The role of accounting and trust in the control of outsourced activities by Dutch municipalities

(1)

Rijksuniversiteit Groningen

MSc Business Administration

Organizational & Management Control

The role of accounting and trust in the control of

outsourced activities by Dutch municipalities

Marijn Slijkerman s2001152

Pastoorcleerbesemlaan 34 1735 HX ‘t Veld m.p.slijkerman@student.rug.nl Supervisor: Prof. Dr. H.J. ter Bogt

Co-assessor: A.R. Abbasi MSc

June 2016

Abstract

This study aims to describe and analyze the way the municipality of Medemblik controls its outsourced activities. With the use of interviews and documents, this study examines two different outsourcing relations within the municipality, and particularly investigates the differences related to the use of accounting documents and trust in the control of these organizations by the municipality. These two different relationships are chosen because of their apparent differences in the measurability of the outputs they produce and the influence this could have on the way the municipality is able to control these respective organizations. Further, the differences in measurability of outputs could also influence the role of trust in controlling these outsourced activities. This study finds evidence for a shift in the way the municipality controls its outsourcing relations as the measurability of outputs changes. Furthermore, it identifies trust plays an important role in both relationships, despite the differences in the measurability of outputs and the shift to focus on output control which is propagated by New Public Management.

(2)

2

1. Introduction

“Concerns about the care of mentally handicapped children after 2015” and “Concerns about pilot ‘care in district’”, these are only a few of the numerous headlines in Dutch newspapers in 2015 (nu.nl & gemeente.nu). These newspaper articles raise the concern that Dutch municipalities are not able to provide the adequate services they are now responsible for.

After the introduction of the Social Support Act, which came into effect on the first of January, 2015, Dutch municipalities received an increasing amount of responsibilities of services which were historically provided by the central government. These new responsibilities are for example in the areas of youth care, care for elderly and care for people with long-term illnesses. Recently, there has been a fierce debate whether or not the municipalities are able to handle these new responsibilities. This is because the municipalities are generally not providing these services themselves (because of efficiency reasons and lack of knowledge), but outsource them to external organizations. In this study we will examine the relationships that emerge when municipalities outsource their tasks to

independent, external organizations, which are heavily reliant on one or more municipal clients. Moreover, it is about how the municipalities control and guide these organizations and activities and what role accounting information and trust play in this relationship.

The decentralization of tasks from government to municipalities and the outsourcing of these tasks by the municipalities fits in the context of New Public Management (NPM). NPM is a different view on public management compared to the classical view. Accounting information and output/outcome measurements are important elements of NPM (Hood, 1995, p. 93). NPM also means that the public sector places more trust in the market and its way to produce and regulate outputs. According to Williams et. al (2012, p. 2616) it is about diminishing the differences between the public and private sector. The shift from input and action to output/outcome controls is also an essential element of NPM. The government tries to benefit from this new view on public management and searches for more efficiency in the market (Andresani & Ferlie, 2006, p. 416).

Although municipalities have always outsourced tasks, during the last fifteen years, they have chosen to outsource an increasing amount of their tasks to external organizations. These tasks and

(4)

4 for these tasks, and should therefore closely monitor the activities of the external organizations. NPM suggests that control should focus on outputs and that accounting information plays a vital role in this (Hood, 1995, p. 94). However, it is unclear how municipalities handle these relationships in practice, and what role accounting information plays in the control relationships between municipalities and the external organizations. Moreover, control is not only about formal types of control. Cäker & Siverbo (2011, p. 331) suggests that there are also informal elements in the control relationship. Vosselman & van der Meer-Kooistra (2009, p. 268) also found that besides accounting information, trust also plays a vital role in the control of inter-organizational relationships in private organizations. If the external organization has performed well over a certain period of time, a certain amount of trust can build up. Then, as trust increases, the vigilance of control and the importance of accounting information might decrease (Van der Meer-Kooistra & Vosselman, 2009, p. 268).

Research concerning the role of accounting information and trust has been done, however, the majority of research was done in the private sector (Scapens & Varoutsa, 2010, p. 39-44). The role of accounting information and trust in Dutch municipalities has gotten less attention (Ter Bogt & Tillema, 2016, p. 7). Also, in contrast to the private sector, in the public sector, goals are often hard to define and outputs are more difficult to measure (Ter Bogt & Tillema, 2016, p. 7). Moreover, studying this topic is relevant, due to the fact that these services provided by external organizations are of great social importance.

Furthermore, the type of outsourcing relation might be important with respect to accounting information and trust. When outputs are sufficiently measureable, the importance of accounting information might increase (Ouchi, 1979, p. 834-837). Municipalities outsource various tasks, ranging from landscape maintenance to youth care. In the instance of landscape maintenance, outputs might be sufficiently measurable and therefore, according to Ouchi (1979), the importance of accounting information will increase. However, in the case of youth care, it can be relatively difficult to determine the outputs and whether or not the external organization has done its job correctly. Furthermore, every child and therefore every case is different, so they have to be evaluated case by case. This is likely to make the evaluation of the external organizations based on accounting information alone more difficult in the case of youth care compared to landscape maintenance. Therefore, it might be necessary to build up a greater amount of trust in relationships where accounting information and output measurements are not sufficient for the control of these external organizations.

In order to analyze the above mentioned differences in outsourcing relations, the following research question has been formulated:

(5)

(6)

6

2. Literature review

2.1 New Public Management

The first ideas of NPM emerged in the UK and in several local authorities in the US. These countries had suffered from the economic crisis in the 1970s and began reforming the public sector. (Gruening, 2001, p. 2). However, it was only later that the term New Public Management was being used. Hood (1991, p. 93) was one of the first authors to introduce and describe the term NPM and he stated there are seven overlapping precepts in NPM. These precepts are respectively hands-on professional

management in the public sector, explicit standards and measures of performance, greater emphasis on output controls, shift to disaggregation of units in the public sector, shift to greater competition in the public sector, stress on private sector styles of management practice and stress on greater discipline and parsimony in resource use. This new style of management in the public sector focused more on making economically rational decisions and focusing more on efficiency (Ter Bogt, 2008, p. 210). Furthermore, Hood (1991, p. 5) stated that NPM can be interpreted as a marriage between two streams of ideas. One partner being the New Institutional Economics, which was built on the post-war

development of public choice, transaction cost theory and principal-agent theory. The other partner was formed out of waves of business-type “managerialism” in the public sector, in the tradition of the international scientific management movement. In practice, a balance has to be made between the different partners. Finding the right balance can differ according to the circumstances. Therefore, there is not one final definition of NPM (Hood, 1991, p. 4). However, there are four aspects that emerge in all definitions (Pollit & Bouckaert, 2011, p. 10). These four aspects are: downsizing and

entrepreneurship, decentralization, performance management and the use of output oriented planning and control. For this study, the principal-agent theory (agency theory), might be particularly

interesting because it focusses on the problems that may arise between the principal (the municipality) and the agent (the external organization).

(7)

7 opportunism. This means that the preferences of the principal and the agent are aligned, because the reward for both depends on the same action. The second is that information systems also curb agent opportunism. This is because information systems inform the principal what the agent is actually doing and the agent will realize he cannot deceive the principal (Eisenhardt, 1989, p. 59-60). According to ter Bogt and Tillema (2016, p. 5) accounting information can be used to provide the partners in a horizontal relationship with economic information and thus could be important in

mediating the communication between partners. Accounting in this case can be seen as an information system in order to overcome the information asymmetry.

2.2 Control

In public-private partnerships, public organizations are dependent on private organizations. When there is a public-private relationship or when outsourcing takes place, agreements, contracts and legal procedures are used in order to define the relationship (Pongsiri, 2002, p. 489). When a task is

performed in this relationship by a private organization on behalf of the municipality, the municipality will still ultimately be responsible for this task. Therefore, after the relationship has been defined, the public organization will need to have some form of control over the private organization. The

management control systems that can be used to do this focus on, for example, quality and quantity of outputs. Control can be divided into formal and informal control (Smith, Carrol & Ashford, 1995; Eisenhardt, 1985; Das & Teng, 2001). Furthermore, Ouchi (1979) stated there are, in principle, three forms of control; the market, the bureaucracy and the clan. Control through the market or the

bureaucracy will imply the use of output control and behavior control respectively. Output and

(8)

8 The types of control provided by Ouchi (1979) are not effectively applicable in every situation. In order to assess which type of control has to be used, Ouchi provides two conditions which play a role in the measurement of behavior and of outputs. These two conditions are the ability to measure outputs and the knowledge of the transformation process. In order to use output control, outputs should be sufficiently measureable. When using behavior control, knowledge of the transformation process or production process is essential. When both the ability to measure outputs is low and there is little knowledge about the transformation process, clan control should be used (Ouchi, 1979, p 843). Hofstede (1981, p 194) states that we have to take into account four criteria when we want to determine the way an organization has to be controlled. These four criteria are:

- Are the objectives of the activity unambiguous or ambiguous? - Are its outputs measureable or non-measureable?

- Are effects of management interventions in it known or unknown? - Is the activity repetitive or non-repetitive?

Hofstede (1981, p 194) argues that the first criterion is the most important one, in particular in case of not-for-profit organizations and public sector activities. In not-for-profit and public sector

organizations there are often many stakeholders which play a role in setting the goals of the

(9)

9

2.3 Accounting and accounting information

When controlling an organization, accounting techniques can be important to provide the management with the information needed for planning, evaluating and taking decisions. Therefore, it is seen as an important element in providing economic information to stakeholders (Kurunmäki & Miller, 2011, p. 238). Accounting techniques are of particular importance when, as suggested by Ouchi (1979), organizations intend to control activities on the basis of their outputs. Accounting information can relate to financial aspects of an organization, but also to the unit costs of output, or the quantity and quality of outputs. However, even when it is relatively difficult to measure outputs, accounting could in principle still be an important tool in controlling an organization, for example, because it provides information about finances, i.e., the inputs, and sometimes also about the processes in the

organization.

Vosselman and van der Meer-Kooistra (2009, p, 268-269) state that in networks and other types of inter-organizational relationships, accounting is perceived to be related to external measure based control. It provides financial and non-financial measures and information on the output of expected behavior of parties in the relationship, not only in order to co-ordinate actions, but also in order to cope with appropriate concerns. This means that accounting information plays a vital role in the control of other organizations in an inter-organizational relationship. Together with the rise of NPM and its focus on outputs, accounting practices from the private sector have also been adopted by public organizations (Cäker & Siverbo, 2011, p. 311; Lapsley, 2000, p. 169-170). Accounting can help to inform managers and other stakeholder about the outputs, but more in general it could be helpful to make organizations more transparent and to hold people in organizations accountable for specific tasks and performances relating to e.g. outputs or outcomes, aspects which are also considered as important in NPM (Kim et. al., 2005, p. 649). Adopting private sector accounting norms is in line with the ideas of NPM, as provided by Hood (1995, p 96). These new public sector accounting norms can in turn lead to a more important role of accounting which, together with the use of other economic information, offer possibilities for communication between organizations in the public sector (Kurunmäki & Miller, 2011, p. 238).

(10)

10

2.4 Trust

NPM focuses on output control and for that reason it sees an important role for accounting (Hood, 1995). However, in practice, there could be several situations in which accounting cannot provide complete, or even adequate information on outputs, as indicated by, for example, Ouchi (1979) and Hofstede (1981). Accounting information is thus not the only way of controlling an outsourcing relationship, as we have also seen in the section above. Moreover, it might be impossible to design a formal control system based on accounting alone that is able to deal with all uncertainties and

coordination needs. The complexity of such a system, or its costs, might be too high. Therefore, it can be necessary to implement, besides formal control systems, informal and potentially trust creating devices (Cäker and Siverbo, 2011, p. 332). Trust can also play an important role in the

communication between the parties (Vosselman and Van der Meer-Kooistra, 2009, p. 279-281). This building of trust is driven by voluntary, local decisions in order to signal co-operative behavior. Through these relational signals, parties show to each other that they are competent, honest and are prioritizing long-term over short-term interests. Therefore, these signals lead parties to have positive expectations about the future behavior of the other parties in the relationship, thereby increasing trust (Vosselman and Van der Meer-Kooistra, 2009, p. 280). This is especially relevant in partnerships where the outputs are relatively hard to measure, such as health care services and youth care. In these examples accounting information is not able to provide all the information that is needed. Therefore, parties could simply feel forced to place a degree of trust in one another, because the alternative (more information regarding output) is lacking. The importance of trust in inter-organizational relationships can also be seen in the study of Nooteboom (1996), in which he develops a process and control model for the analysis of the development of interfirm relations. In this model, an allowance is made for both opportunism and trust (Nooteboom, 1996, p. 985).

The literature distinguishes between different types of trust. Das & Teng (2001, p. 257) indicate there are two types of trust, competence trust and goodwill trust. Competence trust means that one party trusts that the other partner has the resources and capabilities to complete their tasks within the

strategic alliance. Competence trust can be gained over time by for example developing a reputation. It can also be gained during the relationship by investments of the contracting party (Van der Meer-Kooistra and Vosselman, 2000, p. 58). Goodwill trust refers to the good faith, intentions and integrity of the partners in the strategic alliance (Das & Teng, 2001, p. 256). Another form of trust, as

(11)

11 developments it observes in its environment, because it has the impression that these steps are

important for the other in the relationship. This differs from the other two types of trust distinguished, because there are not explicit tasks or rules (contractual trust) and no professional standards that have to be met (competence trust) (Van der Meer-Kooistra and Vosselman, 2000, p. 58).

Probably most important, for the time being, is that the literature makes clear that, at least in profit organizations (on which almost all trust literature seems to focus), trust could play an important role in the control of organizations and inter-organizational relationships. Furthermore, this role of trust in the control relationship can be related to, for example, problems with measuring outputs, but also to the (high) costs of collecting and reporting accounting information.

2.5 Accounting information and trust

The previous sections indicate that control, accounting and trust are not terms that stand on their own. The literature suggests that (in profit organizations) accounting information as well as trust can play a role in the control of an organization. Bijlsma-Frankema & Costa (2005) have tried to contribute to the understanding of the trust-control nexus. They state that there are two main perspectives about how trust and control relate: the substitute perspective and the complementary perspective. The substitute perspective states that control and trust are inversely related. This would mean that more trust results in less use of formal control mechanisms and vice versa (Dekker, 2004, p. 33). The complementary perspective suggests that trust and control can be mutually reinforcing. This means that formal

controls increase the level of trust by providing clear rules and objectives, and can increase the level of cooperation in a relationship (Bijlsma-Frankema & Costa, 2005, p. 269-170). Vosselman & van der Meer-Kooistra (2009, p. 279) elaborate on this relationship and find that control and trust are not simply substituting or complementary, but that they interact.

Tomkins (2001) also argues that information and trust are linked. He states that when there is little trust in the other party, there is a greater need for information. Over time, trust can grow through repeated exchange of information and interaction. At earlier stages of the relationship, commitments are less extensive and risk associated with a breach of commitment is low, therefore there is a lower need for either trust or information. As the relationship matures, both the need for trust and

information increases. However, trust cannot be increased without an increase in information. Therefore, an increase in the exchange of information will lead to an increase in trust. As the

(12)

12 the production of trust takes time, and when organizations are founded on distrust, institutions have to be created in order for trust to be recreated (Zucker, 1986, p. 64).

2.6 To conclude

After investigating the literature, several issues came to light which suggest various sub questions that can help to find an answer to the (main) research question. We have established that accounting information and trust both play a vital role in the control of outsourcing relations by municipalities. The literature indicates that contracts, annual reports and performance reports can be used by an organization (i.e. a commercial company or, in this case, the municipality) to evaluate the external organizations. In this way, the municipality can probably measure the outputs and outcomes produced by the external organizations (or it can be informed about such measurements), and evaluate these. However, we have also seen that sometimes outputs and outcomes are difficult to measure, in the private as well as the public sector. However, in the public sector, outcomes and outputs are often more difficult to measure than in the private sector, for example in the case of youth care. In the case of a concrete and ‘tangible’ activity like landscape maintenance, outputs are expected to be more specific and sufficiently measurable. Subsequently, this means that in the case of landscape maintenance, it is easier for municipalities to evaluate the external organization, compared to the external organization providing youth care. For example, the length of the grass or how much weed there is in a square meter of plantation can be easily determined, these can be measured and counted. However, the quality of youth care is more difficult to determine. Did the child (and perhaps his/her parents) really get the proper care it needed, will the care really solve the problems the child has and has this care been given efficiently? Moreover, every child is different and needs different types of care, so almost no case is the same. This means that in the case of youth care, it might be more difficult for municipalities to make up a contract with the external organization, because outputs are not easily measureable and there is little knowledge of the transformation process. This is why the following three sub questions have been formulated:

- To what extent does the ambiguity of the goals and knowledge of the transformation process play a role in determining the type of control that is being used by municipalities in the control of

outsourcing relations?

- To what extent is control based on the formal information in accounting documents?

- What precisely is the role of accounting information in the control of outsourcing relations by municipalities?

(13)

13 the case of youth care, when measurability of the outputs and knowledge of the transformation process is low, and compare it to the case of landscape maintenance, where measurability of the outputs and knowledge of the transformation process is high. Therefore, the following sub questions have been formulated:

- To what extent does the ambiguity of goals and knowledge of the transformation process play a role in the level of trust between municipality and external organization?

- What is the role of trust in the relationship between municipality and external organization? - In the control of an outsourced activity of a municipality, to what extent are formal accounting information and trust interrelated?

(14)

14

3. Organizations

3.1 Introduction

In the previous chapter the theory provided a framework from which several research questions have been formulated. In order to answer these research questions, interviews were conducted at the municipality of Medemblik and two outsourcing relations of this municipality, Esgédé-Reigersdaal and WerkSaam respectively. A short overview of the researched municipality and organizations will be given in this chapter.

3.2 Municipality of Medemblik

Medemblik is a municipality in the province Noord-Holland in the Netherlands. The municipality is 257km² and counts approximately 44.000 inhabitants. The total budget of the municipality is about 170 million euros. The headquarters of Medemblik is situated in Wognum. The municipality was formed in 2007 after a merger of the two municipalities of Noorder-Koggenland and Wognum. In 2011 the municipalities Werfershoof and Andijk also joined Medemblik. Furthermore, the

municipality is, together with seven other municipalities, situated in the region West-Friesland. These seven municipalities work together on various levels in order to reach their common goal; to be in the top 10 most attractive regions in the Netherlands by 2018.

3.3 WerkSaam

In the municipality of Medemblik, a large portion of the landscape maintenance is done by the organization WerkSaam. WerkSaam is a collaboration of the seven municipalities of West-Friesland and the organization Op/maat and has an annual turnover of approximately 7 million euros.

WerkSaam was founded by the seven municipalities of West-Friesland in order to exercise the participation law (participatiewet). This law, together with several other laws, was set in place to improve and encourage participation in the labor market. Daniel van Essen, the manager, states “we let

people develop here, with preservation of payment. We, as a development/work business, provide development processes to people who are not currently employed, in order for them to learn for example to show up on time and show respect to superiors. We do this with the goal to get them out of the government support program and into the normal labor market.” Landscape maintenance is not

the only activity of WerkSaam, they also provide services like cleaning, catering, transport and mail services, mostly commissioned by the municipalities. However, due to time concerns, this study will focus only on landscape maintenance. On a yearly basis, WerkSaam has approximately 3300 people in its development program.

3.4 Esdégé-Reigersdaal

(15)

(16)

16

4. Methodology

As stated earlier, the role of accounting and trust in the control of outsourced activities in the public sector has not yet been accurately described in the literature, especially not if we focus, more in particular, on outsourcing by municipalities in the Netherlands. By researching this phenomenon we can make a contribution to the literature on outsourcing relationships in the public sector. Therefore, theory is needed to explore this phenomenon and to give guidance to the empirical research. Since not so much is known about the phenomenon, the type of research conducted was descriptive and

explorative case research. By describing and exploring some cases in depth, an insight can be obtained in issues which are relevant in controlling activities which are outsourced by public sector

organizations (Scapens, 2004, p. 259-260).

4.1 Method of data collection

In order to observe the phenomenon, primary data (semi-structured interviews) and secondary data (financial information and contractual agreements about the partnership) are being used. This is because Eisenhardt (1989, p. 538) argued that by making use of two different types of data collection, we are able to provide a stronger substantiation of constructs and propositions. Yin (2011) argued that case study research can be based on quantitative and qualitative data. Jick (1979, p. 603-604) stated that qualitative data can also be used in order to understand quantitative data. This indicates that qualitative information can be relevant for understanding practices in organizations. Therefore, in order to get an overview of the different relationships between Dutch municipalities and their

outsourcing relations in instances of high and low measurability of outputs (and related performances), semi-structured interviews will be used as a primary source of data. Document analysis of accounting information, such as financial and contract information used by municipalities, will be used as secondary data. Qualitative data are useful for understanding the rationale or theory underlying relationships or may suggest directly theory which can then be strengthened by quantitative support (Jick, 1979 p. 603-604). The interviews and the analysis of documents, which will both bring qualitative data, will be used to examine how municipalities control their outsourcing activities and subsequently examine the role of accounting information and trust in this relationship.

(17)

17 Reliability is about the trustworthiness of the study. The results of the study are reliable when they are independent of the particular characteristics of that study and can therefore be replicated in other studies (Swanborn, 1996, p. 21-22). Research bias is controlled for by using one interviewer who holds the interviews and by recording the interviews; the latter will give the researcher a chance to examine the interviews more than once and check if he overlooked things during the interview itself. It also gives the researcher a possibility to make transcripts of the interviews. Yin (2011) also argued that one strategy of overcoming researcher bias is standardization. Therefore, semi-structured

interviews will be used. Instrument bias will be overcome by using more than one research instrument (van Aken et al., 2012). These instruments are semi-structured interviews at the municipalities and their outsourcing partners, and the financial and contractual agreements between these two partners and the municipality. Overcoming respondent bias can be done is three ways. First, all of the roles, departments and groups that are involved need to be represented. Second, if you are not interested in the differences between these members, it is appropriate to select respondents at random. Third, is to increase the number of respondents (van Aken et al., 2012). In this study we will select interviewees based on the first approach, with the managers of the external organization and the people responsible for the outsourcing relations of the municipalities represented.

Yin (2011) argued that triangulation can be valuable to improve construct validity. Therefore, multiple research instruments such as semi-structured interviews and documents about accounting information and contracts will be used. Internal validity will increase when the researchers makes sure that there are no plausible competing explanations (van Aken et al., 2012). In order to increase internal validity, two outsourcing relations of the municipality will be studied.

For this study a total of four interviews were conducted. Two interviews were held at the municipalities itself with the persons responsible for outsourcing relationships of youth care and landscape maintenance. These people were selected because they will have the most knowledge about the municipality, the outsourced tasks and the relation with the external organization. At the

municipality of Medemblik interviews were conducted with Mrs. Proost and Mrs. Siksma concerning youth care, and an interview with Mr. Blom was conducted concerning landscape maintenance. Furthermore, two more interviews were conducted with managers of the external organizations which are in an outsourcing relationship with the municipality of Medemblik. The third interview concerning youth care was conducted with Mrs. Fritzsche, controller at Esdégé-Reigersdaal. Mr. van Essen, manager of WerkSaam was interviewed for the fourth interview concerning landscape maintenance. An overview of the interview questions is presented in the Appendix (in Dutch). All the interviews were recorded with the help of a voice recorder, after interviewees gave permission to do so. Notes were also taken during the interviews. Based on these recordings and the notes made by the

(18)

18 from the author on request). These interview reports, together with the documents studied, form an important basis for the “Result” section of this paper.

4.2 Documents (secondary data)

Analyzing documents will be the secondary source of information. These documents will consist of financial information such as budgets, interim reports and annual reports and contract agreements regarding the partnership. These documents will complement the primary source of data and will provide us with an insight in how the relationship is on paper and in the type and level of detail of the information provided.

4.3 Method data analyzing

Eisenhardt (1989) developed a method for analyzing case study data. The analysis will start with a within-case analysis for each case of the various issues which came up in the Literature review and boiled down into the research sub questions. Here, the overall idea is for the researcher to become intimately familiar with each case as stand-alone entity. This allows the researcher to see any unique patterns in each case before he generalizes patterns across cases. This will be done by reading, coding and interpreting the data of each case separately. The same is to be done with the documents, the secondary source of information. After the within-case analysis of an issue, there will be a cross-case analysis. Cross-case analysis is used to force the investigator to go beyond initial impressions

(19)

19

5. Results

5.1 Introduction

In this chapter the results of the empirical analysis will be presented. These results will be divided into several topics. These topics will be concerned with the reasons for outsourcing, the municipal goals, the relationship between municipality and the external organization, performance agreements and measurability of outputs, accounting information and trust. These topics will be analyzed in order to answer the research questions that were set up previously. For each topic, we will first analyze the case of landscape maintenance, after which we will analyze the case of youth care. Furthermore, each topic will end with a short comparison and critical analysis.

5.2 Reasons for outsourcing

Mr. Blom is the head of the landscape maintenance division of the municipality of Medemblik. According to him, the primary reasons the municipality of Medemblik is outsourcing tasks related to landscape maintenance are “because of high investments in machines and personnel, so you could say

because it is cheaper.” When asked if Medemblik only choses the cheapest external organization to

outsource to, he further adds “we mostly choose the cheapest partner, or the most economically

beneficial, because we also have to take quality into account.” This indicates that, at least for the

instance of landscape maintenance, the reasons for outsourcing are mostly driven by financial incentives. Mr. van Essen, manager of WerkSaam, states that the main reason Medemblik outsources to WerkSaam is “because in the past few years we have always provided high quality work and have a

good understanding with the municipality of Medemblik.” Therefore, one could say that the financial

aspect is the most important reasons why municipalities outsource their activities concerning landscape maintenance, and they do so while keeping a close eye on the quality of the work. The main reason why the youth care is largely outsourced to external parties, according to Mrs. Siksma from the municipality of Medemblik, is “because we cannot do it ourselves”. Mrs. Proost, also a civil servant employed by the municipality and working in the field of youth care, further elaborates on this and states “we are not caregivers, which is why we cannot do it in the first place. We can

provide a small portion of the care, but when a child needs to go to a foster family or to a closed facility, it is impossible for us to provide such care.” Mrs. Siksma and Mrs. Proost indicate that there

is a lack of knowledge, specialists and facilities available at the municipality in order to provide the proper youth care themselves. This view is further strengthened by Mrs. Fritszche, the controller of Esdégé-Reigersdaal, who states that “the treatment of children with disabilities is very specialized

(20)

20 In both relationships there is a financial aspect, i.e. efficiency, as to why municipalities outsource. However, with the case of landscape maintenance, the financial aspect is much greater than with youth care. With youth care, the main reason why the activities are outsourced is due to the lack of

specialists and knowledge at the municipalities. This further indicates that the knowledge needed to provide youth care is significantly more difficult to acquire than the knowledge needed for landscape maintenance. Furthermore, the knowledge needed for youth care is much more dependent on

experience than it is for landscape maintenance.

5.3 Municipal goals

In case of landscape maintenance, the municipality of Medemblik has set some clear goals. It has set a “green structure plan” and a “green management plan”. In the former, they take into account the future, the long-term goals the municipality wants to achieve concerning the landscape maintenance. These goals are defined in rather broad terms. In the latter, which is much more operational, it is formulated what degree of quality has to be maintained. In this “green management plan” there are ranked classifications, which are established on image. For example, when looking at the contractual agreement between parties, the classifications range from rank A+ to rank D, with rank A+ being the most cared for type of landscape (for example on cemeteries or in the middle of roundabouts) and rank D being the least cared for type of landscape. Mr. Blom states “the classifications rank how

intensively the landscape should be maintained in certain areas. For example, in classification B, the grass may not be longer than approximately 7 centimeter and there may only be 20 percent of weeds between the plants.” The “green management plan” and “green structure plan”, which were obtained

from the municipality, elaborate on this. These plans contain the exact number of trees, square meters of lawns and forests, ornamentals etc. within the municipality. Furthermore, they also contain pictures of a wide range of different landscapes (for example plant beds, hedges or trees next to roads and lawns) which are ranked from rank A+ to D. For example, in the instance of plant beds, and A+ image has zero percent of weeds in the plant bed, and image D has more than 40 percent of weeds in it. For each image there are pictures with how, in this case, the plant beds should look like for each image (A+ to D). However, the interviewees also indicate that in practice there are sometimes discussions about what the operational goals mean precisely and whether they are met or not. But more generally speaking, they share the opinion that the operational goals set by the municipality are quite concrete and clear and can also be ‘translated’ into clear performance levels with the organization to which the activities are outsourced.

According to Mrs. Siksma, the main goal of the youth care in the municipality is “to give care to

children as close to their home as possible”. Since January 1, 2015, the central government has

(21)

21 the distance between care giver and care taker, to give care as close to the children as possible,

tailoring to the needs of the children. This view is further elaborated on by Mrs. Proost “When the

care is organized by the municipality where the children live, it is much easier to provide customized care. You can identify problems much faster and tackle them before they escalate. This is the main reason why the youth care has come to the municipalities.” So, according to the interviewees, the

municipality has defined goals for youth care, but what they mean, or should mean, precisely in actual practice and for the support given to youngsters and their parents, seem to be less clear.

Looking at these answers from the interviewees and the documents obtained from the municipality, it can be said that the municipal goals in these two instances have a completely different focus and have different levels of ambiguity. In the case of landscape maintenance, the operational goals are clearly set in the management plans. They have set up long-term goals, which are expressed in more general terms, and they have short-term operational goals based on ranked classifications in order to reach the long-term goals. The long-term goals are, as expected, in general terms and somewhat vague.

However, the short-term goals are precisely set and clear (although there can be some discussion about them in practice, as indicated by the interviewees). This seems not to be the case with youth care. Here, the municipality has one goal which seems to be expressed in very general terms; to provide care as close to the children as possible. This municipal goal, however, is a lot more ambiguous and can raise further questions, because, what does ‘close’ mean precisely in this context, or for example how many kilometers from home can still be called close (supposing that close has something to do with physical distance, which probably is not necessarily the case)? Furthermore, Mrs. Proost indicates that this goal is not always attainable, but that it is just something they generally strive for “because

children from the age of zero to eighteen can have such a wide variety of problems, it is impossible for us to treat them all within the municipality. We just do not have enough specialists and facilities in this region.” This further indicates that there is a difference in the ambiguity of the goals. As Hofstede

(1981) has indicated, the level of ambiguity of goals could influence the type of control to be used.

5.4 Relationship and contacts between municipality and external partner

First of all, concerning the landscape maintenance, Mr. Blom states that “in any case, it is a

relationship with a very collaborative atmosphere, in which the municipality acts as a supervisor and a principal.” The relationship between municipality and external organizations is being strengthened

by regular formal and informal contacts between the supervisors of the municipality and the

(22)

22 indicated that last year there were two official meetings between higher management of WerkSaam and the municipality. In these formal reports the global rules and guidelines are discussed, such as the annual budgets and the vision of both WerkSaam and the municipality.

Besides these formal moments of contact, there are numerous instances where the contacts are informal. The municipality of Medemblik has tree municipal yards where people from the

municipality and contractors come together, where the municipality stores their equipment and has an office. In these municipal yards, there is always a supervisor present. This supervisor has multiple foremen working below him and these foremen in turn guide the contractors. In this municipal yard there is also a canteen, where the supervisor, foremen and contractors meet. “When a contractor or for

example a chauffeur, who is working for us, is working, they sometimes come in the municipal yard during their break, just to drink a cup of coffee and talk things over. Also, when there is something the contractors want to talk about, they are free to come whenever they want, without appointment. We also have regular contact over the phone for example” Mr. Blom states. When the contractors are not

able to do or finish the work they were supposed to do “we just discuss it and often work it out

together.” Furthermore, Mr. Blom states the contractors sometimes give useful information to the

municipality, for instance when things can be done more efficiently. The other way around is also possible, that the municipality gives tips to the contractors. This is also said by Mr. van Essen “when

there are developments in a certain area the municipality does not know about, we inform the municipality, or the roles are reversed and the municipality asks us to inform or assist the

municipality. For example, this afternoon I will be at the municipality because of a demonstration of a new machine which might help us.”

Without going into further details here, it could be noticed that the interviewees also mentioned some other examples, which indicate the good and collaborative intentions from the municipality to the external organizations and vice versa. To summarize, the relationship between the two partners seems to be quite open, informal and collaborative.

In the case of youth care, there are three formal meetings a year with the managers of the external organizations and the municipality. At these meetings they discuss the contracts and performance agreements, they discuss the future and vision of the municipality and state of affairs at the external organizations, including their financial position. Besides these formal meetings, there is also informal contact according to Mrs. Proost, “there are additional moments of contact when it is necessary, when

for example things do not go so smoothly or there is a waiting list building up. It can also be that for example the external organization has an innovative product they want to talk to us about, or the other way around.” This statement expresses that there is particularly contact outside of the formal meetings

(23)

23 already around. On the other hand, the interviewees from the municipality indicate that several of the professionals who are employed at the youth care providers, have been seconded by the municipality and are working, for example, in ‘social teams’ consisting of a mix of municipal and external

employees. These external employees spend part of their working hours in the municipal offices. This means that the relationship between the municipality and the care providers intermingle and can also be very informal in practice, in particular at the level of the ‘shopfloor’.

Nowadays, when there is a new client who needs help, the communication goes via a central electronic system, in which the municipality and external organizations are connected with each other. Mrs. Fritzsche stated that “the whole administrative procedure these days goes via a central messaging

system between the municipality and the external organizations. On the one end, the municipality uploads the need for some type of care for a client, and we pick that message up and make sure we make arrangements and provide the care this client needs.” Before this system was in place, the

addition of new clients had to be done by email of telephone. The implementation of this system has therefore decreases the amount of informal contacts between the municipality and the external organizations.

However, Mrs. Proost, also states that the municipality has good contacts with the external

organizations. She states that “the good contacts come natural, as it is in our common interest to do so

and because as a municipality we carry a big responsibility to the children who need care.” Mrs.

Siksma contributes and states “of course the external organizations will think about the price tag

because they also have to survive, but the basis from which the external organizations argue is the same as us, that we have to provide the care the children need, as close to the children as possible.”

Mrs. Fritszche also states a similar point “in my eyes the relationship with the municipality is fine. In

my view the client has to be in the center, and luckily, the municipality shares this view. This clearly

indicates that it is the common goal that is driving the relationship. This common goal is firmly illustrated by an example of Mrs. Fritzsche, who states that “during the transitional period after

January 1, 2015, there were multiple municipalities with administrative problems. These problems were so big that some of them did not pay us for over a year. However, we kept providing the care to our clients, because we need to help these children. This is also the view of the municipality. We just kept providing the care the children needed, trusting that the municipality would eventually pay us, and they did.” This example expresses the building of trust in the relationship between the

(24)

24 maintenance and youth care, both parties contact one another when new innovations come to light or when problems occur. In both relationships, there is also a significant amount of informal contact between the municipality and the external organizations. However, there seems to be less informal contacts in the relationship of youth care compared to landscape maintenance (although municipal and external employees intermingle at the ‘shopfloor’ and at that level the contacts can be quite informal and intensive). This might be explained by the fact that in landscape maintenance most people are working at the ‘real’ operational level and that the municipality has municipal yards, where

supervisors and contractors come together. In the provision of youth care, the field professionals at the operational level are also very important, however, it seems that the diagnosing and coordinating layer is also relatively large here. Therefore, it seems obvious that in the case of landscape maintenance there is more informal contact, because compared to the relationship between municipality and youth care organizations, they have a place where the many operational employees naturally meet. Another major difference is the central communication system that is in place between youth care organizations and the municipality, this increases the speed of communication while guarding the privacy of their clients. However, the system also reduces the number of direct (informal) contacts between the employees from the municipality and the external party.

5.5 Performance agreements and measurability of outputs

At WerkSaam, concerning landscape maintenance, Mr. van Essen states that it is very clear what the municipality expects of the work that is done by his employees and what financial budgets are available for this work. With respect to the financial budgets, once these are agreed they can be considered as a given for the year, they are strict and can in principle not be debated during the year. Further, there are clear performance agreements that WerkSaam has to comply with. The main indicator here are the ‘images’ provided by the municipality. These ‘images’, as discussed previously in the section of municipal goals, are very clear and are written down in the ‘green management plan’, which is one of the documents obtained from the municipality for this research project. For example, the exact number of square meters of lawn that has to be mowed, the exact number of trees that have to be pruned down each year and the amount of hedges that needs to be clipped are present in this plan. Furthermore, for each activity there are performance agreements. There are, for example, 5 pictures of different types of lawns, ranging from category A+ to D. Rank A+ being the best

(25)

25 After the work is done by the contractors, the supervisors, who are employed by the municipality, check and control if the work was done properly and if it is conform with the ‘images’ demanded by the municipalities. They do this by taking a sample of the work that is done, because checking everything would be too time consuming. Mr. Blom states that “most of the time we carry out this

control on appearance and experience, so we do not go onto the lawn and measure the grass with a ruler. However, when there is a discussion between the municipality and a contractor, these things can happen, and we can go onto the lawn and measure exactly who is wrong or right.” As stated

before, both Mr. van Essen and Mr. Blom have indicated that, in practice, there can still be some discussion about what exactly fits a certain ‘image’. For example, Mr. van Essen pointed out that a lawn is not always exactly level, this means that in some areas of a particular lawn the grass may be five centimeters and in some other area it may exceed the maximum of eight centimeter. However, in general terms, both parties state that the expected performance levels are very clear and concrete. In the case of youth care, the performance agreements are somewhat less clear and concrete. When asked about the performance agreements with the external organization Mrs. Proost states that “last

year was a transitional year and it was quite clear for us, we knew how much care was provided in 2014, and we just made adjustments to that for 2015. In the beginning of the year we indicated the maximum amount of money the external organizations could get, and that was it.” This indicates that,

at least for 2015, there were no clear performance agreements and that they instead were only concerned with the inputs, how much money was given to the external organizations. This year, the municipality employs a slightly different system, where external organizations can enroll in different specializations for which they get a set amount of money in order to provide several different kinds of care (for which they enrolled). In total, the municipality of Medemblik has ten different areas or types of youth care, with for example an area of dyslexia, an area of foster care and an area of youth care plus. For each area of care, there are different performance agreements. However, after inspection of documents concerning the requirements for providing care in the area of youth care plus (the area in which Esdégé-Reigersdaal is predominantly active), it can be said that they are formulated quite ambiguously. For example, one requirement states that “the provider of care must strive to organize a stay for the client as short as possible, but as long as needed, to ensure that every child who needs help actually get it.” This statement is quite ambiguous, because generally it is unclear how long of a stay is needed, and how short the stay can be to have any effect. Also, this statement suggests that if one organization has unlimited resources, it can provide care for every child indefinitely and therefore should not strive for a stay as short as possible or as long as needed, because it is able to ensure the help of all children who need care. “We do not have very concrete agreements for each type of care,

this is something we let go as a municipality” said Mrs. Proost. She states that it is mostly up to the

(26)

26 doing, but that the municipality has little knowledge about how this care is actually performed. This statement is reinforced by Mrs. Fritzsche, who said that “we have one mutual goal, and every

organization is free to try to attain these goals in their own way.” This way of controlling external

organizations seems to have some traits of a laissez-faire approach practiced by the municipality, at least with regard to the way of working at the operational level.

However, the interviewees also clearly stated that the maximum budget available to the care provider was clearly formulated. Agreements are made about the number of the various types of care that can be provided and the prices per unit of each type of care; in this way the municipality tries to control the financial budget quite strictly. However, the civil servants also indicated that in emergent cases some flexibility is possible, so that the provision of care does not necessarily have to stop if, for example, in November the annual budget is exceeded. Nevertheless, the financial control seems to be (much) stricter than the control with respect to the contents of the work and its outputs.

Further, the municipality also tries to obtain at least some form of control in the case of youth care. As a mechanism of control the municipality relies heavily on interviews with parents from children who are a client of one of the external organizations. Mrs. Siksma stated that “in principle, this is our most

important instrument to check if the external organization is doing its job properly. When a child is being treated by an organization and we hear from the parents that things are improving, then you knows things are going well. However, when the child’s progress is stagnating or maybe even declining, we need to change things.”

From the information provided above, it can be said that there are some major differences in the performance agreements and the measurability of outputs in the areas of landscape maintenance and youth care. With landscape maintenance, clear goals are set in terms of the expected performance and results. Moreover, the outputs can be precisely measured. The municipality also makes observations to control the quantity and quality of the work done and thus keeps an eye on whether the agreed upon performances are realized. In the financial sense, the annual budgets available for the landscape maintenance are also very clear and can in principle not be exceeded. In the case of youth care, the performance agreements and goals are very ambiguously formulated and quite vague. The

(27)

27

5.6 Accounting information

When asked what kind of information WerkSaam provides to the municipality, Mr. van Essen states

“that is actually two fold. For the activity of landscape maintenance, we have certain activities that we have to perform that are stated in our contract. We provide interim reports about these activities every month, and provide measures about the quality of the work to show that we still comply with the performance agreements. For the organization as a whole we provide our annual budget, financial statements and provide an interim report for each quarter.” These provided reports are then checked

by the (financial) civil servants of the municipality (and probably in some main lines and/or details by the members of the council). Mr. van Essen further indicates that, for the company as a whole, the financial statements are quite important to the municipality. The accounting documents, such as the budget and the annual account, are discussed in two or three meetings a year at the highest

management level (although these discussions are often not really in-depth, because the important issues and interesting details are already known from the information provided to the municipality and because the civil servants have already checked the documents).

However, if we solely look at the management of the activity landscape maintenance, i.e. the operational level, then the annual reports, budgets and financial statements of the contractors do not seem to be of importance to the municipality. On the question what kind of information the external organization provides to the municipality, Mr. Blom states that he wants interim reports from every organization every four weeks, including one work meeting, also every four weeks. These reports are mainly about planning, timesheets, labor hours, activities, possible complaints from citizens or

municipality and the work done. In general terms, the work meetings focus on the work and its quality. In fact, according to Mr. Blom, documents (such as annual budgets and financial statements) are not so very important during these meetings at the operational level between the municipality and the external organization. However, financial affairs can also receive some attention, for example, because an unexpected problem is noticed that might require extra budget. However, at this operational level he does not expect budgets and annual reports or financial statements from all these external

organizations. That is something for another management level and the financial department of the municipality. He states that these things do not matter to him and that he evaluates these organizations mainly on the quality of work they provide, not their financial statements. This suggests that, at the operational level, the municipality strongly focuses on activities and outputs when controlling the landscape maintenance. At the higher management level, financial issues also play a role in the control of the external parties and there the accounting reports do receive a certain amount of attention

(although they are, generally speaking, probably not discussed in detail during the formal meetings). In the case of youth care Mrs. Proost states “we ask interim reports from the external organizations

(28)

28 provide annual reports and budgets at the end of the financial year, however, this information is only processed by the finance department of the municipality and therefore not checked or looked at by other people in the municipality. “We do not concern ourselves with these types of financial

information” Mrs. Proost said. This means that people such as Mrs. Proost or Mrs. Siksma, whom

both are managers concerning of the youth care and make decisions regarding the youth care at the municipality, do not look at this financial information provided by the external organizations, other than how many clients each organization treats. The only instances when Mrs. Proost and Mrs. Siksma concern themselves with financial information is “when there are new developments, i.e. new types of

care that have to be provided, or when an external organizations has to justify how many clients it has treated.” Although finances are controlled strictly at the higher management level, here too, the

operational level of the municipality (and the external party) do not pay much attention to the financial issues as documented in the accounting reports. The focus in the control of the external organization is mainly on activities or number of clients receiving specific therapy.

If we compare the two outsourcing relations, we can observe that in both cases the financial issues (and related to this: the formal accounting documents, such as the budget and the annual account) do not receive much attention at the operational level where the research focused on. The control of the financial affairs is important, but this is something for the financial specialists at the municipality and the higher management (and political) level. At the operational level, in both cases the control by the municipality focuses on the work actually done. However, there is a major difference between the two cases. The control of the landscape maintenance focuses more on the output and their quality (which can be defined and measured relatively easily) and are reported monthly in an ‘accounting document for the operational level’. However, the control focus of youth care is mainly on activities and number of clients (and this is what is reported in the accounting documents at the operational level). This might be because for youth care, outputs and their quality are hard to define. Mr. Blom from the landscape maintenance stated that for him, the most important point in evaluating an external

organization during the monthly meetings is the quality of work the organizations provide. However, he emphasizes that the municipality foremen are also involved in the process of the work itself, also if it is outsourced, to guide or at least monitor each organization in its day to day operations. In that sense, the monthly reports are mainly a kind of summary and overview and the monthly meetings are a moment to pay attention to issues that might need special attention.

(29)

29 limited municipal control of the outputs in the field of youth care, might be because the outputs of the organizations providing youth care are difficult to measure.

5.7 Trust

In the two researched cases, trust seems to play an important role in the control of the outsourced activities. In both cases, the municipality and the external organization indicate the good relations between both parties, whilst in the case of youth care the expertise and professionalism of the external organizations is also explicitly valued. With respect to WerkSaam, it should be noticed that the municipality of Medemblik is one of the co-owners of this organizations (this is organized as a public sector agency owned by seven neighboring municipalities). This indicates that the organizations, although it is a different organization, is in fact also quite ‘close’ to the municipal organization and working on the same goals. This seems to influence the relationship between the two parties and probably the level of trust.

As we have seen from the section above, it is possible for trust to build up in the relationship between the municipality and external organization. In the case of landscape maintenance, Mr. Blom argues that it is the underlying relationships that matters most to him, and not the financial statements. Mr. Blom states “when for example an external organization has to fertilize the grass, we have to trust the

organization has done a good job. Most of the time you fertilize the grass right before it is going to rain, therefore it is difficult for us to check if he did fertilize, and if he used enough fertilizer. These kinds of things are just a matter of trust.” This statement clearly expresses an apparent degree of trust.

WerkSaam has always provided high quality work and has just signed a new four year contract with the municipality. In municipal terms, a contract of this length is quite rare. Therefore, this too is a signal that the municipality trusts that WerkSaam is able to keep providing their expected quality. Also, there is a lot of informal contact between the municipality and WerkSaam on an operational level. Civil servants and people from the external organizations share information about new technologies and ways of working (which they provide themselves, without being asked), and if problems occur, the municipality automatically expects (and gets) the external organizations to provide information and an explanation about these problems. Besides that, the municipality controls the external organizations based on samples, and therefore has to trust the external organizations the remainder of the work is also done properly.

In the paragraph regarding relationships and contacts, an example has been provided where Esdégé-Reigersdaal kept providing care, even when the municipality did not pay them for over a year because of administrative issues. From this example we can establish that, at least from the side of the external organization, there is a certain degree of trust in the relationship. Moreover, when Mrs. Proost was asked how the municipality controls the external organizations, she states “on the one hand, you know

(30)

30

municipality have the responsibility, so we have to try and check what exactly is happening at these organizations.” When asked what the most important thing is governing the relationship between

municipality and external organization, Mrs. Siksma stated “trust” after which Mrs. Proost said “trust

and honesty, those are the two most important pillars, the basis for the relationships.” These two

examples clearly express there is a high degree of trust the municipality places in the external organizations. This trust also becomes apparent if we look at the way the municipality controls the external organizations. The external organizations are to a large extent free to decide how the work is carried out on an operational level. This signals a degree of trust the municipality has in the external organizations, they trust in their professionalism and that the work is being performed properly and really is for the benefit of the child. Also, the same as is the case with landscape maintenance, both civil servants and employees from the external organization expect to be kept informed about problems, new information and inventions within their respective field. Moreover, both the

municipality and the external organizations expect to share a common goal, and therefore they expect each other to act in a way that makes achieving these goals possible.

One thing to note is that before the outsourcing of tasks from the municipality related to the youth care, i.e. before January 1, 2015, some organizations were already working together with the municipality in some areas. Mrs. Proost has indicated that the building of trust with these organizations has not gone necessarily faster than with the newer organizations, who started the collaboration with the municipality after January 1, 2015.

(31)

31

6. Conclusion and discussion

Although municipalities in the Netherlands have traditionally outsourced several tasks, the influence of NPM has meant a further increase in outsourcing. One important change, which can also be related to NPM, is the decentralization of several tasks from the central government to the municipalities. Since January 1, 2015 one of the responsibilities the central government has shifted to the

municipalities is in the area of youth care. Because of various reasons (mainly a lack of capacity and expertise), most municipalities have chosen to outsource the (majority of) tasks related to this newly acquired responsibility to external organizations. This study, based on an analysis of the literature on outsourcing relations and two case studies, tries to investigate two seemingly different outsourcing relations in the municipality of Medemblik. These two outsourcing relations are in the area of youth care and in the area of landscape maintenance. During this investigation, particular attention went out to the roles accounting information and trust play in this relationship.

One of the key features of NPM, as presented in the literature, is the shift from input and process control to output control. In the instance of landscape maintenance, there seems to be indeed a certain emphasis placed on the outputs produced by the external organizations. However, the municipality also still intensively controls the inputs and processes related to landscape maintenance. At the higher management level, finances (i.e., inputs) and a quite strict input control are important. At the more operational level, the focus is more on activities, processes and monitoring of the work done. At the operational level, there is also a large amount of informal contact between the municipality and the external organization (in the municipal yards for example) about what is happening on the work floor, problems that have occurred etc. This generally contributes to good relationships and trust between the parties involved and this certainly seems to be the case with respect to WerkSaam, the external

organization included in this research. Furthermore, there are monthly meetings between the municipality and the external organization in which a considerable amount of (mostly operational) information is being discussed as well as, just the overall state of affairs of the external organization and the municipality. Reports on activities, planning, etc., also play a certain role there. This indicates that the municipality does not only concern itself with the outputs (which are randomly checked), but also places a considerable amount of importance in monitoring the activities and processes to get to these outputs. Further, in practice, trust between the parties involved seems to play an important role. There are very frequent informal contacts with the external contractors (among which WerkSaam) and WerkSaam has a long-standing and good working relation with the municipality. So, despite a