Regional Budget Allocation System
An interpretative case study at the Frisian Constabulary
-Master’s Thesis-
University of Groningen Faculty of Economics and Business Master of Science Business Administration Specialization Organizational & Management Control Name: Mathijs Lyckle Hoekstra Address: Aweg 27, 9718 CW, Groningen Student number: 1305425 E-mail: m.l.hoekstra.1@student.rug.nl
Phone : 0614400672 Thesis Supervisor Politie Fryslan : B.J. Bos Thesis Supervisor RuG: prof. dr.H.J. ter Bogt
Preface
The completion of this master’s thesis for the Master of Science in Business Administration, specialization Organization & Management Control, at the University of Groningen, brings the end of a memorable period in my life as a student. The completion of this thesis, conducted at the Frisian police force, does, however, also mark a starting point for a new, challenging period in my life with many, exciting opportunities.
I am indebted to several people at the Frisian constabulary, where I was provided the opportunity to finish my study in an instructive practically focused environment. First of all, I would like to thank Ron Gerrits, for introducing me to the Control department of the Frisian police force. Secondly, I would like to thank Peter Slot for the time and effort he took to provide me with an interesting and relevant topic to research. Furthermore, I am indebted to all my colleagues of the Control department, who welcomed me and made me part of an open and sincerely interested team, not only with respect to the daily conduct of business, but also on a social level. Fourthly, I would like to thank my interviewees at the Frisian constabulary, for making time for me and providing me with extensive response to all of my questions. Finally, I owe special thanks to Bert Bos, my internal thesis coordinator for all of his help and his constructive suggestions, especially when the researcher felt the process stagnating.
At this point, I would also like to thank prof. dr. H.J. ter Bogt, for his patience and the useful comments he provided in the process of writing this thesis. At last, I am most indebted to my parents, for their support all these years, both financially as emotionally, to my family and my friends and above all to my girlfriend, Rianne, for her inspiring support and her endless faith in me.
I hope you will enjoy reading this thesis,
Yours sincerely,
Mathijs Hoekstra
Groningen, September 2010
Management Summary
The Regional Budget Allocation System (R-BVS) is an instrument that allows the Dutch police regions to ‘objectively’ determine how the available resources can be divided over the different organizational departments, accounting for the workload offered by the environment. The R-BVS yields an insightful overall picture of the relation between financial resources, human resources and workload within the six different types of work that are distinguished within Dutch police. Because of this relation, the Frisian police force is enabled to make rational choices, based on data which cannot be influenced by the organization, and transparent decisions in the process of (human) resource allocation. Therefore, control over resources can be regained by the management of the organization. In return, the R-BVS requires a joint effort from the managerial departments to align the necessary information.
It is argued that the method of resource allocation, implied by the R-BVS, is congruent with recent developments within the police organization. The number of tasks the police has to fulfil, as well as their complexity, has increased over time. Developments at the political and societal level demand an approach from the police, in which a position in a ‘chain’ alongside several other (semi-) governmental organizations is taken. This chain-approach calls for a more outward-oriented focus; based on collaboration, directed towards the partners in the chain. Another development being congruent with the R-BVS way of allocation resources can be seen in the recent establishment of the Shared Service Centrum (SSC), trying to achieve efficiency by collaborating closely with the Drenthe and Groningen constabularies.
Though the nature of the R-BVS connects with the developments mentioned, on another level, it clearly contrasts with the current institutionalized method of resource allocation. It has been noticed, that the discussion regarding the allocation of resources, tends to revolve around the struggle for human resources. This focus on quantity is not only witnessed within the operational domain, but is also recognized at the strategic level. Initially, after the 1994 reorganization, it was intended that incident patterns would be determinative for the allocation of human resources. However, this method was soon abandoned and instead, a status quo originated, in which only the current quantitative allocation appears to be of any notable influence.
Presuming the actual implementation of the R-BVS will proceed, it is the goal of this thesis to recommend to the Frisian constabulary which are relevant points of attention, when the organization wants to make sure that the information, which is provided by the R-BVS, will play a role in the control of the organization. Given this goal, several theoretical aspects on the process of management accounting change were derived from the literature and subsequently applied to the situation found within the Frisian police force.
The main results, acquired by observation and conducting interviews, were discussed in the light of two, empirically based, frameworks explaining the process of management accounting change. First of all, a framework (Nor Aziah and Scapens, 2007, p. 235) on loose coupling, which means “a separation between the systems used to secure external legitimacy and the systems used to manage the daily activities of the organization”, was used. This drew the attention to the variables trust, power and resistance, which are argued to explain the extent and the process of loose coupling. The general level of mutual trust between certain organizational parts was argued to be low, as well as the specific level of trust with regard to the R-BVS. Furthermore, three sources of resistance with regard to the R-BVS were discerned. Finally, two different shifts in power were reckoned to be implied by the introduction of the R-BVS.
Table of Contents
Introduction………. ……… 7
1. Introduction of the Frisian Police Force & the R-BVS………... .9
1.1 Organizational structure ………... .9
1.2 Outline of the R-BVS………... 10
1.2.1 Background & History ………... 11
1.2.2 Input of the R-BVS ………... 11
1.2.3 Main Contribution of the R-BVS ………. 13
2. Research Design ………... 14
2.1 Research Objective ……..………. 14
2.2 Research Question ……… 14
2.3 Sub Questions ………... 15
2.4 Research Methodology ……… ………15
3. A Dichotomy within Public Management ………... 18
3.1 New Public Management ………. 19
3.2 Critiques on New Public Management ………. 20
3.3 Dutch Police and New Public Management ………. 22
3.3.1 Studies Relating New Public Management and Police ……… 22
3.3.2 The Frisian Constabulary and Features of New Public Management …….. 23
4. Theory on Change & Stability………... 24
4.1 Second-order Change ………... 24 4.2 Institutional Theory ………. ……… 26 4.2.1 An Institutional Framework ……….. 27 4.3 Empirical Contributions ………... 28 4.3.1 Loose Coupling ………. 29 4.3.2 Usage Gap ………. 29 4.4 Concluding Remarks ……… 30
5. Current Process of Resource Allocation ………. 32
5.1 Current Process & Institutional Theory ………... 32
5.2.1 Political-administrative Context ………... 32
5.2.2 Political-administrative Influence on the Frisian Organizational Structure.. 35
5.2.3 Cause of Institutionalized Behaviour ………... 35
5.3 The Missing Link ………. 36
6. Variables Predicting Management Accounting Change ………. 38
6.1 Loose Coupling Predicted ……….... 38
6.1.1 Trust ……….. 38
6.1.2 Resistance ………. 40
6.1.3 Power ………... 41
6.1.4 Conclusion on Loose Coupling Predicted ……… 42
6.2 Variables Affecting the Process of Change within the Frisian Constabulary ……... 43
6.2.1 Pressure for Change ……….. 43
6.2.2 Initiating Change ……….. 44
6.2.3 Enabling Change ………... 44
Organizational Advice ……… 46
References ……….. 48
Appendices ………. 51
Appendix 1: List of abbreviations……….. 51
Introduction
Due to the global economic recession government expenditures have risen sharply, as well as budget deficits (Centraal Economisch Plan 2010, p.10). Now, in a time when the Dutch economy is starting to
recover moderately (NRC, 8 dec. 20091), just after the Dutch national elections, the coming cabinets
are burdened with the financial consequences of the economic recession. It is reckoned, that structural fiscal adjustments are needed to bridge the current sustainability gap in government budgeting (Economische Verkenning 2011-2015, p.61). Experiences from the nineteen eighties show, that when a good set of measures is chosen to, amongst others, create a more efficient government, it is ultimately beneficial for the Netherlands in the long term (Economische Verkenning 2011-2015, p.12). It is highly likely that part of the measures that will be discussed to create this more efficient government on a national level, will concern the organization and funding of the Dutch police force. These measures will be studied in a time in which recently the thirteenth of the twenty-five Dutch police regions, in which the Netherlands is divided, is placed under guardianship of the Ministry of
Home Affairs2. The Frisian region is one of these thirteen financial restrained regions and is subject of
study in this thesis.
In this specific time and setting, when the government is pushing and being pushed to achieve maximum output with the least amount of financial input, the R-BVS tool is placed at the disposal of all twenty-five police regions. R-BVS stands for Regional-Budget Allocating System, (in Dutch: Regionaal-Budget Verdeel Systeem). It is supposed to be an ‘objective’ way of allocating resources, constructing the relation between workforce, financial resources and processes within a certain region of the police force. Being fed with clear workload predicting variables, which cannot easily be influenced, this proposed R-BVS tool withholds a drastic change compared to the current way of internal budget allocation within the Frisian police region.
This study will, amongst others, compare the current way of dealing with budget allocation with the method locked in the R-BVS tool. At the background of this comparison is the theoretical link of the current way of budget assignment within the region, which seems to be based on the ideas of Old Public Administration (OPA), and in which standard procedures matter as well as trust in rules and procedures and where administration is performed in an autonomous way by experts in their field (ter Bogt and Scapens, 2009, p.9). The R-BVS way of budget allocation can in turn be seen as being rooted in the ideas of New Public Management (NPM). Efficient, rational businesslike techniques applied in the public sector are at the core of this school of thought, which has been developing in the Western public sector for about thirty years now.
1
http://www.nrc.nl/economie/article2432578.ece/DNB_ziet_economische_groei_in_2010 2
Given this shift in the process of resource allocation that the implementation of R-BVS withholds, the research is informed by the literature on management accounting change. Using, amongst others, the institutional framework of Burns and Scapens (2000, p. 9), this study attempts to point out which points of attention are relevant for the Frisian police force, when they actually decide to implement the R-BVS to control the organizational resources. To achieve this result, the empirical part of this research focuses on the personal meanings and perceptions of the management of the organization with regard to the current and the proposed process of resource allocation, which possible variables can obstruct the implementation of the R-BVS in the control of the organization, and the presence of variables which can enable this implementation.
Chapter 1: Introduction of the Frisian Police Force & the R-BVS
This first chapter starts by introducing the Frisian police force, subject of study in this thesis. Thereafter, the outline of the new resource allocating tool, R-BVS, which has recently become available for all twenty-five Dutch police regions, is discussed. As an observant within the Frisian police force, the information for this section is mainly acquired by formal documents. Preliminary, it should be noted that some, typical Dutch, organizational concepts are not easily translated in proper English. Within this thesis, it is attempted to provide the reader the most appropriate translation, but for reasons of clarity, also the original Dutch denotation of these concepts, first time in full, subsequent abbreviated, is used. A list of these abbreviations is given in appendix 1.
§ 1.1: Organizational structure
The Frisian police force, also denoted as the Frisian constabulary within this thesis, can be divided into four different parts (see appendix 2). For citizens, the most visible part of the organization is the uniformed police, also called basic police care (in Dutch: Basis Politie Zorg (BPZ)). This uniformed police is entrusted the task to perform the basic duties; dealing with basic reports and (emergency) incidents, supervising events, tackling minor crime etcetera. Within the Frisian constabulary, these tasks are executed by eleven functional teams, varying in size. Their borders are set to coincide with those of the Frisian municipalities. The province of Fryslan currently consists of thirty-one municipalities, of which each functional team serves one or more.
Next to the uniformed police, the criminal investigation departments (in Dutch: Recherche eenheden) deal with the more severe criminal offences. These criminal investigation departments are locally subdivided in three geographical teams. Furthermore, together with the Drenthe and Groningen criminal investigation departments, they cooperate in a Northern investigation unit (in Dutch: Noordelijke Recherche Eenheid (NRE)). Both uniformed police and criminal investigation department are supported by specialized teams (emergency room, police service centre, transport of arrestees etc.) and managerial departments (human resource management, finance, logistics, control etc.). In total, all four different parts of the organization comprise about 1450 employees.
supportive teams, mentioned above, are also part of the operational segment. The operational part, thus including the operational supportive departments, is led by three directors (in Dutch: ‘de Blauwe Directeuren’), with an executive focus. As such, they are responsible for all of the four ‘main’, executive, types of work discerned within Dutch police. These four main types of work distinguished are investigation (in Dutch: Opsporing), enforcement (in Dutch: Handhaving), emergency assistance (in Dutch: Noodhulp) and intake & service. Besides that, a fifth type of work, covering the activities of the mentioned operational supportive departments, is discerned within Dutch police. As could have been expected, this type of work is called operational support (in Dutch: Operationele Ondersteuning) and thus also resides within the control of the three mentioned directors.
Next to the four main classifications and the operational supportive classification, a sixth type of work is distinguished. This type of work is called overhead & management (in Dutch: Overhead & Leiding). Three other directors, who are also part of the board of directors, focus on these managerial supportive types of work. They head the human resource department, the economic affairs department and the information department, together with the relevant clusters these departments consist of. Finally, there are another five remaining organizational supportive departments, of which Control is one, residing in an independent location directly below the regional chief of police.
§ 1.2: Outline of the R-BVS
§ 1.2.1: Background & History
On a national level, the subject of how budget and, before that, available human capacity, is assigned over the different police regions, has always been a subject of discussion during the last decades (AEF, 2005, p. 7). The method by which total national police capacity, which means here ‘the total number of employees available’, was divided from the sixties up until the mid-eighties was a ‘pace-listed’ (in Dutch: gestaffeld) system, based on the number of residents in a municipality. This system, however, proved to be inaccurate due to the differing demand on police utilization in the major cities compared to the rural areas. The discussion of this disparity incited the development of a method that makes a fair distribution of the total workload. This resulted in a system called, in Dutch, Project Kwalificering Politiewerk (PKP), which allocated budgets based on a comparison between police regions, using total workload expressed in a formula of environmental variables. This model resembled the model that allocates budgets to municipalities and provinces (in Dutch: Gemeentefonds and Provinciefonds) in the Netherlands.
However, this method also could not fully reflect the nature and need of police utilization in different settings. A next step in the development of a national budget allocation method, which could possibly better reflect the actual demand for the employment of police, was made in the mid-nineties, when the disappearance of the municipal- and state police and the creation of the current twenty-five police regions induced the possibility to correct existing bottlenecks and actually apply new ways of allocating budget. During that period the first national budget allocation system (in Dutch: Budget Verdeel Systeem (BVS)) was developed, which has not only been the foundation for all the successive approaches on a national level, but also for the subject of this thesis; the recently delivered regional budget allocating system, of which the basic idea is discussed next. This is done by first addressing the informational requirements of the R-BVS in paragraph 1.2.2. That way, this thesis makes clear which different flows of information come together in the R-BVS. Thereafter, in paragraph 1.2.3, the main contribution of the R-BVS, which makes use of and combines these different types of information to finally result in output (i.e. a distribution of resources over the different organizational components), in controlling the organizational resources is brought to the attention.
§ 1.2.2: Input of the R-BVS
the nationwide functioning BVS, of which the currently used version was also developed by AEF for the Dutch police force and was delivered in July 2005 (AEF, 2005, p. 1). Alike the national BVS, the basic assumption of the R-BVS is budget neutrality. This means that, when the R-BVS is used, the Frisian region will still get the same lump sum as now from the Ministry of Home Affairs (in Dutch: Ministerie van Binnenlandse Zaken en Koninkrijksrelaties (BZK)), however, the share of the different organizational components within the Frisian region in the total lump sum can deviate from what they receive at the moment. This lump sum, provided to each of the twenty-five police regions, is one of the six types of input variables necessary to fill the R-BVS. The second type of input is the organizational structure of the concerning police region. In case of the Frisian constabulary, it is the in the first paragraph described organizational structure that is used as input, to adapt the outcome of the R-BVS to the local settings. Next to the organizational structure, the third input variable concerns the financial ‘condition’ of the police region. Depending on previous and future policy, with respect to operational, financial and investment decisions, each police region deals with its own specific financial situation. This determines which part of the total budget has to be employed for material and non personnel expenses (e.g. rent, maintenance, debt repayments etc.) and ultimately determines which part remains for personnel expenses. Fourth, the available workforce of the police region in question is used in the model. This is done in such a way that of each existing function within the region a proportionate distribution to the six types of work, mentioned in the first paragraph of this chapter, is made. This way the available human capacity within the region can be expressed in capacity available for the six types of work. The fifth input variable is the unit-cost of the six types of work, which determines the average price of one additional fte in a specific type of work. This input allows the organization to translate human capacity, per type of work, in financial terms. The unit-cost can be calculated by the regions themselves, but it is also supplied on a national level, on regular intervals, by the Ministry of Home Affairs. When the former method is chosen, the result will be more precise, but consume more time and effort to achieve, while, when the latter method is selected, the unit-cost will be less precise, but more easily achieved. The sixth and final type of information that is required by the R-BVS is of statistical nature. Key figures (e.g. number of inhabitants, number of felonies, crimes levels) per municipality are used in a formula per type of work, to divide the available resources over the different organizational units.
§ 1.2.3: Main Contribution of the R-BVS
After the development of the nation-wide functioning BVS, several police regions in the Netherlands expressed their desire to have a method at their disposal, which could clarify the relation between three variables. The first of these three variables is the total amount of financial resources assigned to a certain region by the national BVS, which is the in the previous paragraph introduced ‘lump sum’. The second variable is the ‘theoretical strength’ of the region, which expresses the established human occupation, per organizational unit, of the relevant region in a numerical value (i.e. the number of fte’s currently ‘tied up’ within the region). The third variable in the link is the organizational processes existent within the relevant region, which refers to how strong the six different types of work are represented within the region and the way this ‘strength’ is divided within the region. Understanding the relation between these three variables would mean that, according to those who support the new tool, the different regions are able to make their own, well informed, choices with regard to the way how budget is allocated internally. Furthermore, as more regions in the Netherlands will implement and make use of the instrument, it should in the future not only provide this allocating function, but it should also be used as a benchmarking tool, by comparing police regions which are, more or less, similar in certain aspects (AEF, 2009a, p. 3). Though one can question whether this benchmarking function has any additional value, because of the region’s freedom of choice regarding internal policy and their specific history in the use of resources, the insight it does provide, via the three ‘connected’
variables, can be valuable, for this link is argued to be missing currently, as will be explicated in the
fifth chapter. Because of the absence of this link, it is currently not possible to decide in an ‘objective’ way, if the current ‘distribution’ of human capacity over the region, does match with workload. This allocation is presently determined by historically grown patterns, organizational restrictions and gut feeling. The new insight, that is provided when the R-BVS tool is implemented, creates awareness within the organization of the choices regarding the allocation of resources that have and can be made. This awareness allows ‘top management’ of the organization to gain a more transparent and rational view on the entire process of resource allocation, which, in turn, positively influences the controllability of the firm at that level. Eventually, it can also create a more efficient and effective police organization, due to the fact that the available human and financial resources can be utilized in those organizational segments where they are needed most, reducing the level of organizational slack and assuring the organizational goals to be achieved with those resources available. In return, the R-BVS requires a joint effort from the managerial departments to align the necessary information.
Chapter 2: Research Design
The first chapter of this thesis introduced both the Frisian constabulary and the recently developed management accounting instrument, R-BVS. Most important in this first chapter is the final paragraph, which explains that currently the organizational resources cannot be distributed within the region in an ‘objective’ way by the management of the organization so that it matches the workload faced. The contribution of the R-BVS, when it is implemented, is that it does provide this ‘link’ between available resources and workload faced and thereby allows management to regain control over the organizational resources. Given this contribution the R-BVS can make in controlling the Frisian constabulary, this second chapter explains the research design.
§ 2.1: Research Objective
At the moment at which the research starts, the organization is in between the delivery of the R-BVS tool and its possible implementation within the organization. On this specific moment in time the researcher is able to analyze, part of the, current relevant organizational forces possibly affecting the process and the outcome of the effort to implement this new management accounting tool. The head of Control of the Frisian constabulary has instructed the Control department to analyse which are the points of attention, the organization has to focus on, when actually implementing the R-BVS. The goal of this thesis is therefore to recommend to the Frisian constabulary which are relevant points of attention, when the organization wants to make sure that the information, which is provided by the R-BVS, will play a role in the control of the organization.
§ 2.2: Research Question
To achieve the above stated research objective, the following research question is stated:
§ 2.3: Sub Questions
To answer the main research question stated above several sub questions are formulated. The first three sub questions address the relevant theory to answer the main research question. The latter three sub questions cover the empirical section of this thesis, making use of the theoretical contributions.
• What type of management accounting instrument is the R-BVS compared to the currently
used system of resource allocation and to which extent are the characteristics that typify this management accounting instrument found in the Frisian constabulary?
• What type of change does the implementation of the R-BVS imply and which factors are,
according to the literature, considered important in the process of management accounting change?
• In what way can a newly introduced management accounting instrument become rooted
within the organization?
• Which factors currently determine the process of allocation of the available resources within
the Frisian constabulary and in what way is the process anchored within the organization?
• Which factors found in the Frisian constabulary can hinder the adoption of the intended effort
to change?
• Which factors found in the Frisian constabulary can attribute to the adoption of the intended
effort to change?
§ 2.4: Research Methodology
The research methodology adopted in this thesis can be classified in the Burrell and Morgan (1979) framework as interpretive. As Hopper and Powell (1985, p. 446) put it: “The focus is on individual
theory is consistent with this interpretive type of case study (Burns and Scapens, 2000, p. 9). This study also makes use of the framework of ter Bogt and van Helden (2000, p. 275) and the framework of Nor-Aziah and Scapens (2007, p. 235), which both have a more empirical foundation. However, this study does not try to find evidence for the workings of those frameworks, but it is merely inspired by points of attention to which theory draws the attention and considers what role these aspects can play in management accounting change within Dutch governmental organizations. Besides its interpretive approach the purpose of this thesis can be called constructive (Kasanen et al., 1993, p. 244), in the sense that the goal of this study is to solve problems in a running public organization. However, concrete problems in relation to the new management accounting system have not arisen yet, they are to be expected and therefore this constructive approach is adopted.
Methods to gather information for this thesis will primarily be studying documentation, conducting interviews, attending meetings and observation. In the first contacting stage of this research, the student has been given access to all relevant documentation regarding the new R-BVS, the system it was based on, the nationwide L-BVS and the proposed nationwide recalibration, the H-BVS. Next to that, all documentation desired by the researcher regarding the organization of the police in the region Fryslan was made available. Furthermore, introducing meetings with the HRM and finance departments were held and an internal presentation about the R-BVS for the control department was attended.
Chapter 3: A Dichotomy within Public Management
This third chapter focuses on answering the first sub question stated in the research design. The final paragraph of the first chapter has made clear what advantages the R-BVS can yield when implemented. For reasons of clarity this section is repeated here:
The new insight (between workload faced and the available resources), that is provided when the R-BVS tool is implemented, creates awareness within the organization of the choices regarding the allocation of resources that have and can be made. This awareness allows ‘top management’ of the organization to gain a more transparent and rational view on the entire process of resource allocation, which, in turn, positively influences the controllability of the firm at that level. Eventually, it can also create a more efficient and effective police organization, due to the fact that the available human and financial resources can be utilized in those organizational segments where they are needed most, reducing the level of organizational slack and assuring the organizational goals to be achieved with those resources available.
Thus described, this thesis argues the R-BVS can be seen to be rooted in the description of New Public Management, how it is used in Lapsley and Pallot (2000, p. 216). They note that NPM as a ‘theory’ of management;
. . . .projects a distinctive style of management— a highly rationalist perspective on management actions in which: choices flow from objective analyses and the evaluation of alternatives; the management of the organization is in command of the resources (material, human) at its disposal; controls exist to induce individuals to work in the interests of the organization; and objectives are key dimensions of the need to measure the performance of individuals, sub-units and the overall organization.
This chapter will address this NPM literature in depth; it will explain that NPM is a more diverse concept than just a ‘highly rationalist’ perspective on management and thereby give a more thorough view on the character of the R-BVS.
§3.1: New Public Management
Within the public governance of OECD countries, some thirty years ago a trend called New Public Management (NPM) started (Hood, 1991, pp. 3-4). This trend withholds the carrying away of the public sector from hierarchy and the state and adopting a more business-like approach in the public sector (Brunsson and Sahlin-Andersson, 2000, p. 723). The extensively studied NPM movement assumes that practices of the private sector are generally superior to those in the traditional public sector (Poole, 2006, p. 1052). It therefore has had impact on most aspects of the public organization, ranging from organizational structure to human resource management and from strategy to financial management (ter Bogt, 2008, p. 212). NPM can not be seen as a particular method applied in a certain setting, but must be seen as a shift of thought in the public sector encompassing different methods (Dunleavy and Hood, 1994, pp. 9-10; Hoque et al., 2004, p. 59).
Hood (1991, pp. 4-5) describes seven doctrines which can be regarded as separate though sometimes overlapping components of the broad term that NPM is. Amongst others, he mentions a hands-on professional management approach, greater emphasis on output control, decentralization and more competition. According to ter Bogt and Scapens (2009, p. 3), another three precepts have been added to the list of NPM doctrines more recently; a focus on quality management, transparency and ‘citizen-orientedness’.
These new doctrines contrasted sharply with the ‘traditional’ way of public administration, or Old Public Accounting (OPA) supposed to be existent in ‘traditional’ bureaucracies. OPA assumes rather distinct types of control for the private and the public sector (Dunleavy and Hood, 1994, p. 9). Organizations in the public sector are fragmented and opaque. This public sector, in the traditional view, is supposed to be in need of general rules and procedures, is built on relations resigned on trust and autonomously functioning experts (Dunleavy and Hood, 1994, p. 9; ter Bogt and Scapens, 2009, p. 9). At the same time a focus on input and procedures instead of output budgeting is important and equity and equality are emphasized (ter Bogt and Scapens, 2009, p. 9).
assessment of internal and external performance, took place since the 1970’s. However, given this corresponding shift in logic, the levels in which both universities were financed based on output or input control differed, as well as in the levels of autonomy.
It can be concluded that an abundance of somewhat mimetic directions (practices and management control systems) in an ongoing “NPM-trend” have been developed, all of which have been given the NPM-label. This all-covering NPM-labelling makes it a universally vague term. To clarify how this study looks at the NPM-trend and to provide a proper background, the next section will focus on the critiques on NPM. Given this point of view, this chapter will thereafter discuss the current presence of NPM within the Dutch police force.
§ 3.2: Critiques on New Public Management
When focussing on the criticism on NPM, there is an abundance of literature. In particular literature from the Dutch study of public administration addresses some interesting criticism on NPM for this thesis, because it can explain upon the local setting, which is argued to be the most relevant in this paper. The criticism on NPM, from this line of study, mainly emphasizes the distinct nature of the public sector. Kickert (1997, p. 732), for example, argues that government functions in a complex social-political environment, where emphasis is upon more than strict business values, where legality and legitimacy, social justice and equal rights play an important role. Such a way of reasoning is in line with the critique on NPM (Kickert, 1997, p. 748) that its businesslike methods are not directly applicable in the public sector because of its basic differences with the private sector.
Two other authors, who focus on the distinctiveness of the public sector, Hendriks and Tops (2003, pp. 321-322), conclude: “the rise of NPM in the Netherlands was relatively quick and strong, but also
relatively shallow”. They describe, what they call “the rise and fall of NPM in Dutch local
government” using five contextual variables and define the situation in the Netherlands as one of dynamic stabilisation. They illustrate their views based on the implementation and application of the Tilburg Model in the Dutch municipality Tilburg. Though this thesis does not agree on the “fall” of NPM, the factors they mention clarify the “rise” of NPM and because this study sees NPM as a developing trend, their point of view can possibly be still relevant in the current situation.
where it is facing great pressure to economize, which makes this external factor relevant again. Budget deficits in government have been increasing rapidly in recent years and in the nearby future budget cuts in central and local government sector are a certainty.
Aside from this external factor, also endogenous factors of the politico-administrative system are of influence, according to Hendriks and Tops (2003, p. 319). The fact that the Netherlands is characterized as a compact decentralized unitary state, which is linguistically homogeneous and with its Atlantic orientation, are all mentioned by Hendriks and Tops (2003) as being factors kick-starting the adoption of the NPM trend. The fourth endogenous factor the authors mention is dynamic conservatism, which typifies the consistency within the institutional order of the Dutch public sector; where at the one side methods of work appear to be flexible and new approaches are quickly addressed with an open-mind, on the other side the formal relationships, that is the institutional order of government, within the public sector tend to remain the same as before (Hendriks and Tops, 2003, p. 321). The endogenous factors these authors list could be of varying importance in explaining the situation within the police.
What the above mentioned authors regarded as the fall of NPM, witnessing the Tilburg Model, was the acceptance of a more citizen-oriented approach, the internal perspective of the organization was replaced by an open and outward focus. External communication was, for example, introduced at the level of the neighbourhood (Hendriks and Tops, 2003, p. 312). According to this stance of literature the sound financial reasoning and its focus on measurement and quantification was learned from the short-lived NPM-trend and was nearly all that would remain of NPM in the field of public governance.
§ 3.3: Dutch Police and New Public Management
This final section of the second chapter will discuss the appearance of NPM-facets within the police force. First, two separate studies using both the variables NPM and police are briefly discussed and the points of special interest for this thesis are highlighted. Thereafter, NPM-features appearing within the police force Fryslan are discussed on the basis of its local policy.
§ 3.3.1: Studies Relating New Public Management and Police
Frederickson (in Frederickson and Ghere, 2005, pp. 165-183) argues that applying business methods within the public sector will inevitably lead to a rise in corruption and a loss of integrity. Kolthoff (2007) performed an empirical study investigating this relation suggested by Frederickson. He conducted his study at the regional police force of Midden-West Brabant. To investigate the hypothesis, Kolthoff used four generally accepted elements or classifications of businesslike methods. This classification can be compared with the seven precepts of Hood (1991, pp. 4-5). The conclusion of his research is that the introduction of the four mentioned elements of business methods in the public sector (NPM), at least three do not lead to a rise in corruption and a loss of integrity. One element (downsizing and entrepreneurship) did seem to have a negative influence, while the other three (decentralization, performance management and ethical and businesslike management) had a positive influence.
Though Kolthoff (2007) does not investigate to what extent business-like methods are existent within the police force, he acknowledges their emergence and existence at the police. What can be of more importance in the research of Kolthoff (2007, pp. 4-6), however, are his results, which suggest that attention should be paid to ethical aspects when implementing businesslike methods, because this could possibly enhance the chance of success.
special role of the police force can also be a factor of importance when addressing the current situation at the Frisian police force or when implementing R-BVS tool.
§ 3.3.2: The Frisian Constabulary and Features of New Public Management
Using the Regional Multi-annual Policy note 2009-2011, this last section will describe some elements within the Frisian police force very clearly reflecting an NPM approach. The introduction to this 2009-2011 policy note already mentions several aspects suggesting more business-like methods. It points out how nowadays the chain of police and other (semi-) governmental organizations (like the prosecution, municipalities, provinces, youth welfare, social work organizations and probation-service) all work together and apply a ‘chain approach’ when determining policy, where until recently this policy was determined individually by each of the mentioned organizations. Attention to collaboration, and also to efficiency and quality, is also apparent within the policy note, when the shared service centre (SSC) is discussed. This SSC operation, which started in 2005 and was expected to be completed ultimo 2009, encompasses an alliance on several functionalities amongst the three northern police regions, Groningen, Drenthe and Fryslan. These forms of cooperation contrast with the old form of public administration, being fragmented and individualistic.
Another aspect mentioned in the 2009-2011 policy note, which is also mentioned by the minister of Home Affairs in Dijkstra (2008, pp. 57-58), is the shift of focus that is needed from speed and quantity of output to quality of output, because this would serve the professionalism of the police force better. This focus on quality management is already described as an approach consistent with NPM. Next to this, a citizen-oriented attitude is clearly expressed in the 2009-2011 policy note. Citizens should have a certain level of confidence in the police and this should be accomplished by working on aspects as servitude and willingness to work on higher citizen-contentment.
Chapter 4: Theory on Change & Stability
The first chapter of this thesis introduced both the Frisian constabulary and the recently developed management accounting instrument, R-BVS. After the research design was discussed in the second chapter, a framework, in which the R-BVS tool can be placed, was sketched in the third chapter. Because of the intended implementation of a new management accounting instrument in the Frisian constabulary, this fourth chapter will focus not only on the broadly discussed theory of management accounting change, but also on the stability of management accounting systems, which has not been given equal emphasis in the literature (Granlund, 2001, p. 143). Different aspects from the literature will be discussed to shed light on the variables possibly affecting the future process of change or stability. This chapter starts by exploring a general approach to the variables influencing accounting change, followed by an explanation of the institutional theory. Thereafter, two additional insights, which can shed light on the process of management accounting change, based on empirical findings, are clarified. Thus, this chapter addresses the second and third sub questions stated in the research design.
§ 4.1: Second-order Change
The first question Levy (1986, p. 12) poses is: “Why do organizations transform?” In his paper Levy (1986, p. 12) discerns four driving forces for second-order change:
• Permitting conditions: These aspects of the internal organizational situation permit the
transformation to occur. Examples are transformational leadership, readiness and willingness of the organizational members and sufficient resources (e.g. managerial time and financial resources).
• Enabling conditions: These external conditions increase the likelihood for transformation.
Examples are the degree of threat to the survival posed by competitors, the economic situation, the degree of tolerance for transformation and the degree of radicalness of the proposed change.
• Precipitating conditions: These conditions can be seen as catalysts for the transformation to occur. Examples are a real and perceived crisis, pressure from stakeholders and feelings of dissatisfaction with respect to the current situation.
• Triggering events: These unchaining events finally allow the transformation to occur. An
example is environmental events (e.g. recession, new legislation and the appointment of a new manager with a new vision).
The (sub-) conditions Levy (1986) mentions can be valuable in explaining the situation at the Frisian constabulary. They can be seen as input for the process of change. It should, however, be noticed that some of the conditions Levy (1986) mentions only apply within the profit sector. For instance, the enabling condition ‘threat to survive posed by competitors’, will be of minor significance in the public sector, especially for an organization as the Frisian police force.
Continuing with the second question, Levy (1986, p. 13) poses: “How do organizations transform?” a clear distinction is made between theory and practice. The theoretical contribution in answering this second question, comes from the ‘classical’ insight that the process of change can be seen as a cycle, consisting of four different stages; decline, transformation, transition and development. Each of these four stages is given substance by several characteristic elements influencing the process of change (Levy, 1986, pp. 13-16). The stage of decline is, for example, characterized by elements as denial, avoidance, resistance and delay.
takes time, energy and resources to achieve structural change. Second, the process of change can be actively managed and facilitated by the organizational members. Third, it is possible to participate in the process of change, when one understands the principals of organizational evolution.
Both theoretical and practical contributions can be considered to represent the throughput of second-order change. Adhering to these principles from theory and practice may be beneficial to the Frisian constabulary, in the proposed process of change.
Finally, the third question Levy (1986, p.16) poses is: “What is changed in second-order change?” This content related question concerns the level in which the organization is affected by the process of change; it can be seen as the output of the effort to change. In his paper, Levy (1986, pp. 16-19) discerns four distinctive, though interconnected, organizational dimensions, in ascending order of ‘abstractness’ these are: core processes, culture, mission and organizational paradigm. It is suggested that the lower, more concrete, organizational dimensions are influenced by the higher, more abstract dimensions, of which the level of organizational paradigm is the highest. Levy (1986, p. 19) concludes that second-order change encompasses change in all of these four mentioned dimensions, embedding the change, irreversibly, deep within the organization.
Having addressed input, throughput as well as output of the process of second-order change, a general, and practice oriented view on the variables affecting the process of change is provided. It is, however, not explicitly discussed by Levy (1986) how the process of change becomes rooted within the organization and which aspects play a crucial role in this process. When answering his second question, Levy (1986) does not address the elements that play a crucial role at the background within that stage. The institutional theory does address these elements within the process of accounting change and is therefore discussed in the next paragraph.
§4.2: Institutional Theory
This thesis makes use of what Scapens (1994, p. 305) calls old institutional economics. Old institutional economics (OIE) is argued to be of good use when addressing processes of change within the organization (Burns and Scapens, 2000, pp. 4-5). With the proposed implementation of the new resource allocating tool, such a change-oriented point of view is argued to suit this study best. Attempting to analyze what possible frictions might occur when implementing the R-BVS tool and in what way the current institutions can facilitate, or prevent, change, directs the attention of this thesis to the current institutions within the Frisian constabulary. Within the OIE school of thought, the unit level of analysis is on these institutions, instead of on the rational maximizing behaviour of the individual, which has a more central role in the neo-classical economics approach (Scapens, 1994, p. 305). The latter is more suited to predict the ‘optimal’ outcome, whilst the former is capable of explaining the unfolding process of management accounting change (Burns and Scapens, 2000, p. 4) To explain how institutions, within an organization, influence, and are influenced by actions, using rules and routines, Burns and Scapens (2000, p. 9) make use of a framework. The next section will elucidate this framework.
§ 4.2.1: An Institutional Framework
The framework of Burns and Scapens (2000, p. 9) shows the organizational institutions as well as the actions and the fact that these may change through time. Between the institutional realm and the realm of action, rules and routines play an important role. Where rules are formal and are described to be necessary to coordinate and give coherence to the organizational activities, routines are described as the way in which ‘things are actually done’ (Burns and Scapens, 2000, p.6). Becker (2004, p. 662) further clarifies the concept of routines by defining them as recurrent patterns of interaction, which enable coordination and provide ‘stability’ of behaviour. These recurrent patterns of interaction can be the result of conscious or mindless efforts. When used in a context of change, rules tend to be changed by explicit decisions at discrete intervals, while the more inert routines tend to be changed in a more cumulative and implicit process (Lukka, 2007, pp. 79-80).
Directing the attention back to the relation between the institutional realm and the realm of action, the existing meanings, value and power (i.e. rules and routines) are shaped by the taken-for-granted assumptions (i.e. institutions). Subsequently, enactment upon these encoded rules and (less encoded) routines brings one to the observable realm of action, which is described as ‘the specific everyday behaviour’ (Lukka, 2007, p. 80) of employees within the organization.
While there may sometimes be a tendency for matters to remain as they are, even in the absence of external change there is also the possibility of change. Either confronted with external change or stability, in the repetition of the outcome of the enactment-process routines are reproduced. These can be changed in both of the above mentioned situations in an intended or an unintended way. Intended change is only probable when within the realm of action the actors have a collective base of power. On the other hand, unintended change is more probable when the rules and routines are not understood and / or accepted. The fourth and final step in the model of Burns and Scapens (2000, p. 9) is the institutionalization of the rules and routines in the institutions of the organization, they become the way things are and can be described as the future shapers of rules and routines. Ultimately, the framework can thus be seen as a two-way process, where on the one hand change contributes to shaping new institutions, rules and routines, and on the other hand change is determined and shaped by institutions, rules and routines.
The above explained the workings of the framework and the basic way of how institutions can be seen as being related to rules, routines and actions in an organizational context, and how institutions influence change, it can be concluded that when studying a proposed process of change within the Frisian police organization, the existing institutions, rules and routines are also ought to be subject of study. How the organization will respond to the pressure to adopt the new resource allocating tool, R-BVS, can, at least partially, be explained by investigating the existing internal institutions, rules and routines on this subject of resource allocation. With the Burns and Scapens framework (2000, p. 9) in mind, the introduction of the R-BVS can be seen as the introduction of new management accounting rules, trying to change the routine behaviour with respect to the current way of resource allocation.
§ 4.3: Empirical Contributions
§ 4.3.1: Loose Coupling
Starting from the notion that the introduction of the R-BVS can be characterized as an attempt to a process of planned change, because it involves the deliberate, purposeful and explicit decision to engage in a program of change, one has to assume that, ultimately, the extent of change actually realized will be a combination of both intended and unintended, ‘emerged out of the situation’, change (Levy, 1986, pp. 6-7). Situated at the start of this process of planned change, one can not predict to what extent the final outcome will be in line with the initial effort to change, but in order to avoid the process of change to result in a decoupled or ceremonial response to the pressure to change (Nor-Aziah and Scapens, 2007, p. 10) management can focus on several aspects in the process of change. A widespread acceptance of the ‘new’ institutions is mentioned by Burns and Scapens (2000, p. 8), as an important factor, positively influencing the actual compliance with the intended effort to change, resulting in the required action. Nor-Aziah and Scapens (2007, p. 235) further clarify the aspect of acceptance and the fact whether the effort to change becomes rooted within the institutions of the organization, by creating a framework. In their framework, they mention trust, resistance and power as the variables explaining the extent to which loose coupling, which means a separation between the systems used to secure external legitimacy and the systems used to manage the daily activities of the organization (Nor-Aziah and Scapens, 2007, p. 210), is likely to occur. Preventing the effort to change to result in a decoupled or a merely loose coupled management accounting system, which can neutralise the introduction of the R-BVS and culminate in a situation of stability, described by Granlund (2001, p. 143) as the counterpart of change, the Frisian constabulary is required to pay attention to these mentioned factors.
§ 4.3.2: Usage Gap
mentions as input, while the organizational culture is similar to what Burns and Scapens (2000, p. 9) refer to as institutions. The ‘enabling’ factors ter Bogt and van Helden (2000) use are drawn from the Seven C’s model of Shields and Young (1989). Their seven C’s stand for: culture, champion, compensation, controls, continuous education, change process and commitment. The institutional, behavioural and pragmatic variables interact with each other and together they determine what ter Bogt and van Helden (2000) call the usage gap. The usage gap can be described as the gap between the formally developed accounting change and the actual accounting change. This gap, between input and output, can be compared with the, in paragraph 4.3.1 described, final result of the attempt to change, being a combination of intended and unintended change. Within this comparison, the intended change resembles the formally developed accounting change before implementation, while the final combination between both intended and unintended change resembles the actual accounting change after implementation. To what extent the formally developed (intended) accounting change and the actual (intended & unintended) accounting change differ is thus, at least partially, explained by the ter Bogt and van Helden framework (2000, p. 275). The several, interacting, variables they use are therefore also important for the Frisian constabulary to account for, in the proposed process of change.
§ 4.4: Concluding Remarks
The introduced insights from the literature on management accounting change will be used in the following chapters to explain the situation regarding the proposed implementation of R-BVS in controlling the resources available to the Frisian constabulary.
Chapter 5: Current Process of Resource Allocation
This fifth chapter attempts to answer the fourth sub question stated in the research design. Primarily, by making use of the institutional framework of Burns and Scapens (2000, p. 9), which was explained in the fourth chapter, this chapter will address the current process of resource allocation within the Frisian constabulary. As has been clarified, the existing rules, routines and institutions, regarding the current method of resource allocation, will have their influence on the process of change and are therefore studied.
§ 5.1: Current Process & Institutional Theory
To understand the process of resource allocation within the Frisian police force, this paragraph starts by explaining what is actually meant by the word ‘resource’ in the term ‘resource allocation’. Personal expenses exert by far the greatest pressure on the total ‘lump sum’ assigned to the Dutch police regions. For the Frisian constabulary it is estimated that in the year 2010, of the total assigned budget, about 73 percent is available for personal expenses (AEF, 2009b). The material and non-personal expenses (e.g. buildings, transport, interest payments, equipment, communication, etc.) account for the rest of the available budget. Under the current method of resource allocation, as well as under the proposed R-BVS method of allocation, these material and non-personal expenses are deducted from the available ‘lump sum’ before the ‘process of allocation’ starts. This means that of the total available financial resources in the ‘lump sum’, only the human resources are divided over the region. Thus, when the term ‘resource allocation’ is used, the word ‘resource’ only refers to human resources and not to any other category of resources, as one might have expected. The same applies to the abbreviation R-BVS, which, as has already been mentioned, stands for Regional Budget Allocating System. The letter ‘B’ merely refers here to the budget available for human resources. In that aspect, the current and the proposed method are alike.
§ 5.2: An Institutionalized Focus on Quantity
The next step is to determine why this current organizational ‘distribution’, with regard to the number of allocated human resources, had such a strong influence on subsequent decisions regarding the allocation and why the, at first, accepted method on incident patterns was abandoned and an autonomous process of allocation arose instead. The current autonomous process of allocation seems to have been preferred over the use of incident patterns for the allocation of human resources. The reason for this failure of applying the method that uses incident patterns for the allocation of human resources can be indicative for the proposed implementation of the R-BVS. After all, the R-BVS is, like the method using incident patterns, also an objective approach to the allocation of human resources. Therefore, it is important to analyse what has caused the institutional focus on quantity. While doing so, it became clear that the cause of this institutionalization can not be analyzed in isolation of the political-administrative context in which the Dutch police functions. Therefore, this political-administrative context and the influence it has on the organizational structure of the Frisian police force in general, and on the way how human resources are divided within the Frisian constabulary in particular, is first discussed.
§ 5.2.1: Political-administrative Context
subordinate to and controlled by the competent authorities in the execution of their duties, the organization of the Dutch police force has to account for these institutions.
§ 5.2.2: Political-administrative Influence on the Frisian Organizational Structure
Having described the political-administrative context in which Dutch police operates, this paragraph explains how the current Frisian organizational structure is determined by the political-administrative structure. After all, this organizational structure constitutes the basis for the allocation of human resources over the Frisian region.
The interviews made clear how the outcome of the organizational reconfiguration within the Frisian constabulary was influenced by the political-administrative context in two ways. First of all, the boundaries of the geographical teams had to coincide with the municipal boundaries to ensure that municipalities are served by only one organizational unit of the Frisian police. Next to that, the boundaries of the geographical teams also had to account for the existing cooperative relations between municipalities, to connect to the structure of administrative control of the Frisian region. The final result of the organizational reconfiguration, given the political-administrative context, was the, already mentioned, arrangement of the Frisian police force in eleven geographical teams. This reconfiguration was the outcome of a political process which had to be endorsed by the several involved parties. For the management of the police some practical problems arose because of this new organizational structure, for it was decided that incident patterns were decisive in allocating available human strength over the teams. The outcome of this calculation was that the smallest teams would consist of less than thirty-five people, which was argued to be the minimal size of a team to be still able to fulfil the activities it had to, without committing an infringement upon the scheduling requirements. To solve this problem some adjusting shifts in personnel at the expense of the larger teams were made. Part of the reasoning was that the overcapacity of the smaller teams, which would theoretically have to arise at some moments in time under good conduct of business, could be shifted back to the larger teams with a higher workload. Because of the former, the different teams were seen to be forced to collaborate with other teams outside their own confinements.
§ 5.2.3: Cause of Institutionalized Behaviour
The interviews and documentation on the national budget allocation tool, L-BVS, provided insight in the factors that supported or caused the institutionalized behaviour. The report on the L-BVS (AEF, 2005, p. 23) states that within the field of police, from an historical perspective, the dominant focus has always been on the quantity of human resources allocated to a certain region / organizational unit. Important factors, such as the composition of those allocated human resources (i.e. how many fte’s of which different job categories are needed to address the workload faced in the six different types of work) and the financial consequences of this chosen composition, are barely discussed within the field of police. This does not only hold for the direct management of the police (i.e. the police organization headed by the regional chiefs), but also for the, above discussed, political-administrative management, controlling the Dutch police. The management accounting instruments, which were used to allocate budget before the introduction of the L-BVS in 2005, are all characterized by this focus on quantity. It is reckoned that this situation has contributed to a large extent to the fact that within the Frisian constabulary all employees strongly adhere to the quantitative aspect of the current allocation of human resources. Also in the political-administrative context, the discussion has traditionally been centred on the numerical aspects of the police presence.
§ 5.3: The Missing Link
respect to the allocation of human resources. Therefore, the Frisian constabulary lost control over the process of resource allocation. The additional, strongly present, historical focus on quantitative aspects of the human resource allocation process, in all levels of the organization and in its political-administrative context, ultimately caused the allocation process to stagnate in a stable and autonomous situation.
Chapter 6: Variables Predicting Management Accounting Change
This final chapter will discuss the variables that can influence the process of management accounting change within the Frisian constabulary. Based on the interviews held and the observations made during the six months internship within the organization, the presence of the variables, which were introduced in the fourth chapter, is assessed. Ultimately, based on this assessment and the findings of the previous chapter, advice is given to the Frisian constabulary regarding the points that deserve attention, when introducing the R-BVS. This chapter starts with an analysis of the variables that were discerned by Nor-Aziah and Scapens (2007), investigating the notion of loose coupling, in an empirical study. Thereafter, the findings from ter Bogt and van Helden (2000), studying the process of management accounting change in Dutch government, together with the notions of Hardy (1996) on power dimensions and the conditions for second-order change of Levy (1986), are addressed.
§ 6.1: Loose Coupling Predicted
The fifth chapter explained that the institutionalized focus on quantity is deeply rooted within the Frisian constabulary and that this focus has determined the way the organization is restrained in the process of human resource allocation. Therefore, the difficult task that awaits the organization, with regard to the implementation of the R-BVS, is to assure that the effort to change reaches into the institutional realm (or into what Levy (1986, p. 16) calls organizational paradigm). Via the habituation of new rules in routine behaviour, which corresponds with the R-BVS, the current influence of the institutionalized focus on quantity needs to be reduced and the organization needs to be permeated with a changed set of mind. In order to achieve the desired institutional change, this paragraph addresses the intertwined factors that Nor-Aziah and Scapens (2007, p. 235) use in their framework to explain, amongst others, the persistence of the prevailing organizational institutions.
§ 6.1.1: Trust
