A redesign of Planning & Control products

MSc Business Administration

Organizational & Management Control

University of Groningen

Faculty of Economics and Business

January 2014

A redesign of Planning &

Control products

Case study at municipality Aa en Hunze

Name: E. Kroes

Student number: S1894455

Email address: e.kroes@student.rug.nl Supervisor: drs. M.M. Bergervoet

PREFACE

I hereby present my master’s thesis. It is the final result of the specialization Organizational & Management Control, a Master Business Administration of the University of Groningen. It also means the end of my internship at the municipality Aa en Hunze.

The past semester I have investigated how to improve the quality of planning and control products of Dutch municipalities. It has been an intense process, but above all, it was satisfying.

It would not be possible without the cooperation of the municipality Aa en Hunze. They gave me the possibility to execute my research, for which I am thankful. I have also been introduced to daily activities, and therefore gained useful working experience. I hereby want to thank the people who have contributed to this thesis, and Gerjam Reilink and Henk Bouwers in particular.

Throughout the process, they have greatly supported me and offered me the right amount of flexibility.

Furthermore, I am thankful to my supervisor at the University of Groningen, drs. M. M. Bergervoet. His critical and useful feedback has been very valuable and contributed to the final result.

Last but not least, I want to thank my family for supporting me in any possible way and for expressing their interest.

Groningen, januari 2014

MANAGEMENT SUMMARY

Based on signals from the organization, a Dutch mid-sized municipality decided to reconfigure their planning and control (P&C) cycle. This cycle is the process of planning, execution, replanning and justifying afterwards, including the corresponding documents (products). It is used by the council, the municipal board and the organization. According to preliminary interviews, the users and suppliers state that ‘’the several products of the P&C cycle do not offer the desired information and are presented late, while at the same the time the effort to produce them is inefficiently high’’. The users should be able to quickly interpret the provided information. At this moment, that is only the case to a limited extent. This has negative effects on the controllability of the organization. Therefore, this study strives to identify the causes for the previous problems and to provide the organization with tools to overcome these problems. This leads to the following research question:

‘How can Dutch mid-sized municipalities improve the quality of their planning and control products so that the control function of the organization is strengthened?’

According to the interviewees, there is an overdose of information. They perceive it as too detailed, it is not used for determining whether the municipality is ‘in control’. Furthermore, it is difficult to interpret the information because relevant information is not presented clearly. Also the time of throughput is perceived as long, not all information is reliable and there is obscurity regarding the P&C instruments.

This leads to the following recommendations:

1. Simplify the products. The large products, like budget and policy plans, contain too much information that is not used for controlling. This is acknowledged by the organization, municipal board and also the council does not see the added value of this information. This is about going concern information and information on a low aggregation level. The P&C department can contribute to this by being critical: is this information really necessary? Furthermore, a clearer presentation of information is needed. Everyone should be able to quickly interpret the information. So show differences between plans and outcomes. 2. Shorten time of throughput in the future. At the moment, shortening the time of

throughput is not supported by everyone. However, I suggest to consider it seriously. When the information is lifted to a more strategic level, it automatically costs less effort to produce the products. Because of the upcoming decentralization, municipalities have to work more efficient and the council thinks some products are delivered too late at this moment already. Shortening the time of throughput is the best solution. Practically, this can be done by discussing the documents once in the management team, once together with the municipal board and once in the municipal board.

This can be done by creating a timetable that explains the several instruments and its cohesion. The contribution of the suppliers should also be used afterwards in for example job evaluations to create a sense of urgency to deliver qualitative pieces of information. It is also important to point people to their responsibilities and to show them what they can mean for the next person in the process instead of the other way around.

4. Evolve towards achieving societal effects. At the moment, there is a large focus on the financial results of an investment in the annual account. However, societal effects are barely measured. This means considering performance management related to goals formulated beforehand. The financial result is important, however, effects as ‘cooperation’ and ‘safety’ should also be evaluated more qualitatively.

5. Have the courage to change the way things are done. It might not be easy to resign from going concern information, then there is less grip. However, to prevent the documents from becoming inaccessible a distinction between relevant and irrelevant information has to be made. Furthermore, although the annual surplus might arise from incidental causes, calculating sharper and with more courage can lead to more investment budget. In times of economic misery it is strange to present a surplus. The derivative of quality and reliability is caution. The mayor said: ‘’it is the same as driving 70 km/h on the highway, that’s also dangerous’’.

Table of content

New public management ... 13

Information supply at municipalities ... 14

Quality of information ... 16 Conceptual model ... 18 3. METHODOLOGY ... 21 Research method ... 21 Case description... 21 Data collection ... 21 Data analysis ... 22

Generalizability, validity and reliability ... 23

4. RESULTS ... 25

Strategy and goals ... 25

Clients and informational needs ... 26

Products ... 28

Discussion ... 31

5. REDESIGN ... 33

Problem definition ... 33

Problem analysis and diagnosis ... 33

Plan of action ... 34

6. CONCLUSION... 37

Conclusion ... 37

Limitations & future research ... 37

REFERENCES ... 39

1. INTRODUCTION

Introduction

Local governments should operate more businesslike. This is the message of the widely accepted new public management (NPM) doctrine in the 1980s. Since, there has been a trend at Dutch municipalities and provinces, also known as local government. From that time on, they have been faced with several changes regarding their management control. Almost every aspect of the organization was influenced by this new development: organizational structure, financial and management accounting, strategy and the way IT is carried out (Ter Bogt & Van Helden, 2000; Ter Bogt, 2008a). Two major accounting changes concern the transition from centrally-controlled to divisionalized organizations and the replacement of input control by output control (Hood, 1995). ‘’Further, they introduced output-oriented rather than input-oriented planning and control, customer friendliness, effectiveness and efficiency evaluations and integral management’’ (Ter Bogt, 2008a, p. 1). This change at local governments can be described as the introduction of New Public Management. New Public Management (NPM) is closely associated to the Policy and Management Instruments (PMI; in Dutch: BBI: Beleid en Beheers Instrumentarium), which can be seen as the Dutch version of NPM. PMI was initiated by the Dutch government in 1989 and ended in 1995. Moreover, it has been widely used by Dutch provinces and municipalities and was a response to the economic crisis in the 1980s (Aardema, 2012). Like NPM, PMI is associated with a more entrepreneurial spirit at local government: more focus on results, more efficiency, less input and more output based thinking and less bureaucracy. ‘’PMI was developed to make municipal policies more transparent, controllable and manageable for politicians and managers as well as for citizens’’ (Ter Bogt & Van Helden, 2000, p. 5).

PMI caused municipalities to adapt their planning and control (P&C) instruments. P&C is shortly defined as: ‘’from planning, via reporting and replanning to evaluation’’ (Van Helden, 2000, p. 9). P&C is responsible for the information supply of every Dutch municipality, meant to provide accountability towards council and citizens. Planning is concerned with the way management wants to shape the future: which objectives are important, what is the role of the external environment and which instruments are needed to achieve those objectives, for example budgets and policy plans. Planning uses a top-down approach, the council decides the course of action and the organization executes. On the other hand, control refers to the resources management uses to execute the planning. It compares the planned and actual results and serves as a tool for accountability and adjustment, for example performance reports and annual reports (Van Helden & Jansen, 1996). Control uses a bottom-up approach, the employees lower in the organization justify their actions to their supervisor and so on. The PMI project gained a lot of popularity in a short period of time and the outcomes were mixed. Van Helden and Ter Bogt (2001) showed that some of the goals of PMI, achieving more effectiveness and strengthening control, are only moderately realized.

Van Helden (1998, p. 4) articulated this as follows: ‘’decreasing spending opportunities made municipalities aware of the necessity to do the same or even more with less money. Consequently, efficiency and effectiveness have become important topics’’.

Besides, the responsibilities of Dutch municipalities will increase in the near future. In 2014 and 2015 they will adopt several responsibilities of the central government in the context of the decentralization. This leads to the fact that more and more municipalities are redesigning their P&C cycle. Since the initiation of the PMI project this is a trend, but not with great success. Aardema (2012) concluded in his paper the P&C cycle in municipalities (in general) has not been improved in the last 10 years.

Problem analysis

The municipality Aa en Hunze also has the urge to improve their P&C cycle. The municipal board and management team have decided the cycle needs to be reconfigured. The municipality has worked the past 10 years with their current P&C cycle while the environment and the organization changed and are about to change, see the previous part. To do a thorough problem analysis I decided to conduct a large number of preliminary interviews. A total of 18 interviews have been taken to present a clear problem analysis. The interviewees vary from council, municipal board, management team, team leaders and their members as well as an external party like the accountant.

Council

The council have expressed they are not sufficiently able to fully understand every document of the P&C cycle. This makes it difficult for the council to actual plan and control the organization. A reason for this is that the readability is insufficient, because the council does not consist of solely specialists. Members of the council concluded the documents are over-complete. A councilor said: ‘’it is undesirable that the same and too much information is included in multiple documents, what is the added value?’’ They are not able to quickly interpret the information, important information is not clearly presented. They further address some documents are presented too late, which damages the actuality and sharpness of control.

Municipal board

The municipal board states the readability is not satisfying. Information should be compact and on main threads. At the moment the documents contain a lot information, and they wonder if it is still manageable. Financially it is reliable, however, textually it is subject for improvement. Also the lay-out should be changed in order to make the documents more attractive for councilors and citizens. They also expressed the organization is cautious regarding P&C, for example with calculating budgets. This careful attitude results in less investment budget.

Management team

The council needs the least detailed information, the municipal board more and the MT the most detailed. Throughout the organization, the question ‘’what information do you need?’’ is not sufficiently asked. So the information needs are unclear. Furthermore, the MT is partly dissatisfied about the time of throughput and complexity of the documents, which damages the actuality and readability. Finally, the MT has addressed the organization perceives the frequency of endeavor as an unnecessary burdening. The moments of information supply are not matched with each other, which causes the feeling of continuous accountability.

Team leaders

Team leaders have addressed similar topics. They say the time of throughput takes long. Therefore their team members feel like they continuously have to deliver (the same) information. They experience the P&C cycle as a fill-in trick, rather than an instrument which is used to control the organization. The team leaders have argued that their team members do deliver the information but that they have no idea what for. There is a lack of awareness regarding the utility of P&C. Furthermore, the team leaders indicated that the accessibility of the P&C instruments is a problem area. Although they say it is partly dependent on themselves taking the initiative, it is not clear what the functionalities of the P&C cycle are.

Team members

Team members indicated that the demand for P&C information sometimes has a bad reputation. Although they recognize the need for information to control the organization, they still believe they are too often asked to deliver. The moments of delivery are continuously overlapping and that causes the frustration. This is because the several documents are, after they have been treated by municipal board and MT, returned to the employees to implement the feedback, while they have delivered their information weeks ago.

Accountant

Finally, the accountant has been interviewed. She said she could imagine not every employee understands the annual budget because there is quite a lot to account for and the documents are comprehensive.

Conclusion

Research question

‘How can Dutch mid-sized municipalities improve the quality of their planning and control products so that the control function of the organization is strengthened?’

In order to answer the research question several questions are formulated to get a broader perspective on the subject. These questions are about new public management, information supply at municipalities and factors that determine the quality of information.

1. What is New Public Management?

2. What does information supply mean at Dutch municipalities? 3. Which factors influence the quality of information?

4. By which criteria can the quality factors be measured?

Contribution

This paper adds to the current literature that discusses P&C instruments at Dutch municipalities. And about strengthening the control function in particular. In their paper, Van Helden and Jansen (2003) expect a continuing reform of local governments in the Netherlands. Furthermore, municipalities need to cope with the complications of applying businesslike tools in the public sector. Evidently, it will take a lot of effort to achieve improvements in P&C instruments. These improvements may also contribute to a better usage of this information for P&C. Ter Bogt (2008a) showed that Dutch local governments did not perceive the reforms regarding PMI wholly as a success. He states that ‘’the opportunities offered by PMI were not fully exploited’’ (p. 24). Therefore it is time for a next step in applying P&C instruments, a step to achieve its potential. Despite the debate about the cut-offs at the public sector, resulting in shrinking budgets for municipalities, not much research has been done on how to increase the quality of these instruments to strengthen control.

Thesis outline

2. THEORY

This chapter provides a theoretical framework with key concepts that are relevant for this study. It starts with describing New Public Management and Policy and Management Instruments. Next, the way Dutch municipalities control their information supply is explained. Also the quality aspects of information are outlined. This chapter ends with describing the conceptual model and corresponding sub-questions.

New public management

The way many Dutch municipalities are shaped today draws on the concept of New Public Management (NPM). This concept started in America and the UK and became popular in Europe in the early 1990s. NPM is concerned with explicit formal measurable standards and measures of performance and success and puts a great emphasis on output controls (Hood, 1995). It refers to the introduction and application of businesslike tools and styles in the public sector. NPM is based on two principles, on the one hand removing differences between the public and private sector and on the other hand shifting the emphasis from process accountability towards a greater element of accountability in terms of results (Hood, 1995). According to Hood (1991) the rise of new public management over the past 15 years is one of the most striking international trends in public administration. This doctrine has been used by Osborne and Gaebler (1992) to develop 10 rules to reform the public sector:

 Catalytic Government (steering rather than rowing)

 Community-Owned Government (empowering rather than serving)

 Competitive Government (injecting competition into service delivery)

 Mission-Driven Government (transforming rule-driven organizations)

 Results-Oriented Government (focus on outcomes, not inputs)

 Customer-Driven Government (meeting the needs of the customer, not the bureaucracy)

 Enterprising Government (earning rather than spending)

 Anticipatory Government (prevention rather than cure)

 Decentralized Government (from hierarchy to participation and teamwork)

 Market-Oriented Government (leveraging change through the market)

In the late 1980s, the Dutch ministry of Home Affairs took the initiative to stimulate municipalities to apply businesslike instruments. This initiative has become known as PMI (in Dutch: BBI) (Van Helden & Jansen, 2003; Ter Bogt, 2008b). PMI was a response to the economic crisis in the 1980s and is associated with public organizations operating more businesslike.

The ministry of Home Affairs started working on this project in 1987 and it took two years to finish. In 1989 the Stichting BBI was created by the overarching organization of municipalities and existed until 1995.

This organization had as main task to advise and help municipalities to implement different kinds of tools to become more effective and efficient and to bridge the gap between authorities and citizens (Aardema, 2002a; Houwaart, van der Linde, Post & Verduijn, 1995). Many municipalities switched to a decentralized structure and their P&C focused more on products and output instead of resources, input and processes (Ter Bogt, 2006). In short, municipalities adopted several management practices from the profit sector.

Information supply at municipalities

The PMI project puts emphasis on P&C: from planning, via reporting and replanning to evaluation (Van Helden & Jansen, 2003). P&C can be seen as a form of management control at the municipal level. With the, in 2003 introduced, law dualisering gemeentebestuur, the control function became even more important. In this law, the emphasis lies on the unbundling of responsibilities of council and municipal board, meaning an enforcing role of the controlling and representative function of the council.

The PMI project has 3 goals (Houwaart et al., 1995). Firstly, enforcing the position of the members of the council. This can be achieved by offering customized information (based on the needs of the municipal council) and providing them with insight in the consequences and the effectiveness of the policy for better control. Secondly, improving the control of the organization. This can be achieved by efficient behavior and integral management, which puts responsibilities low in the organization. The third goal is increasing customer friendliness. This can be accomplished by paying more attention to customers (civilians) and decentralization.

During the creation of the PMI project, 7 stages for implementation were developed to achieve the 3 goals mentioned above (Houwaart et al., 1995, pp. 25-26). Each stage consists of tools that can be used by the municipalities and are illustrated below.

Stage 1: Translation of political goals and wishes into concrete policy plans.

Stage 2: Setting up a planning pyramid: from policy plans, via division plans and department plans, to a budget.

Stage 3: Adapt the organization to allow effective implementation of policy and improvement of information management.

Stage 4: Develop interim management reports and control reports.

Stage 5: Develop an annual report and financial statements as policy instruments.

Stage 6: Develop targets for different organizational levels and for policy planning and control.

Based on the previous text one can conclude the two concepts, NPM and PMI, show great similarities. However, a basic distinction can be made on the use of the two concepts. PMI is a pragmatic approach that is mainly concentrated on affairs happening within the public sector, while NPM is mainly focused on the way the government should carry out towards society. Furthermore, PMI provides municipalities with concrete tools to implement the concept. In contrast to NPM, that has a more superficial nature (Aardema, 2002a). Interestingly, there is no evidence saying the two concepts are influenced by each other.

Summarizing the main findings, there is a development going on regarding the implementation of NPM. 20 years ago there was just the entire package of NPM, but meanwhile many countries have developed their ‘own’, customized version. This trend may have been the beginning of the situation we are in now. De Vries and Nemec (2013, p. 4) articulate this as follows. ‘’There is no one-size-fits-all approach visible. In that sense and because of what we see in recent account of national public sector reforms, it can be argued we are in a period of transition. A transition from decades in which promoting efficiency and minimizing government has been the incantation for all problems in the public sector towards a period in which governments in different parts of the world seek their own way out of this ideological based fad’’.

Garrison, Noreen & Brewer (2003) describe the P&C cycle as a gradual stream of activities from planning, performing those plans, performance measurement, comparing the plans with the results (control) and finally back to planning. Planning is concerned with the development and definition of plans and choosing a course of action. Controlling means that the organization intends to truly execute the plans and adjusts to the circumstances if necessary. This is confirmed by Aardema (2002a, p. 1), who says: ‘’in instrumental sense, planning and control is a cycle of matching plans and reports, built from the financial budgetary cycle’’. He further mentions that planning is not just about creating documents in which intended visions and result-oriented goals are formulated, it concerns process management as well. With regard to control it is not only about making sure the organization is ‘in control’ and that the related resources are available to achieve the goals. Control is about the quality of communication and behavior as well.

The PMI project uses a P&C focus: from planning, via reporting and replanning to evaluation (Van Helden & Jansen, 2003). In this context, many municipalities use the Plan, Do, Check, Act cycle. This four step cycle, which is also known as Deming’s wheel, is a management method used for the control and continuous improvement of processes and products. It includes planning (definition of a problem and a hypothesis about possible causes and solutions), doing (implementing), checking (evaluating the results), and action (back to plan if the results are unsatisfactory or standardization if the results are satisfactory) (Moen & Norman, 2006).

Due to the creation of the PMI project an overview is available with P&C instruments municipalities could implement and is summarized by Van Helden (1998, p. 20). That overview contains the following 7 instruments:

Instrument 2: An output budget which specifies performance measures related to inputs for all policy fields.

Instrument 3: A hierarchical planning and control system which encompasses budgets and reports on the various organizational levels

Instrument 4: Performance audits which take place during each budgetary cycle,

offering opportunities to manage, adjust and hold organizational units accountable (interim performance reports).

Instrument 5: The formulation of performance standards which indicate that values of performance indicators are compared with target levels, in order to improve the quality of the planning and control process.

Instrument 6: Auditing of relevant outcomes in order to evaluate the effectiveness of the policy plans.

Instrument 7: Additional instruments for improving control, such as quality management systems.

Despite the enthusiastic and ambitious start of the PMI project, research has shown that in practice the developed instruments are only used to a limited extent and that control of the organization has not significantly improved (Ter Bogt, 2004; Aardema, 2012). Therefore it is interesting to see which factors determine the quality of P&C products.

Quality of information

Research has been done into control at administrative organizations, e.g. municipalities.

Hartog, Molenkamp and Otten (1992) have developed a model which can be used to systematically analyze and establish organizational control, so it is effective, efficient and adapted to the needs of the stakeholders. This is also known as the KAD-model (kwaliteit van administratieve dienstverlening). This model consists of a product module (adaption of the organization with its environment; are the users satisfied about the products?), a process module (the control and execution of the processes) and a structure module (does the organizational structure contribute to achieving the objectives?). Since the research is focused on the several instruments of the P&C cycle, their mutual cohesion and the extent to which they match with the needs of the users, I will elaborate on the first one.

Product module

This module has the goal to assess the quality of the several products in the form of critical success factors (CSFs) and quality aspects. This is important because the quality of information has a direct link with the quality of control. This module focuses both on the origin and goal of a product e.g. budget, policy plan, and on the quality aspects a product can be judged. The way these products should be designed is determined by two factors. On the one hand the strategy and goals of the organization and on the other hand the informational needs of organizational members.

Furthermore, the CSF’s should be translated in measures and finally in product standards.

An example is timing (CSF), which can be measured by the time of throughput on which a standard can be set e.g. 3 weeks.

Quality of the product (for example a budget or annual report) can be defined as ‘’the extent to which the information is matched to the needs of the user’’ (Hartog et al., 1992, p. 56). Information has several attributes by which the user can judge if it meets their needs. These attributes are also known as quality aspects.

The quality spectrum used for this study was established by Starreveld, van Leeuwen and van Nimwegen (2002). They distinguish primary and secondary quality aspects. The primary quality aspects are targeted information and reliability. The former determines if the information is appropriate to achieve the desired goals and it can be measured by relevance, timing and lay-out. These are the secondary quality aspects. Relevance is the effectiveness of information, timing determines whether the information is presented at a moment it is still possible to act upon and lay-out concentrates on whether the information is presented in such a way it is adjusted to the ability of its user. In other words, if it is accessible. Reliability is about the extent to which the information is factual. The secondary quality aspects of reliability are correctness and

completeness. The meanings of both are straight-forward so an explanation is not necessary.

Hartog et al. (1992) have identified a quality aspect that is not mentioned in the framework of Starreveld et al. (2002), namely psychic effect. This aspect is from a different order than the previous aspects. The way the product is composed can either work stimulating or obstructive, the psychic effect. Table 1 contains the features by which the quality aspects can be identified.

TABLE 1

Targeted Reliable Psychic effect

 Relevance  Timing  Lay-out (Accessible)  Correctness  Completeness  Stimulating/obstructive

Grit (2000) acknowledged these quality aspects of information, although he made a slide alteration in the classification. He states that ‘’for an organization to perform as a unity, a proper information provision is of the highest importance’’ (Grit, 2000, p. 22). Therefore he mentions five quality aspects regarding information an organization needs to comply to.

Information needs to be well-timed. The actuality determines if the information is interesting to

use.

Information needs to be correct. Incorrect information leads to incorrect decisions. Information needs to be complete. Important information cannot be missed.

Information needs to be proper detailed. The abstraction level of information. The council should

act on main threads, while a team leader needs more detailed information.

Information needs to be accessible. The effort to retrieve (important) information should not be

Conceptual model

The conceptual model used in this research is the KAD-model of Hartog, Molenkamp and Otten (1992) and is illustrated in figure 1. Taking into account the scope of this research not the whole model will be used, only parts. The elements that will be investigated are white and have bold arrows, the structure module and process module illustrated in grey will not be investigated. An information product is the result of processing data, focused on complying the informational needs of its users. In other words, a product is the desired contribution of the system to the larger whole the system is part of.

This is on the one hand, seen from the perspective of clients, related to needs, and on the other hand, seen from the perspective of the system, related to a goal. In order to guarantee the continuity of the organization, these two aspects need to be matched. The product module of the KAD-model has the goal to determine the desired quality of a product in the form of critical success factors (CSF) and product norms. The quality of a product is defined as the extent to which the critical success factors are matched with the informational needs of the users. Next, these needs are, based on the strategy and goals of the organization and complied with the external requirements and regulations, translated to products, and this is called strategic control.

FIGURE 1

In order to answer the research question, the following sub-questions need to be answered. These questions are represented by the bold arrows in the conceptual model. To be able to put the research and sub-questions in perspective, I have chosen to show the whole KAD-model.

1. What is the influence of the strategy and goals of the organization on the products?

2. In what way do the clients and informational needs influence the products?

Summary

This chapter started with describing the principles of new public management. These principles, operating more businesslike and a focus on effectiveness and efficiency, correspond with the way Dutch municipalities are shaped nowadays. This caused municipalities to act differently.

They shifted from being input-oriented to output-oriented and decentralized their structure. This was the result of the PMI project, a project initiated by the Dutch government. P&C instruments were introduced to help municipalities achieving their goals. Theory showed several success factors that determine the success of P&C instruments, and the quality of the information in particular. The quality of information has a direct link to the quality of control. Targeted, reliable and motivating information leads to higher quality and therefore better control. This is explained in the conceptual model (figure 1).

3. METHODOLOGY

This chapter describes the justification of the research method. Also a brief description of the case used for this study is provided. Furthermore, the way the data will be analyzed is explained and finally generalizability, validity and reliability is addressed.

Research method

The research method used for this paper is academic problem solving. This is because the organization of interest is facing a problem regarding control. The problem solving cycle, also known as the regulative cycle (Van Strien, 1997), consists of five steps. The first step is to formulate a clear business problem by structuring the bulk of problems (problem definition). The next step concerns an analysis and diagnosis, where ‘’the context is analyzed and the causes of the problem are established as far as possible’’ (Van Aken, Berends & Van der Bij, 2012, p. 12). After this, a solution has to be designed (plan of action). The next step is the intervention stage, where the solutions are implemented. This is followed by an evaluation. Unfortunately, the final two steps are not included in this research because they have to be executed by the organization over time.

Case description

The research has been conducted at the municipality Aa en Hunze in Gieten, situated in the province Drenthe, Holland. The municipality counts 35 villages and harbors 25.435 inhabitants. The general management is executed by the council, which counts 21 members. The number of council members is determined by law based on the size of the municipality. Their role is to monitor the organization and provide them with a framework of plans in which they can operate. They are positioned at the top of the pyramid on a strategic level. The daily management is taken care of by the municipal board, which consists of the mayor, three aldermen and a managing director. The managing director is at the same time the head of the organization. The municipality Aa en Hunze has nine teams which are divided in three departments, Services and Society, Resources, and Territorial Affairs. Furthermore there is a team that has a facilitating role. The organizational chart is included in Appendix A.

Data collection

Preliminary interviews were conducted to get a good understanding of the current situation and to narrow down the research. A total of 18 interviews have been taken to present a clear problem analysis. The interviewees vary from council, municipal board, management team, team leaders and their members as well as an external party like the accountant. The average duration of the interviews was 40 minutes and they were audio recorded. This resulted to the research question on page 12.

Furthermore, internal documents of the municipality Aa en Hunze have been consulted to create thorough understanding and a wider perspective of the way municipalities act in practice. These documents were budgets, policy plans, annual accounts, autumn letters, management reports and other internal notes.

Research has been done on the most suitable characteristics of municipalities with regard to implementing PMI. The PMI framework is likely to be useful for municipalities with a number of inhabitants ranging from 15.000 to 100.000, and a number of employees ranging from about 100 to 1.000. In small municipalities (<15.000 inhabitants) it is not possible to introduce advanced systems of planning & control. On the other hand, large municipalities (>100.000 inhabitants) have independently developed and implemented business tools in their organizations (Van Helden, 1998). The municipality Aa en Hunze applies to these characteristics. It has 25.435 inhabitants and 194 employees.

Semi-structured interviews have been conducted to collect data for this paper. On the one hand it is necessary to get in-depth information from the stakeholders. On the other hand it is important to create a structure to make sure the most important topics and issues are treated. ‘’Semi-structured interviews based on an interview schedule that centers on around six to 12 chosen and well-phrased questions to be delivered mostly in a set order, but with some flexibility in the questions asked, the extent of probing, and question order, is a good starting point’’ (Rowley, 2012, p. 3). The interview questions are included in Appendix B. A total of 13 interviews have been done to collect the data. Since a problem is investigated that concerns every layer in the organization, (a representative delegation of) each hierarchical level is interviewed. The interviewed councilors are part of the audit committee in this municipality. This committee consists of members from several political parties and they are considered to be specialists. Prior to the interviews they were asked to try to represent the whole council for as far as possible. The interview scheme is included in appendix C.

Data analysis

Generalizability, validity and reliability

Generalizability refers to ‘’the extent to which one can extend the account of a particular situation or population to other persons, times, or settings than those directly studied’’ (Maxwell, 1992, p. 15). Generalizability might be a problem because every municipality is different and only one case is used for this study. However, this municipality has built its P&C cycle on PMI, like any other Dutch municipality. This means the basis of the operation is the same. We saw earlier that traditional P&C cycles might have different outcomes at small and large municipalities. Therefore, the results of this paper might not be generalizable to those municipalities. However, the majority of Dutch municipalities does not apply to either of those qualifications. 71% (source: CBS) of Dutch municipalities have more than 15.000 or less than 100.000 inhabitants. So the results might be more generalizable to those municipalities.

Validity represents the truthfulness of findings. This may be difficult in qualitative research because of the combination of both standardization and subjectivity into the scientific process (Johnson, 1999). Mays and Pope (2000) have identified multiple solutions to improve validity: triangulation, respondent validation and clear exposition of methods. Triangulation is ensured because interviews have been done with members of different interest groups, the findings have been shared with the participants afterwards and by clearly describing how the data has been collected.

Reliability refers to the stability of findings. To ensure this, every part of the organization is represented in the data collection, both horizontally and vertically. It is also tried to interview representative delegations of each hierarchical level. Moreover, the interviewees had the opportunity to adjust the transcripts of the interviews to make sure their input is correctly written down.

Summary

4. RESULTS

In this section the findings from the interviews with the stakeholders are presented and analyzed. The data consists of three topics. These topics can also be found in the conceptual model and cover the sub-questions, namely: Strategy and goals, Clients and informational needs and Products. Because the strategy and goals are predetermined, that data is retrieved from internal documents. First, the outcomes of the questions will be described briefly, thereafter, the outcomes will be analyzed. This chapter ends with a discussion, where the main findings are discussed in the context of academic literature.

Strategy and goals

After the law dualization in 2002, the position and responsibilities of the council and municipal board were separated. This had its consequences on the structure and content of the main documents. This is explained in the ‘Besluit Begroting and Verantwoording provincies en gemeenten’ (BBV), which was introduced in 2004. It was implemented to enforce the supervising role of the council by obliging municipalities to make their products reliable and transparent. A principle of the BBV is that the products comply with the informational needs of the council. The BBV determines some obligatory topics and structure of the documents. An example is the budget. Every program of the budget needs to answer the following three W-questions: ‘What do we want to achieve?’ ‘What will we do to achieve that?’ and ‘What should it cost?’ This shows that the BBV has a great influence on the structure and content of the documents.

The next upcoming years several internal and external developments are approaching the municipality. They say: ‘’without proper adjustment in the (organizational) structure we are insufficiently prepared to efficiently and effectively respond to these developments’’. Taking into account the widening of municipal responsibilities as a result of the decentralization, Aa en Hunze developed a goal. Their goal is to be a professional organization for the following 10 years which is flexible enough to properly serve citizens, companies and institutions in a context of quickly approaching changes. In order to fulfill this they have the intention to shift to demand focused services, budgetary cut (€4 million on a €53 million budget), administrative decrease of burdening and deregulation and operate integral and project-wise.

Clients and informational needs

This part will set out the users (clients) and their informational needs. According to Hartog et al. (1992), it is recommended to interview the suppliers as well in order to improve the quality of the products. To adhere to the hierarchical pyramid, I start describing the informational needs of the council.

Council

Concerning the relevance of the documents, the council stands on a crossroad. On the one hand, they think the information is too detailed, and on the other hand there are councilors who use the in-depth information. The several W-questions are repeated in every program of every document, which is not seen as relevant.

Also the time of throughput is not satisfying. It should be matched with the actuality. The annual account and autumn letter are late in particular. The frequency of the documents is good, only the time of throughput should be shorter.

Another quality aspect of information is the lay-out. In other words, is the information accessible for the user? The council believes it is not optimal. ‘’Because the financial paragraph is so extensive, I do not believe every councilor starts reading it’’. Every document contains 16 programs, and because of the repetition it is not clear what is important and what is not. The council wants to act on main threads and the programs are not. Furthermore, the council is not properly able to see the differences between plans and results.

Municipal board

Because the mayor and the alderman are responsible for the execution of the policy, they are quite familiar with the documents. Concerning the relevance they believe the justification of projects is underexposed. The mayor said: ‘’there is attention for the financial consequences, so we know what the ‘profit/loss’ is, but we look insufficiently at ‘what is the contribution?’ and ‘was the investment efficient?’ ‘’. So the results of projects are formulated rather quantitatively.

The constant repetition of the 16 programs is perceived to be hardly relevant by the municipal board as well. They believe the time of throughput is not too long, except maybe for the annual account and management reports. The frequency is fine. The municipal board thinks the documents are quite accessible. However, they have the opinion that the core can be presented clearer.

Reliability is split up correctness and completeness. Even though the reliability is of good quality, the correctness is subject for improvement. ‘’Concerning the correctness, I believe the progress is sometimes presented too positive’’, the alderman said.

Concern controller (head of P&C)

Also the time of throughput is too long. It is long because the information has to pass every level of the organization, sometimes multiple times. The frequency of the documents is fine.

However, the documents are not always accessible for one another. This is partly caused by the lack of uniformity. ‘’I perceive the quality of the delivered information is very diffuse. One’s input is perfect and another’s input has to be changed drastically’’. Besides, the amount of programs is too large, which withholds the integrality of the organization.

Regarding the reliability, the concern controller is not that positive about the completeness in particular. The reason for this is that not everyone, and especially in the organizational layers where they should, feels responsible for the complete product. ‘’Then I have to trust if the supplier is complete. A department head only checks his sector. Whether the completeness is guaranteed this way is a question mark’’. ‘’Also the correctness is not perfect, because the information is sometimes simply copied from an old product, is the information from then still reliable?’’. He acknowledges that some people perceive the supply as a fill-in trick.

Management Team (MT)

When looking at the management team, a majority (3/4) finds that the relevance of the documents is good. However, they say that some information is repetition and thus not relevant, just as the going concern information. So the needed information is mostly available, it is only too much. The time of throughput is experienced too long by half the MT (2/4), the other two perceive it as appropriate. The treatment of the annual account is too late (2/4).

The frequency of the documents is good. The director expressed it as follows: ‘’at the municipality Aa en Hunze, we do not have a strict division between the official and organizational roles. By the way we do that, I do not have the urgency to ask for information more often’’.

Concerning the accessibility, the MT is unanimous that important information (e.g. new developments) is not always easy to find. Important information should be presented clearer and where possible in more accessible language.

Although they think the reliability is good, the head of department Resources says that the completeness is underexposed. ‘’Not everyone thinks in terms of completeness. What do we miss? What do you use to control? Only when everyone’s key performance indicators are known, we can objectively judge completeness’’.

Also is spoken about the psychic effect of constructing the documents. The director said: ‘’when the supplier perceives it as a fill-in trick and has a blurred sight on the complete process, it does not contribute to the support’’. A majority (3/4) said that the awareness of the P&C cycle is everyone’s own responsibility. ‘’But if they mention a lack of awareness, we should do something about it’’, thus the Resources department head.

Team leaders

Team leader Society expressed it as follows: ‘’looking back, I think we have not realized that in for example a budget, far too many going concern, executive things were mentioned. That is just reporting daily activities, and has nothing to do with making policy. That is why we should report on a higher aggregation level in the four large documents’’.

There was no real conformity between the team leaders concerning the timing of the documents. Although they acknowledged that procedures are quite long, the team leader Spatial policy said that the time of throughput is not so long the actuality becomes insufficient. The team leader Society does find the time of throughput too long. ‘’The time between setting out the delivery and the moment the information is treated in municipal board and council is too long’’. However, the frequency is perceived as fine.

The accessibility (lay-out) is closely related to the relevance, so the answers are partly corresponding. All team leaders believe the documents contain too much detailed information, which is not relevant. They (3/3) also say that current information can be presented clearer. The team leaders believe the reliability of the information is good. This means the correctness and completeness is guaranteed.

A majority (2/3) acknowledges that the supply of information is perceived as a fill-in trick. The team leader of Spatial policy said: ‘’I can imagine the employees experience it as a fill-in trick. It has to do with perception. They are strongly engaged in their own procedures and this results in a sometimes blurred vision at the bigger picture called planning and control’’.

Team members

The individual team members believe that the relevance of the documents is good. A member of team board and management support said: ‘’when I deliver nonsense, I have to fix it. That is not the case, so I assume it is relevant’’.

Regarding the timing, there is no consensus regarding the time of throughput. One says ‘’you have to accept there is difference of time because it is a municipality’’. Another said ‘’the actuality is not satisfying because findings are only presented at the final result’’. This means the stakeholders are not informed in the meantime. The frequency is perceived as fine.

With regard to the accessibility, a member of team Society said the following: ‘’even for a policy employee it is difficult to completely analyze the budget and summarize the most important findings. However, that is not necessary. You can compensate that by reporting on main threads’’. The other team member found the documents sufficiently accessible. According to them, both correctness and completeness are guaranteed. The low awareness as a cause for the perception of a fill-in trick is acknowledged. They think the board can help on this. On the other hand they say it is everyone’s responsibility and it is too easy to blame the P&C department.

Products

This section analyzes how the informational needs influence the products. In other words, which aspects of information are the most important for the users and suppliers, what are the critical success factors? It is of importance to understand that all the aspects are important. All the

Before analyzing the results, I would like to briefly elaborate on the current P&C products of the investigated municipality. The municipality Aa en Hunze uses four, yearly repetitive, main documents. These documents are the policy plan, budget, autumn letter and annual account and are presented to the council. Besides these documents, the municipality uses management reports to inform the municipal board three times per year. Finally, an activity planning is used to

specifically watch over the progress of all the plans specified in the budget and determines which activities are prioritized. The municipality also makes use of a digital P&C dashboard.

Relevance

Together with the reliability, relevance is the most important aspect because relevance is seen as the umbrella that covers all the other aspects. A majority said the instruments should provide concrete control information and should not contain descriptions of daily activities (going concern) and repeats. At the moment, too much information is not used for controlling and can be qualified as irrelevant, which makes it hard to work effectively. This is the case at all the documents. The alderman Finance said: ‘’the start of a document is interesting, followed by the programs, which I basically do not read. At a certain point the level of interest drops while the more interesting parts are yet placed after the programs’’.

The head of department Territorial affairs said: ‘’if I look at the budget, I do not read everything anymore because it is known information’’. This represents the opinion of the majority and shows that some information is not even looked at. The council was a bit ambivalent at this point. They say they do not want the detailed information, however, they say it should be available for them.

Timing

After relevance and reliability, the timing or actuality is mentioned as a critical success factor. Everyone agreed the frequency is good. However, only a minority stated ‘’the time of throughput is too long’’. One of the main and surprising findings is the difference in opinion about the time of throughput between council and municipal board.

The former thinks it should be shortened, while the latter believes it is just right. According to the council there is too much focus on the reliability. ‘’The autumn letter is presented too late (December), while it represents the situation until the 31st _{of September. This means there is} almost no time to adjust’’. If the reliability will be slightly damaged if the actuality can strongly be improved, it is welcomed. They have also mentioned that the annual account is not that important at the moment, because it is presented in June while it represents the previous year. ‘’The documents become more interesting when they are presented earlier’’.

Looking at the suppliers, there is support for both sides. There is no shared urgency to shorten the time of throughput.

Accessibility (lay-out)

The accessibility is not considered to be a critical success factor and is of secondary importance. The concern controller said: ‘’one cannot control without relevant and reliable information. If the information is provided quick and accessible as well, control can be executed effective and efficient’’. This aspect is closely related to relevance, because relevant information is perceived as more accessible. Many perceive the programs in the documents as bold. The team leader Society said: ‘’the programs are just enumerations, it does not tell me anything. I’m interested in the story behind it’’. The council said: ‘’we are not interested in all the enumerations, but in the highlights. What have not we done what we should do and vice versa’’. They also said: ‘’as a party we have to read the documents, so it’s not urgent for everyone to understand every part of for example a budget. However, at the moment, the finance section is too extensive that not everyone starts reading it’’.

The documents are accessible for the municipal board. The mayor said: ‘’we are often confronted with the documents, so I know how to find my way’’.

Reliability (correctness/completeness)

Many said the reliability is most important. Unreliable information can lead to undesired political consequences and if the content is not correct, the rest is not of importance. There should be no debate whether de information is correct and/or complete. The mayor noted that the criterion ‘reliability’ does not mean it has to be 100% reliable. ‘’Not every detail has to be reported 3 figures after the comma to present a quality document. In other words, relevance is closely related’’. No one expressed the reliability of the documents is at danger. As the council, the municipal board acts on main threads. They are dependent on the information provided by the organization. The alderman expressed his concerns about the correctness: ‘’at every level the progress is displayed too positive, then I see mainly green lights on my progress scheme. That could be more realistic’’. He thinks because an orange/red lights raises questions.

This could be the case, however, the organization thinks the correctness is fine at this point. Expressed differently, the mayor said: ‘’sometimes the organization is too cautious. At the beginning of the year we intent to be break-even at the end of the year. However, we always end up with a surplus, because we are too cautious at estimating. Mostly it’s an incident, however, it happens every year. The consequence is that the surplus cannot be spent, and that is a pity. It takes some courage to change it, but the reward is more investment budget’’.

Psychic effect

The team members themselves agree on this: ‘’I recognize this, it is experienced like a fill-in trick. I prefer to spend my time on daily issues, rather than accounting for the past. At the moment it is everyone for themselves. The awareness that if you deliver sloppy information, others have to repair that or people do not have qualitative information, is indeed insufficient’’, thus a member of team board and management support. The team leader Spatial policy agreed and said: ‘’I can imagine it is experienced as a fill-in trick. This has to do with perception. The people are very focused on their own procedures. This leads to a blurred vision on the bigger picture called planning and control’’. They think they have to deliver more or less the same information over and over again. In fact, that is not true, because every document has its function.

Discussion

This paragraph will discuss the main findings in the context of academic literature.

1. What is the influence of the strategy and goals of the organization on the products?

The MT is responsible for translating the informational needs to products. They have to take into account the external requirements, internal developments, the informational needs and it needs to be in line with the strategy and goals of the organization (Hartog et al., 1992).

We saw that the constant repetition of the W-questions are not that interesting for the users. However, the law dualization in 2002 resulted in external requirements to which the P&C documents had to comply. This means the documents are partly predetermined.

The goal of the organization is to be a professional organization for the following 10 years which is flexible enough to properly serve citizens, companies and institutions in a context of quickly approaching changes. Because of the budgetary cuts municipalities have to do more with less resources. This could mean that the products have to be constructed by fewer people than in the current situation, while at the same time they have to report about more projects. This means the products are expanding, and already at the moment they are sometimes perceived as inaccessible. According to the literature, municipalities are faced with the introduction and application of businesslike tools and styles (Hood, 1995). This is indeed confirmed by this research, because flexibility and efficiency are pursued to become dynamic and to adapt to a changing environment. The previous chapter showed that the goal of P&C in particular is to improve the coupling between the P&C system and the agreements with teams and individual employees. The P&C instruments can contribute to a more result-focused organization and can strengthen the link with the HR-cycle. This complies with New Public Management and the Policy and Management Instruments line of thought described in the theory section. It shows that the adaption of businesslike instruments in local government described by Osborne & Gaebler (1992) is still an up-to-date topic.

2. In what way do the clients and informational needs influence the products?

With regard to the relevance, the council said the information is too detailed, but on the other hand, it is read as background information. However, one of the principles of the PMI project was that the role of the council is to act on main threads (Houwaart et al., 1995), so the question is if they should receive that information, even though they want to.

That mainly provides information about daily activities and should be deleted or be included in an appendix according to the interviewees. All in all it can be said the information has to be lifted to a higher aggregation level. Ter Bogt (2001) researched the value that Dutch councilors and aldermen attach to outputs and performance aspects. He concluded that ‘’official P&C documents contain some quantitative information about outputs and related performance aspects. However, this information is often incomplete. According to the alderman and councilors, the quality of these documents leaves something to be desired’’ (p. 20). This supports the findings of this research. The mayor said: ‘’we look at the financial consequences, however, there is insufficient attention for measuring effects in a more qualitative manner’’.

Moreover, it is said there is insufficient attention for the qualitative side of projects. Then we are back at the final stage of the PMI project, which said: ‘develop a set of instruments for measuring the effect in society’ (Houwaart et al., 1995). This complies with instrument 6 of the same project (auditing of relevant outcomes in order to evaluate the effectiveness of the policy plans). When the municipality is able to solve this, they have fulfilled the PMI project as it was intended.

Further, many respondents said that an individual has to be aware of P&C in order to use it effectively. A councilor said: ‘’If everyone understands they are a part of bigger system and that they work to serve citizens, it might boost the P&C flow’’. This is confirmed by Van Helden & Ter Bogt (2001. p. 3), who state that ‘’the success of planning and control is not only dependent on the extent to which instruments are introduced and implemented in an organization, or on their quality’’. Other factors can also play an important part, for example the consciousness of politicians, managers and employees towards P&C.

Summary

This chapter showed that municipalities are limited until a certain extent in establishing P&C documents. The central government obliges municipalities to record specific elements in each document.

Regarding the interviewees, a majority finds that the information in the documents is too detailed. This is not relevant and is not used for determining whether the municipality is ‘in control’.

Furthermore, no real consensus was achieved looking at the timing of products. Some would like to shorten the throughput, some would like to present the annual account much earlier and some think that the current P&C products are well-timed.

A majority indicated that the readability can be improved to make the documents more accessible to citizens and councilors. In general, the reliability is sufficient, however, the progress is sometime presented too positive. Also the surplus at the annual account is not in correspondence with what is calculated earlier in the budget. Finally, the awareness of P&C in the municipality is subject for improvement.

5. REDESIGN

The goal of this study is to solve a problem of the municipality Aa en Hunze. To achieve this, the problem solving cycle, also known as the regulative cycle (Van Strien, 1997), has been used. This cycle consists of five steps, from which three of them are covered in this research. The final two steps, implementation and evaluation, have to be performed over time by the organization itself. The first three steps are the following: problem definition, problem analysis and diagnosis and plan of action.

Problem definition

Based on the preliminary interviews, the problem definition is the following: the several products of the P&C cycle do not offer the desired information, while at the same the time the effort to produce them is inefficiently high. This has its influence on everyone’s performance. For the council, municipal board and MT it is difficult to control the organization. They should be able to quickly interpret the provided information. At this moment, that is only the case to a limited extent. The team leaders and their members addressed the frequency of delivering information is too high and not efficient. The creation of current products costs a lot of time and effort, but does insufficiently lead to control.

Problem analysis and diagnosis

Many respondents indicated that not all the information in the documents is relevant. Because of that bulk of information, it is difficult to filter the most relevant parts. Sometimes this leads to skipping certain elements of the products, as we have seen in the results chapter. This is particularly about reporting daily activities and known information, also known as going concern. The timing of documents determines the extent to which they are used. The council said that the annual account is less interesting because it is presented in June. At that time the policy plan is presented as well and it overshadows the annual account. On the other hand, the municipal board does not recognize this problem. They think the reliability is more important than timing.

In order to make a decision, the documents have to be accessible. At the moment it is very difficult to distinguish the interesting from the less interesting parts. The majority is not interested in all the enumerations, but in the highlights. Also the way of presenting is discussed. The information in the programs is sometimes too bold, which makes it only accessible for specialists.

Many said the reliability is most important. However, the council argued it is sometimes too complete, which hinders the time of throughput. The concern controller doubted that the documents are always complete because the department heads solely look at their departments. The informational needs are unclear at the moment, so they believe it’s difficult to objectively judge the completeness. The council and municipal board stated that ‘’there quite often is a big surplus at the annual account, while it wasn’t expected in the budget’’. It can have incidental causes, but they perceive a certain cautiousness at calculating benefits and costs.

Finally, the psychic effect of the suppliers were treated. Almost everyone acknowledged that the supply is sometimes perceived as a fill-in trick. This is caused by several factors.