4 The allocation of decision rights
The above discussion leads us to a combination of centralised and decentralised decision rights characterised by a “tight/loose” fit with “tight” or centralised decision-making over issues that have “whole system” implications such as: major government objectives, key public policy values and broad taxation and resourcing decisions. “Loose” or decentralised decision-making may be appropriate, in contrast, over many other decisions in order to enable those with better information, knowledge and relationships with clients to make more appropriate and timely decisions.
Thus, a tight/loose pattern of decision-making is characterised by a clarity of objectives and values that is articulated and enforced by the centre. While, at the same time, those at the coal-face are given the freedom to manage (and the associated accountability) in order to ensure the best decisions. Scott (2001) discusses a similar notion, which he calls “strategic management”. He notes, “strategic management is about promoting direction, purpose and transformation from the management centre, while preserving the devolved management that is essential for quality and innovation in service delivery and also creativity in policy analysis.” (Scott 2001:321)
The presence of location-specific information and the need for customisation suggests decentralised discretion and control over how client needs are met. Centralised control over the overall objectives allows responsiveness to government objectives and ensures alignment with those objectives while decentralised control over how those objectives are achieved prevents the risk of decision-makers becoming detached from the needs of clients and enhances innovation and flexibility in service delivery.
Decentralised discretion and autonomy over the ways in which the government’s key objectives are achieved may help allocate decision-making rights to those with the comparative advantage to undertake them, thus preventing the concentration of an enormous load of decision-making on a few people and resources. For example, some decisions relating to service delivery should be allocated to those at the frontline while politicians undertake significant resource allocation decisions and determine the major objectives of the government. Decentralised decision-making does not eliminate the need for central coordination, indeed, it may strengthen that need in order to address the fragmentation resulting from decentralisation of authority to a larger number of decision-makers (Hart 1998).
Incentive problems must be taken into account when adopting a decentralised allocation of decision-making rights. In order to maintain centralised control over major objectives, increased performance monitoring, a combination of value/cultural alignment, and greater management of accountability processes by the centre may be necessary.
Decentralised discretion over the ways in which government objectives are achieved allows for greater participation and community involvement. Centralised control where national guidelines and standards are required enables “tight” control over government objectives. For example, there may be national standards relating to equal employment opportunities while other decisions regarding employment conditions are decentralised to fit the requirements of specific organisations and employees.
Through a tight/loose pattern of centralised and decentralised decision-making it may be possible to achieve the benefits of one approach without losing many of the benefits of the other. For example when decentralising decision-making rights a “tight/loose” approach suggests it may also be appropriate to use incentive mechanisms, contracts, guidelines, reporting requirements and performance monitoring. And when centralising decision-making rights it may be appropriate to adopt additional mechanisms such as consultation processes, surveys on results and reporting mechanisms. This enables a clarity of objectives and values to be articulated and enforced by the centre while managers with the location-specific knowledge are given the freedom to manage in order to make the best decisions.
4.1 Examples
The following examples show how a tight/loose pattern of decision-making might look in practice. These examples show that the solution often lies in a combination of centralised and decentralised decision rights, typically characterised by tight or centralised control over major objectives and loose or decentralised discretion and autonomy over how those objectives are achieved. This is not intended to be an exhaustive discussion of the issues relevant to each example but rather a useful way of considering the practical application of a tight/loose pattern of decision rights.
4.1.1 Human resources
One of the most important areas of information in this case is that relating to the performance of staff. On a daily basis this is most likely to be observed by “front line” managers. While some information relating to the performance of staff is likely to be transferable, it is important that the section managers have the rights and powers to respond to staffing issues as they arise. Within a department the responsibility for the day-to-day management of staff needs to rest with the person who has the relevant information.
If the Chief Executives of departments are to be held accountable for the actions of their staff then they should have the rights and responsibilities associated with being an employer. For example, they may have discretion over whom they employ and over many of the conditions of employment but not around some of core public sector competencies. Related to the issue of accountability is the need to ensure adequate incentives for Chief Executives. This requires performance monitoring, likely to be undertaken by central agencies.
There is a need for some public sector wide and economy wide standards, for example equal opportunities policies and safe working conditions. The setting and monitoring of such standards, therefore, may be centralised.
Economies of scale may be possible in areas such as advertising vacant positions (central agencies may provide a valuable brokerage role, for instance, in managing a vacancy web-site) and training of staff. However these benefits may be outweighed by the cost of obtaining the relevant information from departments.
Thus the solution is likely to result in a combination of centralised and decentralised functions, with day to day management of human resources and decisions regarding the allocation of resources (such as remuneration) decentralised to departments while central agencies set and monitor public sector wide standards (such as EEO policies).
4.1.2 Benefits payments
In this case there is a need for national guidelines outlining basic entitlements, including who is entitled to a benefit and the amount of the entitlement, in order to ensure national consistency, fiscal control and an equitable access to benefits. The setting and monitoring of such guidelines, therefore, is likely to be centralised.
However, front line staff need to decide whether an individual fits the eligibility criteria. Again this is necessary in order to ensure equitable access to benefits. Front line staff also need to have some decision-making rights in order to ensure timely decisions are made, particularly with regard to supplementary benefit payments and emergency assistance. Thus, while guidelines and standards may be set centrally, it is important that other decision making rights (such as the right to deal with some exceptions, the right to decide eligibility etc) relating to service delivery are decentralised to frontline staff in order to enable a timely and appropriate decision to be made.
Economies of scale may be possible in back office”functions such as organising and facilitating regular payments. Thus, these types of functions may be performed by a central office or by a shared services centre.
Again, the solution is likely to lie in a combination of centralised and decentralised functions, with front line staff having the discretion to make some decisions regarding eligibility while the setting of basic entitlements and eligibility guidelines and standards are set centrally and with some centralisation of back office functions.
4.2 Maori
There are two ways of looking at centralisation and decentralisation questions with regard to Maori. First, given that the Treaty of Waitangi is between Maori and the Crown, Maori need to be able to deal directly with the Crown (ie, Ministers and their direct advisors) on Treaty of Waitangi related issues.
Second, the tribal based nature of the Maori community and a recognition that the Treaty of Waitangi was signed by chiefs on behalf of their iwi, rather than on behalf of a Maori nation, suggest that enhancing the responsiveness of the public sector to Maori clients may require greater decentralisation. A more participative mode of decision-making may be required to empower Maori, enhance local accountability for Maori issues and ensure public services are more responsive to particular communities and cultural groups, including Maori. Decentralised decision-making can serve as a tool to ensure Maori clients are better informed about government services; ensure public agencies are more aware of the social, economic and cultural influences affecting Maori; ensure government services are more relevant to the needs of Maori; ensure Maori clients have a greater sense of ownership; and improve client access to services through the removal of social, physical and psychological impediments (Boston, Martin, Pallot and Walsh 1996).
Both perspectives (the first in favour of centralisation and the second in favour of decentralisation) are relevant, and in some cases, both may be relevant to the same issues.
4.3 Central agencies
The factors and underlying frameworks in this paper are particularly relevant with regard to the role of central agencies. The factors derived from the various perspectives help to answer key questions concerning the role of central agencies:
Which functions are most efficiently and effectively done at the centre?
How directive should central agencies be?
Should any of the functions currently undertaken by central agencies be decentralised?
Are there any additional functions that should be undertaken by central agencies?
