The Rationality of Control

1. The Rationality of Control What information do managers use and how do they use it? Dr Rodney Dormer Victoria University of Wellington

2. Concepts of Performance • It seems reasonable to suggest that, following an (ongoing) series of reforms of public management practices, concepts of performance have become dominated by a rational economic discourse that emphasises: • objectivity – and facts • rationality – and targets and control • transparency – and evidence • economy, efficiency, and effectiveness – and products, consumers and customers Dr Rodney Dormer Victoria University of Wellington

3. Measuring the immeasurable The theoretical approaches that shaped new public management models of public sector management in the late 1980s and early 1990s reflect the measurement principles of scientific management whereby resources (inputs) and final goods and services (outputs) are viewed as being objectively defined and measured so as to control and optimise the economy and efficiency of each agency’s work.

4. Measuring the immeasurable • However, this instrumental approach to the measurement and management of performance has been criticised by those who perceive the work of public sector managers as being less concerned with rational decision making and more an exercise in: • “muddling through” (Lindblom, 1955) or • “management by groping along” (Behn 1988).

5. Measuring the immeasurable “Nowadays, everything is measured, including highly ambiguous phenomena like well-being, social cohesion, crime and safety. In this world of measurement, phenomena are turned into crisp facts and figures, states of affairs can be assessed and comparisons with earlier, other, or imagined states of affairs can be made. By improving ‘numerical capture’, it is assumed, phenomena like well-being can be improved. “ (Noordegraaf, 2008).

6. Measuring the immeasurable “Measurement in the public sector is less about precision and more about increasing understanding and knowledge” [Mayne, 1999]

7. Objective representation Objective representation occurs in situations where a formal logic or “scientific calculus” can be applied. This occurs, for example, in a “production” organisational environment (Wilson, 1989) in which work done and the results of the work may be observed, and goals and means-ends relationships are well defined and able to be monitored. Such an environment facilitates specific and quantitative measurement.

8. Subjective representation Subjective representation is socially constructed through social interaction, based on shared values, norms and goals. Rather than quantitative information, it employs anecdote, narrative and direct observation. This applies, for example, in organisational environments in which means-ends relationships are not clearly defined (as in Wilson’s (1989) “coping” organisational environment), and the final goods or services are highly variable. In such environments performance is benchmarked against professional standards and normative frameworks (OECD, 2000).

9. What information do managers use? We might expect a tension between the use of subjectively framed local knowledge for local decision making and the standardisation and objectification of that knowledge for purposes of upward accountability and control However, recent research has showed that at the local level managers rely heavily on objectively quantified information and managers at the national level are not averse to picking up the ‘phone to find out what is really going on.

10. The use of narrative in sensemaking “… most models of organisation are based on argumentation rather than narration, yet most organisational realities are based on narration “ (Weick, 1995) “… given mankind’s propensity for inductive generalisation, noteworthy experiences will often become the empirical basis for rules of thumb, proverbs, and other guides to conduct” (Robinson, 1981)

11. Beware “the narrative fallacy” Narrative is used to impose order on, and make sense of, the confusing mass of information with which we are confronted. However, we use narrative to select from, and thereby reduce down, that mass of information. What we select is often the most dramatic or spectacular events or factors – despite the fact that those events or factors may not be representative of the complexity and reality of the whole.

12. Beware “the narrative fallacy” “The explanatory stories that people find compelling are simple; are concrete rather than abstract; assign a larger role to talent, stupidity and intentions than to luck; and focus on a few striking events that happen rather than on the countless events that fail to happen. We humans constantly fool ourselves by constructing flimsy accounts of the past and believing they are true.” (Kahneman, 2011)

13. A Divergent Rationality ? “… the growing use of business and managerial terminology in child welfare has tended to create a gulf between those who direct practice and those responsible for managing systems of child welfare” (Connolly, 2007, p.835) “… the dangers of increasing reliance on procedures, guidelines and targets that routinise social work practice to make it quantifiable, thereby undermining professional autonomy, attending to organisational rather than client goals and downplaying the non-measurable aspects of performance.” (Tilbury, 2007, p.119).

14. OBJECTIVE FUNCTION FOCUS To be effective in terms of making a difference Outcomes Institutional Functions To produce the right things To produce sufficient quantity and of the right quality ManagerialFunctions Outputs Congruent Objectives Technical Functions To use our resources appropriately and efficiently Processes/Activities To manage and retain limited resources Inputs A Performance Measurement and Management Framework

15. A Performance Measurement and Management Framework Institutional Functions - are concerned with enabling managers to provide “evidence that the organisation is meeting standards or engaging in activities that confer legitimacy on it” (Kanter & Summers 1989). Managerial Functions - are the domain of operational managers and are primarily focused on outputs and processes. They are primarily concerned with structure and process corrections and internal resource allocations. Technical Functions - focus on process and inputs, the efficiency with which inputs are used and the quality of the resulting products or services. This is the domain of Lipsky’s (1980) “street-level bureaucrat” who operates in a world of vague policy goals and insufficient resources.

16. Performance Measurement and Management Functions In Use

17. The Rationality of Control The rationality of control represents the underlying logic and mechanisms by which organisational performance is understood and managed.

18. The Rationality of Control Measurable Work and Results Representation Objective/Subjective Rationality Formal/Substantive Regulative Control/Shared Understandings [tight/loose coupling of frameworks]

19. Measurable Work and Results Inputs, Processes, Outputs or Outcomes ? Where both outputs and outcomes are unobservable there is likely to be a high degree of conflict between managers and operators in public agencies, especially those that must cope with a clientele not of their own choosing. (Wilson, 1989, p.169) “We monitor the activity that we know will contribute to positive results.” (CYF regional 8).

20. Measurable Work and Results Inputs, Processes, Outputs or Outcomes ? “There are some simple things you need to do every month … these are key things around the practice that we’re monitoring. A fair number of the reports are based around timeliness of completion of the task … the more frequently people get it done on time that becomes embedded; and then the quality of the work will probably improve as well.” (CYF national 4) “What I monitor is work coming in the door weekly. Whether we’re meeting those timeframes daily – traffic lights.” (CYF regional 5)

21. “ I’d love to talk to you about performance against outcomes, but we’re not there yet ” “a workforce that has never worked against measures” (CYF national 4). “Our measures largely, in terms of the public domain, have reflected timeliness - of getting to things and completing things, rather than a set of measures that actually go to the core of the organisation which is about improving young people’s lives. As though if you measured every step of the process and the process was done perfectly, then the lives would be improved.” (CYF national 2)

22. Performance ‘Dark Matter’ “We don’t capture everything that a Case Manager does which can be highly frustrating. Like, they can have someone that comes on the books today and they can work with them intensively and then they go and get their own job. You can not capture that stuff. Case managers would have a feeling that there’s a lot of stuff that they do that’s important that we don’t capture.” (Local manager in a public service department)

23. Objective and/or Subjective Representation ? “The monthly report uses measures such as getting court reports completed on time and other important aspects of activity that give us a level of confidence that things are being managed. “ (CYF regional 8) “I can look at all the data I want in the world … but it’s whether I think that people are making the right judgements. Is it my judgement that they are all trying to do a good job? Are they all trying to do the very best? Are they all mindful of the things that I consider important?” (CYF external 9)

24. Formal and/or Substantive Rationality ? “…if managers really understood the power information can give to a manager, how it can really open your eyes to let you know what is going on and really enable you to be a really successful manager, we’d have a lot more successful people. “ (CYF local 7)

25. Formal and/or Substantive Rationality ? “We know how many kids you’ve got coming through; we know what you’re forecasting. You’ve got the social workers, you’ve got the financial plan cost money. You’ve absolutely got enough money to do the job.” (CYF national 4) “The KPIs [key performance indicators] don’t input to good practice. They don’t tell us a story about good practice. … KPIs are just inputs into something else. I never tell anyone off for missing KPIs. I think it’s how you manage people to understand what it is they have to do in order to get them – why it’s important – and get that internalised and people will accept it.” (CYF local 7)

26. Formal and/or Substantive Rationality ? “[S]ocial workers want to have “caring, sharing, loving relationships with their clients.” (CYF local 6). “We’re working with people who have problems, but they also have a significant emotional edge around all of this. We’re talking about people’s kids.” (CYF regional 8) “The chief social worker’s office has advisors that can actually go out and informally sniff around and check things out. You may never see a report on it but what happens is there will be verbal briefings about what is happening and the solutions that need to be put in place. So that’s sort of like the informal way - it’s sort of like gut feelings.” (CYF national 1)

27. Formal and/or Substantive Rationality ? An integrated set of performance measures cascading down from government priorities, to Ministers’ purchase decisions, to the specification of managers’ objectives at each level of the organisation. or “Symbolic action” and “pseudo control” ?

28. Institutional Carriers and Framework Decoupling

29. Formal Rules and Procedures Formal rules and procedures exist in all of the agencies studied and act as a regulative mechanism by which performance management frameworks are communicated and reinforced. These rules and procedures are usually contained in documents such as the manuals which an interviewee from one agency described as “our bible, basically”

30. Formal Rules and Procedures … a lot of the things we’re looking at there are the reasons people end up getting fired at that level; do they follow the rules? (Local Manager) … how does anybody know what our success is if we don’t have procedures to follow? (National Manager)

31. Routines Learning “the tricks of the trade” in reporting is important because: “Assumptions are formed, whether you like it or not, and they aren’t necessarily an accurate reflection of what’s happening. … So every brownie point you can receive is well worth it – it helps you survive within the organisation and enables you to keep your focus on what it is you really want to achieve.” (Local Manager)

32. Artefacts “The CYRAS computer system is getting bigger, and bigger, and bigger. … It is so, so big now. To start a new social worker they say it takes a good two years for someone to learn CYRAS well. At the rate we’re going it’s going to take four years!” (Local Manager). A lot of people don’t know what they should be recording and how to do it … it’s my view that we spend hours and hours recording lots and lots of things we don’t need to know anything about. (Local Manager)

33. Social Networks of Roles and Procedures “We are very aware that we can’t do what we want to do in isolation, [without] building collaborative relationships across sectors [and] government departments; but also, certainly, within our communities. “ (Local Manager) “We’ve let them into the organisation; we’ve had them in our residences; all sorts of things. I think that’s given us more room. Instead of saying we’re protecting our position, I haven’t been defensive about it. I’ve said, ‘of course we can’t manage those difficult kids, who can?’ and they say, ‘OK, it’s difficult, isn’t it.’ “ (Local Manager)

34. Shared Understandings and Logics of Action “… to work in Child, Youth and Family, I mean I have a social work background, my whole being in this organisation is about improving services to families.” (Local Manager)

35. Shared Understandings and Logics of Action “I commissioned somebody outside the organisation to come in and do intensive supervisory management work with all the supervisors within the [area]. That’s 15 staff members. And some of these supervisors didn’t even know what our organisational structure looked like. They didn’t know the implications of working for a government department and that we were accountable to a Minister - those types of things. So it really opened our eyes to what we expected, or perceived, that they would know, that they didn’t know.” (Local Manager)

36. Shared Understandings and Logics of Action … they just missed out on some really good systems and some tricks of the trade - you know, how you survive. So simple things such as you’re going to assign a social worker to do an investigation. So which one are you going to choose out of the one’s that you haven’t actually done. You may as well do the one with 8 kids in as opposed to the one with one child in because that will knock off 8 KPI in one hit as opposed to one; where the presenting of information is pretty much the same. That sort of thing had never occurred to them. (Local Manager)

37. Shared Understandings and Logics of Action … every brownie point you can receive it’s well worth it - it helps you survive within the organisation and enable you to keep your focus on what it is you really want to achieve. (Local Manager)

38. Framework Decoupling To what extent does ‘framework de-coupling’ occur in your organisation? Why?

39. Congruence or closing the management loop? The de-coupling of formal and in use performance measurement and management frameworks will become more difficult as the institutional framework moves from being more regulative to being more cultural/cognitive. “The implementation of an institutional practice is symbolic, or decoupled, if it is not integrated into the management and organization processes” (Dillard, Rigsby and Goodman 2004)

40. The symbolic nature of management information There is an assumption that during the decision making process managers will gain and analyse information in a timely and intelligent manner as long as its marginal cost is less than its incremental value. However, in practice it would appear that managers do not carefully weigh the reliability, precision and relevance of information. Instead they collect and process more information than they could usefully use for decision making.

41. The symbolic nature of management information One suggested reason is that the information has a symbolic value, demonstrating the organisation’s commitment to rational decision making. More information leads to better decisions. Thus gathering information demonstrates a manager’s broad commitment to reason and rational choice; as does the manager’s bulging briefcase and laptop computer.

42. The symbolic nature of management information • Management accounting information may therefore be used to construct a reality that is: • a defensive image of having followed the most competent path of gathering all the available information before making a decision; • an offensive tactic involving a false reality for others, under the assumption that other managers are doing the same; or • a ritualistically created image of being a follower of rational choice

43. The Role of Management Information UNCERTAINTY OF OBJECTIVES OF ACTION LESS MORE Answer Machine Ammunition Machine UNCERTAINTY OF CONSEQUENCES OF ACTION Rationalisation Machine Learning Machine MORE (based on Burchall et al 1980)

44. Answer Machine If the objectives and consequences of action are not uncertain, the accounting information works as an answer machine. This is an ideal situation where algorithms, formulae and rules can be derived to solve problems by computation. It represents the default situation assumed in many dominant views of what role accounting information plays in organisations. Decision making occurs via computation.

45. Ammunition Machine Where there is uncertainty over the means to be used to reach an objective accounting information plays the role of an answer machine used by different parties to support their arguments. Where means ends relationships are less clear decision making is more of a political process involving bargaining and compromise.

46. Learning Machine If objectives are relatively clear but how to achieve them is not, accounting plays the role of a learning machine Decision making occurs via judgement involving ad hoc analysis, what if models and sensitivity analysis

47. Rationalisation Machine If both the objectives and the means to achieve them are uncertain, accounting information is used as a rationalisation machine by which actions are justified after they have been taken. Decision making involves inspiration as rationales for action emerge in the decision making process itself.

48. The Behavioural Aspects of Management Accounting Systems What is accounted for shapes what people see as important. Accounting systems are most certainly implicated in the design and functioning of organisations as we know them. (Burchell et al, 1980)

49. The Role of Management Information What role does management information play in your organisation?

50. Summary Summary The nature of the work undertaken and the results of that work may not always be able to be predetermined and subsequently monitored. The performance measures that are used may also reflect the predictability and consistency of the organisational production processes. In practice, managers at all levels within public sector organisations use a combination of both objective (calculation-based) and subjective (socially constructed) information.