall aim to promote improvement of the way in which the functions of best
value authorities are exercised, having regard to a combination of economy,
efficiency and effectiveness, and
(b) shall have regard to any recommendations made to him by the Audit
Commission.
(5) In exercising a function a best value authority must meet any applicable
performance standard specified under subsection (1)(b).
Best value
reviews.
5. - (1) A best value authority must conduct best value reviews of its functions in
accordance with the provisions of any order made under this section.
(2) The Secretary of State may by order specify a period within which an authority
is to review all its functions, and an order may-
(a) apply to one authority or more;
302
(b) make different provision in relation to different authorities;
(c) require specified functions to be reviewed in specified financial years.
(3) In conducting a review an authority-
(a) shall aim to improve the way in which its functions are exercised, having
regard to a combination of economy, efficiency and effectiveness, and
(b) shall have regard to any guidance issued by the Secretary of State under this
section.
(4) The Secretary of State may by order specify matters which an authority must
include in a review of a function under this section; and in particular an order may
require an authority-
(a) to consider whether it should be exercising the function;
(b) to consider the level at which and the way in which it should be exercising the
function;
(c) to consider its objectives in relation to the exercise of the function;
(d) to assess its performance in exercising the function by reference to any
performance indicator specified for the function under section 4 or under
subsection (6)(a) below;
(e) to assess the competitiveness of its performance in exercising the function by
reference to the exercise of the same function, or similar functions, by other best
value authorities and by commercial and other businesses;
(f) to consult other best value authorities and commercial and other businesses
about the exercise of the function;
(g) to assess its success in meeting any performance standard which applies in
relation to the function;
(h) to assess its progress towards meeting any relevant performance standard
which has been specified but which does not yet apply;
(i) to assess its progress towards meeting any relevant performance target set under
subsection (6)(b).
303
(5) The Secretary of State may issue guidance on-
(a) the timetable for a review;
(b) the procedure for a review;
(c) the form in which a review should be recorded;
(d) the content of a review.
(6) In particular, guidance may state that an authority should-
(a) specify performance indicators in relation to functions;
(b) set targets for the performance of functions ("performance targets") by
reference to performance indicators specified under section 4 or under paragraph
(a);
(c) set a plan of action to be taken for the purposes of meeting a performance
target.
(7) Guidance may state the matters which should be taken into account in setting
performance targets; and these may include the range of performances expected to
be attained by best value authorities.
Best value
performance
plans.
6. - (1) A best value authority must prepare a best value performance plan for each
financial year in accordance with any order made or guidance issued under this
section.
(2) The Secretary of State may by order specify matters which an authority must
include in a plan for a financial year; and in particular an order may require an
authority-
(a) to summarise the authority's objectives in relation to the exercise of its
functions;
(b) to summarise any assessment made by the authority of the level at which and
the way in which it exercises its functions;
(c) to state any period within which the authority is required to review its functions
under section 5;
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(d) to state the timetable the authority proposes to follow in conducting a review;
(e) to state any performance indicators, standards and targets specified or set in
relation to the authority's functions;
(f) to summarise the authority's assessment of its performance in the previous
financial year with regard to performance indicators;
(g) to compare that performance with the authority's performance in previous
financial years or with the performance of other best value authorities;
(h) to summarise its assessment of its success in meeting any performance standard
which applied at any time in the previous financial year;
(i) to summarise its assessment of its progress towards meeting any performance
standard which has been specified but which does not yet apply;
(j) to summarise its assessment of its progress towards meeting any performance
target;
(k) to summarise any plan of action to be taken in the financial year to which the
plan relates for the purposes of meeting a performance target;
(l) to summarise the basis on which any performance target was set, and any plan
of action was determined, in relation to a function reviewed under section 5 in the
previous financial year.
(3) An authority must publish its plan for a financial year before-
(a) 31st March of the previous financial year, or
(b) such other date as the Secretary of State may specify by order.
(4) The Secretary of State may issue guidance on the form and content of plans and
the manner in which they should be published.
Audit of best value performance plans
Audit.
7. - (1) A performance plan published by a best value authority for a financial year
under section 6 shall be audited by the authority's auditor.
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(2) An audit of a performance plan is an inspection for the purpose of establishing
whether the plan was prepared and published in accordance with section 6 and any
order or guidance under that section.
(3) Subsections (1), (2) and (4) to (7) of section 6 of the Audit Commission Act
1998 (auditor's right to documents and information) shall have effect in relation to
an auditor's functions under this Part as they have effect in relation to his functions
under that Act.
(4) In relation to an authority's performance plan the auditor shall issue a report-
(a) certifying that he has audited the plan,
(b) stating whether he believes that it was prepared and published in accordance
with section 6 and any order or guidance under that section,
(c) if appropriate, recommending how it should be amended so as to accord with
section 6 and any order or guidance under that section,
(d) if appropriate, recommending procedures to be followed by the authority in
relation to the plan,
(e) recommending whether the Audit Commission should carry out a best value
inspection of the authority under section 10, and
(f) recommending whether the Secretary of State should give a direction under
section 15.
Response to
audit.
9. - (1) A best value authority shall publish any report received in accordance with
section 7(5)(a).
Best value inspections
Inspections.
10. - (1) The Audit Commission may carry out an inspection of a best value
authority's compliance with the requirements of this Part.
Inspectors'
powers and
duties.
11. - (1) An inspector has a right of access at all reasonable times-
Reports.
13. - (1) Where the Audit Commission has carried out an inspection of an authority
under section 10 it shall issue a report.
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Inspections:
housing benefit
and council tax
benefit.
14. - (1) The following shall be substituted for section 139A(1) and (2) of the
Social Security Administration Act 1992 (reports on administration of housing
benefit and council tax benefit)-
Secretary of
State's powers.
15. - (1) This section applies in relation to a best value authority if the Secretary of
State is satisfied that it is failing to comply with the requirements of this Part.
(2) Where this section applies in relation to an authority the Secretary of State may
direct it-
(a) to prepare or amend a performance plan;
(b) to follow specified procedures in relation to a performance plan;
(c) to carry out a review of its exercise of specified functions.
Exercise of functions by best value authorities
Power to modify
enactments and
confer new
powers.
16. - (1) If the Secretary of State thinks that an enactment prevents or obstructs
compliance by best value authorities with the requirements of this Part he may by
order make provision modifying or excluding the application of the enactment in
relation to those authorities.
(2) The Secretary of State may by order make provision conferring on best value
authorities any power which he considers necessary or expedient to permit or
facilitate compliance with the requirements of this Part.
(3) An order under this section may-
(a) impose conditions on the exercise of any power conferred by the order
(including conditions about consultation or approval);
(b) amend an enactment;
(c) include consequential, incidental and transitional provision;
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(d) make different provision for different cases.
Audit
Commission.
22. - (1) In this Act a reference to the Audit Commission is a reference to the Audit
Commission for Local Authorities and the National Health Service in England and
Wales.
(2) The Audit Commission may delegate any of its functions under this Part to-
(a) a committee or sub-committee established by the Commission (including a
committee or sub-committee including persons who are not members of the
Commission), or
(b) an officer or servant of the Commission.
(3) The Audit Commission Act 1998 shall be amended as follows.
(4) In section 33 (studies by Commission)-
(a) in subsection (1)(a), for "the provision of local authority services and of other
services provided by bodies subject to audit" substitute "the exercise of the
functions of best value authorities and the provision of services provided by other
bodies subject to audit".
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Appendix 2: The White Paper - Strong Local Leadership – Quality Public
Services
Note: the following table includes parts of the White Paper - Strong Local
Leadership – Quality Public Services. (For the full version please see
http://212.100.250.130/pub/215/StronglocalleadershipQualitypublicservicesDTLR20
01PartOne_id1165215.pdf)
Presented to Parliament by the Secretary of State for Transport, Local
Government, and the Regions, by Command of Her Majesty
This white paper sets out a new vision for local government at the beginning of the
21st Century. It seeks to establish a partnership between central and local
government, reflecting the critical importance of local authorities as a tier of
democratic government, delivering high quality public services to local people.
Democratically elected councils are part of the fabric of our communities. The
services they provide have a vital part to play in sustaining and enhancing the social
and economic prospects and environmental quality of our towns, cities and
countryside. They can have a profound effect on the opportunities and quality of life
of the people who live and work there. People want good standards of education, safe
communities, efficient transport systems and high quality are for the vulnerable in
our society. They want clean streets, decent housing, good leisure and cultural
facilities, and well planned neighborhoods. They want their voices to be heard when
decisions are made about how these services are delivered, and they want someone
looking after and speaking up for the interests of their communities. People therefore
expect a great deal from their council. And those expectations are rising. To meet
them, councils have constantly to seek new and more effective ways to deliver
customer-focused services and lead their communities. The proposals in this white
paper will provide a framework in which all can do so, through the application of the
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Government?s four principles of public services reform: Establishing a national
framework of standards and accountability for the delivery of high quality services
and effective community leadership. Within this framework, devolution to local
councils to encourage diversity and creativity, giving them the freedom they need to
respond to and meet their communities? needs. Building local capacity in recognition
of the need for flexibility at the front-line to exploit the opportunities we are opening
up, and deliver the improved services and effective leadership we all want to see.
And more choice for customers, with access to an alternative supplier where
performance falls below acceptable standards. The implementation of this white
paper will see greater freedoms for high performing councils, incentives to support
the achievement of stretching targets, focused attention where councils are
struggling, and effective intervention to tackle failure. These proposals form part of
the Government?s agenda for modernisation and reform. For many, they will be
challenging. They are meant to be. We propose these changes not for their own sake,
but because local people will benefit. From the requirement that all services should
be delivered to an acceptable standard. From the fact that the changes we all really
want to see – better schools and social care, improved local environments, better
transport and other vital local services – will get the priority they deserve. And from
effective community leadership by councils in touch with local people and working
to meet their aspirations. I want to see central and local government working together
in a constructive partnership to deliver high the quality public services that local
people have the right to expect. In a practical way this white paper shows how we
can do so.
Strengthening local Government
We want a vibrant local democracy in which councils deliver high quality and
improving local services and provide strong and confident leadership. We will work
with local government to achieve this and remove unnecessary controls, which stifle
local innovation. The proposals we set out in this white paper mark a radical change
in the relationship between central and local government.
1.1. The Government wants to see strong, vibrant, innovative, and responsive local
government delivering the quality of local leadership and public services that
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their communities need. Councils are run by people elected by the local
community. That gives them a unique role and responsibility to respond to local
needs and circumstances, and to provide the leadership that helps to create and
support thriving communities.
1.2. The proof that they can do so is all around us. In the magnificent municipal
achievements of the nineteenth century. In the contribution that councils made
to the establishment of our welfare system and economic prosperity in the last
century. And it is there today in the things which councils up and down the
country do day in and day out to help make peoples? lives better.
1.3. Four years ago councils were not well placed to respond to the Government?s
vision of successful local government. The resources they needed for essential
investment were not in place. An effective, constructive partnership between
central and local government did not exist. Universal capping and CCT were the
order of the day, focusing on inputs and relegating the achievement of outcomes
that matter, such as improvements in education, social care, housing and
transport, and the creation of a clean and safe local environment.
1.4. Since 1997 the Government has introduced a wide range of measures designed
to develop better local leadership and focus on service delivery. Financial
support for councils? revenue and capital expenditure has risen in real terms in
each of the last four years (in stark contrast to the 4 years before that), alongside
financial reforms including the end of universal capping.
1.5. A major public service reform programme has begun. The bureaucracy of CCT
has gone. In its place, councils strive for continuous improvement through the
achievement of best value. This means balancing costs and quality in
consultation with local people, and identifying the most appropriate method of
service delivery, be it public, private, voluntary, or in partnership. Local Public
Service Agreements (PSAs) encourage councils to stretch their performance
still further, in return for additional finance and the freedoms and flexibilities
needed to do so.
1.6. The new constitutions that councils are introducing following consultation with
local people will improve the efficiency, transparency and accountability of
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local leadership and decision-making. The introduction of statutory community
strategies and the broad new enabling power to promote community well-being
encourage councils to face outwards and work alongside public, private and
voluntary partners to develop and deliver their communities? vision for their
locality.
1.7. We need to build on these reforms to ensure effective service delivery and
community leadership across the whole of local government. Further reform is
needed so that councils have the tools they need to make the improvements
local people want to see. In particular, we need to get rid of regulations where
these impede councils in finding innovative ways of tackling local problems,
and to modernise local government finance.
1.8. Reform is needed because Government has a responsibility to ensure that
wherever people live in this country, they have access to good quality public
services. Where local government is responsible for providing these services, it
must be held to account for achieving appropriate standards across the country.
That means tackling the current variability in service quality, especially in
critical areas like education and social services.
1.9. Reform is needed to lay the foundations for local government?s future. A future
in which councils enjoy the confidence of all the partners they work with and all
the people they serve, and which sees local government return to the very centre
of life in their communities.
1.10. The proposals we set out here will mark a new and lasting basis for effective
local government – by celebrating councils as a significant and vital sphere of
government and by enhancing their ability to make a real difference to peoples?
lives.
1.11. Summary of proposals: We will support councils to make a success of their
unique role as democratically elected leaders of their local communities. We
will help them to develop the democratic legitimacy and sound governance
needed to underpin community leadership and effective service delivery
building on the new well-being powers and local strategic partnerships. We will
encourage other public sector partners to work effectively with councils to
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tackle local problems and exploit local opportunities. We will promote closer
engagement between councils and their communities, and give councils further
powers to serve local people and improve the local environment and public
spaces. We will allow councils to introduce Business Improvement Districts to
promote partnership with local businesses. Significant deregulation will
increase councils? freedom of action.
1.12. In line with our principles for public service reform, we will shift our focus to
the assured delivery of outcomes through a national framework of standards and
accountability, and away from controls over inputs, processes and local
decisions. This white paper sets out a comprehensive performance framework
for improvement, accompanied by a substantial package of deregulation.
1.13. The framework (which will be complemented by the new performance rating
system for social services) comprises:
– Clearly defined priorities and exacting performance standards, developed
with local government through the Central Local Partnership;
– Regular comprehensive performance assessments for all councils,
identifying how they are performing against these standards;
– Co-ordinated incentives, rewards and tools which address the results of the
comprehensive assessments and drive service improvement including: –
clear and concise public information about councils? performance;
– Integrated inspection programmes tailored to councils? strengths,
weaknesses and needs;
– Additional freedoms, powers and flexibility over resources for councils with
the track-record and capacity to use them;
– Tough action to tackle failing councils and services;
– Stretching targets and rewards for service improvement, through local
PSAs; and a streamlined, proportionate and integrated best value regime.
1.14. With this framework in place there will be an increased emphasis on delivery,
responsibility and accountability. By removing restrictions and requirements on
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planning, spending and decision-making and providing new powers to trade and
charge, we will free up councils to innovate and deliver tangible improvements
in the quality of services and effective community leadership. Unnecessary
bureaucracy, red-tape and regulation will be removed for all councils. We will
adopt a more co-ordinated and proportionate approach to the demands we make
of councils, focusing on the delivery of priorities and outcomes. There will be
more financial freedom within a basic framework underpinned by sound
financial management and prudent decision-making.
1.15. Specifically, for all councils we will:
– Abolish the council tax benefit subsidy limitation scheme;
– Shift control over council borrowing decisions to the local level;
– Significantly reduce the numbers of plans and strategies that councils are
required to produce;
– Scale back on area-based initiatives and give greater scope to rationalise
partnerships;
– Remove unnecessary red tape and bureaucracy including many
requirements for councils to obtain Government consent before acting;
– Provide councils with wider powers to provide services to others; and
– Allow councils to charge for the discretionary services they provide.
1.16. Additional freedoms will be available for high performers, with less ring
fencing, fewer planning requirements and greater freedom to use income from
fines. These councils will also have more discretion over best value reviews, a
much lighter touch inspection regime and the widest freedom to trade across
their services. We will not use reserve powers to cap the council tax increases of
high performing councils. Other councils will also be able to agree additional
freedoms, depending on their performance profile. Freedoms will also be
negotiable through local PSAs, to accelerate progress on key national and local
priorities.
1.17. This package of reforms demonstrates Government?s commitment to bring
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about vibrant, innovative and responsive local government. Local authorities
will have more freedom and responsibility to improve their performance and
serve their communities. This will enhance local democracy, with local
authorities being more clearly accountable to their electorate for service
delivery and council tax levels. In return, Government will expect local
authorities to rise to the challenge and bring about significant improvements in
performance and overall efficiency.
1.18. Police authorities are a special type of local authority, whose national standards
and priorities are the responsibility of the Home Secretary. They will retain their
own separate performance framework and will benefit from elements of the
wider local authority proposals, such as the new freedom to borrow.
1.19. We will draw together support, on a crossdepartmental basis, for: • building
councils? capacity to deliver; and • improving the skills of councillors and
council staff.
1.20. The emphasis will be on targeting resources where they are needed most and on
enabling councils themselves to tackle their weaknesses and develop their
strengths. Chapter 5 seeks views on our proposals to do this. We will help
councils to exploit the potential that new technologies offer to restructure
services, speed up transactions, provide a single point of contact for people?s
needs and join up delivery by local authorities and other agencies.
1.21. We will promote sound financial management in local government including
requiring councils to maintain adequate reserves and keep finances under
review. We will reform the single capital pot to reduce the proportion of ring-
fencing of Government support for capital investment for high performing and
striving councils.
1.22. Chapter 6 outlines our proposals for reform of the local government finance
system including reforms for parish and town councils. Part II of this
publication describes our local government finance proposals in detail.
1.23. We will clarify accountability for financial decisions. In providing greater
responsibility to councils for decisions on borrowing, fees and charges and
council tax, we will also strengthen the scrutiny role of councillors and
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reinforce the need for local consultation. Council tax bills will be clearer. They
will show the annual percentage change in council tax for different authorities
up front, not hidden away in a leaflet.
1.24. We will design new grant formulae that are more intelligible and transparent to
all stakeholders.
1.25. The Government?s goals of bringing decisions closer to the people they affect,
increasing democratic participation and improving the efficiency and
effectiveness of service delivery are also being addressed at a regional level.
The Government is committed to publishing a white paper setting out proposals
for giving people in the English regions a better say in how they are governed.
These proposals will be based on the drawing down of powers from central
government, as part of our wider commitment to devolution. This will have
close links with the ways in which we are strengthening the role of local
government and improving the working relationships between different levels
of governance.
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Appendix 3: The Audit Commission Methodology for the Core Services
Performance Rank
Source: Andrews, Boyne, and Walker (2006)
"The core service performance (CSP) score embraces all the main areas of
local government activity-education, social care, planning, waste management,
housing, library and leisure, and benefits, together with the "management of
resources." The Audit Commission gives each service a score from 1 (lowest) to 4
(highest). These scores are derived from a mixture of performance indicators, the
results of inspection of services, and service plans and standards. All the data used by
the Commission are in the public domain.
For three of the services (benefits, education, and social services), the
methodology for obtaining the CSP score relied on existing measurement systems,
which were converted to Audit Commission categories. Education scores were
translated from the Office for Standards in Education's performance profile star
system (0 stars =1, 1 star = 2, 2 stars = 3, and 3 stars = 4). For social services, the
Social Service Inspectorates performance ranks, which are based on the average
score for the judgments of services for children and adults, were converted thus: not
serving people well = 1, serving some people well = 2, serving most people well = 3,
yes-serving people well = 4. The Benefits Fraud Inspectorate uses a combination of
self-assessment, inspection judgments, and evidence from performance indicators to
assess local authorities' performance against their key performance standards. The
Commission translated these scores thus: up to 39 percent = 1, 40 percent-59 percent
= 2, 60 percent-79 percent = 3, and 80 percent and above = 4.
The score for the remaining three service areas and management of resources
was calculated by the Audit Commission from Best Value Performance Indicators
from 2000-01 and 2001-02, inspection reports, and service plans and standards data.
The performance indicators were taken from the Best Value Performance Indicators,
which every authority is obliged to provide to central government on an annual basis
(ODPM 1999, 2000b). These indicators cover key dimensions of performance
(Boyne 2002): quantity of outputs (e.g., number of exclusions from primary school,
number of home helps for the elderly), quality of outputs, (e.g., number of cyclists
killed, serious injuries on highways), formal effectiveness, (e.g., average school
317
passes at 16, percentage of rent collected from council housing tenants), efficiency
(e.g., cost per benefit claimed), and consumer satisfaction (e.g., satisfaction with
waste collection, users satisfied with theaters and concert halls). These data were
audited prior to publication.
Local government services are inspected by the Audit Commission. The
Commission makes judgments on the performance of the service and the likelihood
that the service can make improvements. The CSP draws on the performance
judgment. Inspectors use a scale of 1 (lowest) to 4 (highest) to judge the performance
of a service based on performance indicators, internal improvement plans, field
visits, and other documentation (these inspection reports are published on the Audit
Commission's Web site, www.audit-commission.gov.uk). The final piece of evidence
used by the Commission to derive the CSP score are statutory plans, which are
assessed against the criteria of the service's relevant central government department.
Weighting systems were used by the Commission to derive the CSP score.
These are sometimes complex because they have to compensate for the absence of
data in some services for some councils. The notable example here is inspection
reports. Environmental services, which include transport, waste, and planning, can be
used to illustrate the process. Best Value Performance Indicators, inspection reports,
and service plans are used to judge how good the service is. When no inspection had
taken place prior to the CPA process, the authority was inspected during 2002 on one
of the three subservice areas. When inspection had taken place in transport, for
example, the inspection result accounted for 50 percent of the evidence, Best Value
Performance Indicators 30 percent, and the Local Transport Plan 20 percent. Where
more than one inspection had taken place in a subservice area, the average inspection
score was taken. When there was no inspection, Best Value Performance Indicators
account for 60 percent and the Local Transport Plan 40 percent. Different weightings
were used in waste and planning. The three subservices carry different weights in
counties, metropolitan boroughs, unitary authorities, and London boroughs,
reflecting the varying responsibility of each organizational type. The weighted data
are then converted to the 1-4 scoring system.
Following the calculation of the CSP score for each service, the Audit
Commission weighted services when deriving the overall authority score. The
318
weights used at this stage reflected the relative importance and budget of each
service. On average, education and social services account for two-thirds of a
council's budget and are the most visible services. They were given the highest
weighting of 4. For environment and housing, the weight was 2, and for libraries and
leisure, benefits, and management of resources, the weight was 1. The Commission
then combined these weights with the performance score (1-4) for each service to
calculate the CSP. The CSP ranges from a minimum score of 15 (12 in the case of
county councils that do not provide either housing or benefits) to a maximum of 60
(48 for county councils)."
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Appendix 4: The Qualitative Tool - a Semi-Structured Face-to-Face Interview
Section 1: Introduction
Dear Mr./Mrs. _____________
It is nice to meet you and thank you for your time. My name is Itai Beeri. I
am a Ph.D. Student in UCC, Department of Government and Department of
Management & Marketing. Our research deals with turnaround management
in (failing) LAs. The aim of the study is to enrich both the managerial and
academic areas, about the causes and circumstances that led the local
authority into difficulties (a crisis, a failing situation). We would like to
explore the actions and decisions that the management took in order to
recover the local authority. We want to thank you about your cooperation and
to promise you that your personal identification details and the LA details
will be kept confidentially. The information you will share with us is very
important, and therefore, we would like to record this conversation. Do we
have your permission to do so?
Section 2: Demographic Questions
1. What is your current position?
2. What is your tenure in this position?
3. What was your previous position?
4. What was your tenure of previous position?
5. How many employees are employed in this local authority?
6. How many employees are employed in your department?
7. How many employees do you directly manage?
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Section 3: Core Questions
1. How would you define the severity of local authority?s failure?
2. Could you describe the level of failure in your local authority in 2002?
3. Why do you think it happened? What were the causes that led to the local
authority deterioration? Please give examples
4. What was the balance between internal and external causes to the
deterioration? How much factors in the local authority?s environment or
inside the local authority contributed to the deterioration?
5. What was the management responsibility for the deterioration?
6. Were there any financial/demand/political causes that led to difficulties?
Please give examples
7. Were the organisational learning skills a factor in the deterioration?
8. How did you know? What were the symptoms of the deterioration?
9. Who of the stakeholders recognised the symptoms? How severe was the
situation was to recognise the symptoms and react? Please give examples
10. Were there any managerial/financial/behavioural/physical symptoms to the
causes you have mentioned? Please give examples
11. Why do you think in that stage things have not been changed? What actually
triggered a change in the local authority? What stimulated an action?
12. What were the reactions to internal and external triggers like elections,
governmental involvement, consumers? demands, and the media?
13. Could you please specify the timing of these occurrences? For how long the
causes continued? For how long the symptoms continued? How much time
has past before the triggers appeared and when for the first time something
has been changed?
14. Has the local authority declared about a failure or preferred to deny it? Why?
What were the considerations and dynamic of that decision?
321
15. Has the local authority carried out a diagnosis of its difficulties/ barriers/
constrains/ causes, symptoms of the failure?s level and the triggers for
change? In what way? Who did it? To whom it was sent? According to what
guidance?
16. Has the local authority formulated a recovery plan? A formal one? Why?
Who were the partners to create the plan? How decisions have made? Who
proof it? What was the consumers/government/managers involvement?
17. Has the local authority asked for funding? From whom? Have you gotten any
funding?
18. What was the plan for recovering the local authority?
19. What were the actions that have been taken, in practice, in order to recover
the local authority?
20. Have you taken actions of Retrenchment (like for example, reducing of
services or reducing their quality, to some customers, in some areas, for some
time)? Please give examples
21. What were these actions? contributions to the recovery? What problems did
they cause?
22. Have you taken actions of Repositioning, improving or even innovativeness
(like for example, new investments, improving services, efforts to make
queues shorter, change charges for services, privatisation)? Please give
examples
23. What were these actions? contributions to the recovery? What problems did
they cause?
24. Have you taken actions of Reorganisation (like for example, replacement of
management or leaders, centralisation/decentralisation, changing financial
control, changing the organisational structure, changing the organisational
culture)? Please give examples
25. What were these actions? contributions to the recovery? What problems did
they cause?
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26. Which actions mostly contributed to stability of the local authority after the
deterioration?
27. Which actions mostly contributed to recovery and back to growth of the local
authority, up to the levels of performance it enjoyed before the crisis?
28. Which actions mostly contributed to renewal of the local authority and to
level of performance that is higher than prior to the crisis?
29. Are they any other comments, suggestion you would like to state or questions
you would like to ask?
Thank you very much for your cooperation and kindness, I do appreciate your
efforts. I am sure you have contributed significantly to this research.
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Appendix 5: The Quantitative Tool - a Questionnaire
Local Authorities’ Management Strategies -
Important Survey
Dear «TITLENAME»,
«POSITION»,
This questionnaire is part of a research project that focuses on Local Authorities’
Management Strategies. You have been chosen to represent your Local Authority?s
senior leadership. To gain insight about Management Strategies that were
implemented in your local authority during the past 4 years, we ask you, as a
representative of your Local Authority leadership, to complete this questionnaire.
(The contact details were gathered from the Council's website. Cabinet members,
chair committees, and executive directors were chosen).
The information you are asked to provide is of great value for Governments,
Local Authorities, and Citizens and will be kept confidential. The time needed
for completing the questionnaire is 7 to 10 minutes. Please answer all questions.
There are no “right” or “wrong” answers; we are only interested in your personal
opinions.
? Within the Respondents, A SHARP Personal Electronic Organiser will be drawn
? Respondents will receive the survey results
Much effort has been invested in this project and your personal participation is most
appreciated. We thank you in advance and trust we shall have the benefit of your
cooperation, which is invaluable for research purposes and for the general
improvement of Local Authorities.
Regards,
Itai Beeri, Ph.D. Student
Supervised by: Dr. Carol Linehan and Dr. Aodh Quinlivan, University College Cork.
For any further information, please contact Mr. Itai Beeri: [email protected] , +353-(0)21-4677649, +353-(0)85-7116301
Dear PA,
If you have received this mail, please transfer it to the addressee so he/she could decide whether or not take part in
the survey. Many thanks for your cooperation.
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Implemented Strategies
The following statements represent strategies that might have been implemented in
your Local Authority. To what extent these strategies were implemented in your Local
Authority?
Please circle the number from 1 to 5 that best reflects your evaluation.
A. Retrenchment Strategies
Over the last 4 years the Local Authority: Hardly
at All
To a Very
Large Extent
Contracted activities and services? scope 1 2 3 4 5
Eliminated particular services 1 2 3 4 5
Decreased some services expenditures 1 2 3 4 5
Partially / Temporarily exited from specific services 1 2 3 4 5
Liquidated assets in order to raise capital 1 2 3 4 5
Reduced / suspended capital expenditures 1 2 3 4 5
Created stronger financial control 1 2 3 4 5
Closed down public organisations 1 2 3 4 5
Decreased financial support to other organisations 1 2 3 4 5
B. Repositioning Strategies
Over the last 4 years the Local Authority: Hardly
at All
To a Very
Large Extent
Established new services 1 2 3 4 5
Entered into joint activities/cooperated with other agencies 1 2 3 4 5
Extended activities? and services scope 1 2 3 4 5
Changed the priorities of traditional activities 1 2 3 4 5
Introduced new ways of implementation 1 2 3 4 5
Extended services? availability 1 2 3 4 5
Extended marketing efforts (reaching out) to new segment of
consumers
1 2 3 4 5
Increased services expenditures 1 2 3 4 5
Modernized services capacity with equipment utilizing new
technologies
1 2 3 4 5
Began to give services / internal services that were previously
purchased
1 2 3 4 5
325
Over the last 4 years the Local Authority: Hardly
at All
To a Very
Large Extent
Loaned money / asked for subvention for reorganisation
purposes
1 2 3 4 5
Redefined core missions 1 2 3 4 5
Ensured high quality of services 1 2 3 4 5
Privatised services 1 2 3 4 5
Rebuilt stakeholders? trust in the Local Authority 1 2 3 4 5
Improved the local authority?s internal and external image 1 2 3 4 5
Rented / Sold /Mortgaged assets 1 2 3 4 5
Increased average price of services / levying money 1 2 3 4 5
C. Reorganisation Strategies
Over the last 4 years the Local Authority: Hardly
at All
To a Very
Large Extent
Replaced the Chief Executive Officer 1 2 3 4 5
Changed the internal local authority?s structure 1 2 3 4 5
Replaced senior and middle managers 1 2 3 4 5
Took centralisation steps 1 2 3 4 5
Took decentralisation steps 1 2 3 4 5
Increased time and efforts in researching the consumers
needs
1 2 3 4 5
Increased time and efforts in becoming a learning
organisation
1 2 3 4 5
Made changes in human resources management style 1 2 3 4 5
Reshaped and improved the organisational culture and
climate
1 2 3 4 5
Invested in staff skills training 1 2 3 4 5
Defined a common vision of the Local Authority 1 2 3 4 5
Diagnosed the Local Authority?s strengths and
weaknesses
1 2 3 4 5
Formulated an organisational working plan 1 2 3 4 5
Fought the denial and resistance of employees 1 2 3 4 5
326
General Information
Finally, your personal details will be kept confidential. Please tick your answer or print
where necessary.
1. Gender: ? Male ? Female
2. Age: What is your age? ___
3. Years of Education: ________ (including elementary school, high school, and higher education)
4. Position ? Elected Member / Councillor ? Non-Elected Member / Executive Officer
5. Title in the Local Authority ? Cabinet Leader ? Cabinet Member
? Committee Chairman ? Chief Executive ? Executive Director ? Other: ___________
6. Tenure in the present position __________ years
7. If you have any comments or suggestions, please specify
Thank you very much for your cooperation
327
Appendix 6: The Quantitative Tool - a Questionnaire – On Line Version
328
Appendix 7: Table 27: Correlation Matrix for TMSLA Individual Strategies (N = 118 - 126)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
1. Eliminated particular services
2.Contracted activities and services' scope .485 **
3.Partially / Temporarily exited from
specific services
.616 ** .387 **
4.Reduced / suspended capital expenditures .226 * 0.058 .333 **
5.Increased services expenditures -0.100 -0.084 -0.111 -.371 **
6.Decreased financial support in other
organizations
.343 ** .269 ** .502 ** .380 ** -.242 **
7.Began to give services / internal
services that were previously purchased
0.013 -0.086 0.097 -.183 * .241 ** -.198 *
8.Increased time and efforts in becoming
a learning organization
0.045 -0.025 0.108 -0.058 .179 * -0.038 .427 **
9.Increased time and efforts in
researching the consumers needs
0.083 0.095 0.120 0.020 0.173 -0.077 .318 ** .749 **
10.Extended marketing efforts reaching
out to new segment of consumers
-0.013 -0.018 0.074 0.095 .271 ** -0.017 .323 ** .448 ** .446 **
11.Changed the priorities of traditional
activities
.274 ** .275 ** .407 ** 0.146 .233 ** .207 * 0.094 .282 ** .318 ** .388 **
12.Introduced new ways of
implementation
.184 * 0.105 .241 ** 0.077 .226 * 0.098 .303 ** .522 ** .544 ** .482 ** .683 **
13.Entered into joint activities/
cooperated with other agencies
.200 * .260 ** 0.168 0.007 .246 ** 0.005 0.123 .375 ** .429 ** .314 ** .571 ** .635 **
14.Extended activities' and services scope -0.113 0.041 0.081 -.195 * .442 ** -0.078 .215 * .418 ** .419 ** .429 ** .416 ** .461 ** .490 **
15.Extended services' availability 0.036 -0.051 .212 * 0.014 .349 ** -0.073 .359 ** .549 ** .492 ** .573 ** .482 ** .642 ** .543 ** .579 **
16.Established new services -0.044 0.153 0.065 -.195 * .302 ** -0.091 0.174 .404 ** .316 ** .379 ** .340 ** .377 ** .499 ** .579 ** .505 **
17.Redefined core missions .229 * 0.101 .331 ** 0.107 0.129 0.139 .295 ** .298 ** .345 ** .327 ** .345 ** .410 ** .285 ** 0.174 .374 ** 0.157
18.Closed down public organizations .252 ** .228 * .347 ** .259 ** -0.169 .411 ** -0.039 -0.145 -0.091 -0.034 -0.007 -0.073 -0.126 -0.159 -0.119 0.007 0.028
19.Privatised services .309 ** .461 ** .313 ** 0.167 -0.002 .324 ** 0.133 0.046 0.062 0.149 .251 ** 0.163 0.145 0.012 0.001 -0.012 0.165 .354 **
20.Ensured high quality of services 0.000 0.052 0.019 -0.136 .196 * -0.161 0.174 .553 ** .520 ** .377 ** .265 ** .414 ** .379 ** .393 ** .445 ** .381 ** .302 ** -.325 ** -0.121
21.Rebuilt stakeholders' trust in the
Local Authority
0.039 -0.008 -0.005 -0.097 .187 * -0.120 .300 ** .515 ** .437 ** .357 ** .240 ** .367 ** .321 ** .207 * .452 ** .287 ** .305 ** -.269 ** -0.024 .614 **
22.Improved the local authority's internal
and external image
-0.022 -0.024 -0.035 -0.131 0.130 -0.178 .272 ** .541 ** .489 ** .426 ** .182 * .295 ** .268 ** .291 ** .429 ** .272 ** .323 ** -.336 ** -0.047 .643 ** .796 **
23.Diagnosed the Local Authority's
strengths and weaknesses
-0.008 0.009 -0.075 -0.149 0.168 -0.164 0.112 .511 ** .465 ** .264 ** .273 ** .433 ** .334 ** .226 * .393 ** .285 ** .326 ** -.312 ** -0.047 .595 ** .531 ** .589 **
24.Invested in staff skills training 0.047 0.056 -0.007 -0.111 .264 ** -.180 * .297 ** .536 ** .453 ** .352 ** 0.170 .391 ** .387 ** .284 ** .456 ** .332 ** .377 ** -0.177 0.072 .473 ** .526 ** .527 ** .623 **
25.Formulated an organizational working
plan
0.051 0.081 0.026 -0.117 .214 * -0.136 0.140 .593 ** .488 ** .257 ** .274 ** .456 ** .342 ** .305 ** .349 ** .245 ** .294 ** -.219 * 0.013 .490 ** .404 ** .485 ** .748 ** .599 **
26.Defined a common vision of the Local
Authority
0.030 0.011 0.048 -0.019 0.047 0.006 0.043 .391 ** .376 ** .183 * .191 * .261 ** .325 ** 0.096 .332 ** .192 * .352 ** -0.171 -0.075 .377 ** .413 ** .456 ** .586 ** .492 ** .515 **
27.Reshaped and improved the
organizational culture and climate
-0.006 -0.088 -0.011 -0.119 .231 * -0.171 .311 ** .522 ** .432 ** .296 ** 0.165 .374 ** .291 ** .183 * .500 ** .260 ** .369 ** -.249 ** -0.079 .437 ** .510 ** .545 ** .577 ** .623 ** .495 ** .470 **
28.Made changes in human resources
management style
0.023 0.005 0.012 -0.072 .279 ** -0.095 .227 * .405 ** .429 ** .394 ** .245 ** .412 ** .309 ** .276 ** .449 ** .208 * .353 ** -0.141 0.125 .332 ** .348 ** .386 ** .431 ** .585 ** .417 ** .330 ** .696 **
29.Created stronger financial control 0.095 0.121 0.096 0.063 -0.006 0.075 0.091 .395 ** .400 ** .317 ** .346 ** .439 ** .453 ** .244 ** .367 ** .199 * .448 ** -0.102 0.024 .504 ** .398 ** .483 ** .529 ** .400 ** .429 ** .346 ** .395 ** .406 **
30.Took centralization steps .190 * -0.037 .245 ** 0.151 -0.106 0.039 0.097 -0.133 -0.091 -0.010 0.041 0.070 0.022 -0.088 0.021 -.192 * 0.146 0.132 .247 ** -0.108 -0.143 -0.151 -0.134 -0.048 -0.121 -0.148 -0.087 -0.032 -0.005
31.Took decentralization steps -0.034 0.035 0.008 -.217 * 0.147 0.001 .251 ** .312 ** .286 ** .236 ** .181 * .247 ** 0.140 .247 ** .289 ** .384 ** 0.119 0.074 0.022 .201 * .283 ** .269 ** .183 * 0.091 .185 * 0.071 .215 * .229 * 0.066 -.354 **
32.Replaced senior &middle managers 0.035 -.194 * 0.044 0.054 .207 * -0.050 0.118 0.103 0.135 0.051 0.041 .265 ** .189 * 0.127 .261 ** 0.052 .225 * -0.102 -0.106 0.045 0.055 0.005 0.133 0.104 0.170 0.063 .289 ** .203 * 0.105 .281 ** 0.039
33.Changed the internal local authority's
Structure
0.134 -0.056 0.135 0.121 0.080 -0.053 0.117 0.120 .190 * 0.079 0.048 0.148 0.080 0.018 .235 ** -0.015 .336 ** -0.014 -0.029 0.065 -0.001 -0.004 0.067 0.168 0.173 .230 * .346 ** .288 ** 0.044 .219 * 0.066 .546 **
* = p < .05, ** = p < .01
329
Appendix 8: Table 28: Descriptive Statistics of Individual TMSLA Strategies for LAs According to Performance (N = 126)
Factor Strategy Persistently failing LAs Recovered LAs Well-performing LAs
M
e
a
n
M
e
d
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e
S
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.
D
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e
a
n
M
e
d
i
a
n
M
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d
e
S
.
D
.
Retrenchment
of
Services
2. Eliminated particular services 2 1.03 2.14 2 2 1.06 1.97 2 2 .93 2 1.03
1. Contracted activities and services' scope 3 1.15 3.00 3 4 1.20 3.44 4 4 1.29 3 1.15
4. Partially / Temporarily exited from specific services 3 1.09 2.43 2 1 1.19 2.23 2 2 1.05 3 1.09
Retrenchment
of
Expenditures
6. Reduced / suspended capital expenditures 1 1.14 2.38 2 1 1.34 2.43 2 1 1.26 1 1.14
17. Increased services expenditures 3 1.05 2.58 2 2 1.27 2.78 3 3 1.05 3 1.05
9. Decreased financial support in other organisations 3 .93 2.73 2 2 1.17 2.68 3 2 1.07 3 .93
Repositioning
as
Reaching
out
19. Began to give services/internal services that were previously purchased 3 1.05 2.31 2 3 1.08 1.85 2 1 .98 3 1.05
34. Increased time and efforts in becoming a learning organisation 4 .68 3.78 4 4 1.17 3.80 4 4 .76 4 .68
33. Increased time and efforts in researching the consumers needs 4 .64 3.49 4 4 1.25 3.97 4 4 .74 4 .64
16.Extended marketing efforts (reaching out) to new segment of consumers 4 .95 3.39 4 4 1.13 3.50 4 4 .93 4 .95
Repositioning
As
Innovative
Services
13. Changed the priorities of traditional activities 4 1.01 3.61 4 4 1.05 3.78 4 4 1.03 4 1.01
26. Introduced new ways of implementation 4 .76 3.86 4 4 1.07 3.88 4 4 .97 4 .76
11. Entered into joint activities/cooperated with other agencies 4 .76 4.14 4 4 .93 4.28 4 4 .68 4 .76
12. Extended activities' and services scope 4 .92 3.08 3 3 1.08 3.45 3.5 4 1.01 4 .92
15. Extended services' availability 4 .85 3.56 4 3 1.16 3.28 3 3 .92 4 .85
1 . Established new services 4 1.01 3.06 3 3 1.24 3.53 3.5 3 .96 4 1.01
23. Redefined core missions 4 .88 3.58 4 5 1.25 3.08 3 3 .97 4 .88
Repositioning
as
Renewed
Relationship
7. Closed down public organisations 2 .91 1.69 1 1 1.02 1.77 1 1 1.13 2 .91
21. Privatised services 2 .97 2.33 2 1 1.39 2.13 2 1 1.20 2 .97
24. Ensured high quality of services 4 .78 4.00 4 4 1.04 4.33 5 5 1.01 4 .78
27. Rebuilt stakeholders' trust in the Local Authority 4 1.03 3.66 4 4 1.26 3.47 4 4 1.03 4 1.03
25. Improved the local authority's internal and external image 4 .96 4.06 4 5 1.04 3.80 4 4 .99 4 .96
Reorganisation
at the
Institutional
Level
39. Diagnosed the Local Authority's strengths and weaknesses 5 .86 4.14 4 5 .90 4.15 4 4 1.05 5 .86
37. Invested in staff skills training 4 .72 3.81 4 4 1.06 3.78 4 4 .73 4 .72
4 . Formulated an organisational working plan 4 .80 4.06 4 4 .87 4.00 4 4 1.01 4 .80
38. Defined a common vision of the Local Authority 5 .97 4.47 5 5 .74 4.03 4 4 .83 5 .97
36. Reshaped and improved the organisational culture and climate 5 .82 3.81 4 4 1.06 3.58 4 4 .96 5 .82
35. Made changes in human resources management style 4 .91 3.34 3 4 1.14 3.41 4 4 .94 4 .91
8. Created stronger financial control 5 .97 3.95 4 5 1.18 3.88 4 4 1.11 5 .97
Reorganisation as
Extent of Centralisation
31. Took centralisation steps 3 1.19 3.00 3 3 1.31 2.23 2 1 1.12 3 1.19
32. Took decentralisation steps 3 1.24 2.71 3 3 1.20 2.98 3 3 1.12 3 1.24
Reorganisation at the
Personnel Level
3 . Replaced senior and middle managers 4 .86 3.50 4 4 1.13 3.23 3 3 1.21 4 .86
29. Changed the internal local authority's structure 5 .71 3.97 4 5 1.32 3.78 4 4 1.21 5 .71
330
Appendix 9: Comparing Persistently Failing, Recovered, and Well-
performing Local Authorities
Table 29: One-Way ANOVA Tests for TMSLA Scores for Well-performing,
Persistently Failing, and Recovered Local Authorities
W.P. LAs = Well Performing Local Authorities, P. F. LAs = Persistently Failing
Local Authorities, R. LAs = Recovered Local Authorities
Overall Effect: * = p < 0.05, ** = P < 0.01
Quadratic Trend: # = p < 0.05, # # = P < 0.01
Post-Hoc, Tukey: ? = p < 0.05 (Higher mean value), ? = p < 0.05 (Lower mean
value)
Dependent Variable Comparison
Group (N)
Mean S.D. F (Sig) D.F. Eta
Squared
Overall TMSLA
W.P. LAs (40) 3.29? 0.43 3.904
(0.024) * #
2, 74 0.147
P.F. LAs (48) 3.52? 0.38
R. LAs (37) 3.33 0.56
Retrenchment
of Services
W.P. LAs (40) 2.54 0.94 0.199
(0.820)
2, 122 0.003
P.F. LAs (48) 2.63 0.84
R. LAs (37) 2.50 1.00
Retrenchment of
Expenditures
W.P. LAs (40) 2.62 0.60 1.892
(0.155)
2, 122 0.030
P.F. LAs (48) 2.81 0.57
R. LAs (37) 2.57 0.65
Repositioning as
Reaching out
W.P. LAs (40) 3.28 0.56 1.003
(0.361)
2, 72 0.015
P.F. LAs (48) 3.45 0.65
R. LAs (37) 3.26 0.99
Repositioning as
Innovative
Services
W.P. LAs (40) 3.61 0.67 0.571
(0.566)
2, 120 0.009
P.F. LAs (48) 3.72 0.63
R. LAs (37) 3.56 0.84
Repositioning as
Renewed
Relationship
W.P. LAs (40) 3.11 0.60 1.067
(0.349)
2, 72 0.023
P.F. LAs (48) 3.28 0.47
R. LAs (37) 3.19 0.76
Reorganisation
- Institutional
Level
W.P. LAs (40) 3.83 0.71 2.564
(0.081) #
2, 122 0.040
P.F. LAs (48) 4.17 0.66
R. LAs (37) 3.96 0.77
Reorganisation
- Personnel
Level
W.P. LAs (40) 3.50? 1.06 7.909
(0.001) ** ##
2, 68
0.068
P.F. LAs (48) 4.21? 0.66
R. LAs (37) 3.74 1.09
Reorganisation as
Extent of
Centralisation
W.P. LAs (40) 2.60? 0.74 2.999
(0.054) *
2, 120 0.048
P.F. LAs (48) 2.95? 0.53
R. LAs (37) 2.88 0.78
331
332
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