From Quality Improvement to Better Meta-Governance: The Case of a Housing for Workers in Mexico

1. From Quality Improvement to Better Meta-Governance: The Case of a Housing for Workers in Mexico Ernesto Velasco-Sánchez Cívicus, Consultores México ernesto.velasco@civicus.com.mx

2. Contents • Introduction • Quality and public sector reform: from efficiency to metagovernance • Infonavit’s case: • Background • Introducing quality management • From quality to metagovernance • Concluding remarks

3. Introduction • National Institute of the Found for Housing of the Workers (Infonavit) is a Mexican organization created in 1972 aimed to fulfill the right of workers to housing by means of collecting a social security duty (5% of worker’s salary) to fund mortgages for private sector workers. • Since the year 2001 it has made efforts to redesign its processes and increase its beneficiaries’ satisfaction with its services. • The success of those changes has resulted in more ambitious objectives and to a wider interpretation of the public responsibilities of the organization. • Infonavit´sexperience with quality management is presented as an example of how the implementation of such initiatives results gradually in a wider understanding of what constitutes “quality” in the housing policy domain.

4. Quality and public sector reform: from efficiency to metagovernance • Quality Management (QM) in the public sector has been controversial: • As part of New Public Management, QM has been seen as a way to deal with the negative aspects of traditional public administration (inflexibility, fragmentation, rule and procedure oriented…) • It has been seen as a threat of public sector ethos given its association with private-sector practices • Others consider that QM can help governments to be more focused on the needs and expectations of their users / beneficiaries / costumers and, therefore, improve their performance and even legitimacy • In reality, the relation between QM and public sector reforms is more complex as these positions tend to recognize

5. Quality and public sector reform: from efficiency to metagovernance • Many authors (for example, Pollit and Bouckaert, 1995) have argued that the understanding of the idea of “quality” varies greatly in different countries and reform projects • Even the QM literature has develops different definitions of “quality” (Aguilar 2009 and Bovaird and Löfler, 2003): • Quality as “conformance with requirements” • Quality as “fitness for purpose” • Quality as “capacity to satisfy or exceed expectations” • Quality as “the totality of properties and characteristics of a product or service that render it capable of satisfying certain needs, as it complies with predetermined requisites”

6. Quality and public sector reform: from efficiency to metagovernance • The reasons for introducing QM vary greatly from country to country and even within the same nation. The preferred definition of “quality” also varies greatly. • These efforts, even if important, have been criticized because they have frequently been implemented in a disjointed fashion and, thus, resulting in a greater fragmentation of the efforts of different public entities. • Quality in the public sector has to deal not only with the individual costumer, but with the impacts that one generates in a whole community; with present beneficiaries and future ones (Gaster and Squires, 2003).

7. Quality and public sector reform: from efficiency to metagovernance • Setting standards for an isolated public office may not be adequate and it may even hamper the achievement of more general policy goals that usually require the collaboration of many actors (public and private). • As a result, the idea of public-private partnerships and of promoting more participation of civil society organizations in service delivery has been a growing concern in recent years in many countries.

8. Quality and public sector reform: from efficiency to metagovernance • The governance literature has stressed the idea of productive collaboration between public, private and social actors to define and achieve common goals: • “Governance is the set of interactions in which government, private sector and civil society involved in order to solve public problems and create new social opportunities” (Meuleman, 2008). • Meta-governance is “a means by which to produce some degree of coordinated governance, by designing and managing sound combinations of hierarchical, market and network governance, to achieve the best possible outcomes from the view point of those responsible for the performance of public-sector organizations” (Meuleman, 2008, 68).

9. Infonavit’s case: background • 1917: The Mexican Constitution includes the obligation of employers to give housing to their employees, but was not implemented. • After difficult negotiations, in 1970 the Mexican government created a Housing Fund financed by an employer’s social security contribution (5% of salary of each employee) aimed at offering mortgages to workers. • The Infonavit is the organization created to collect the contributions, administrate the Fund and operate the loans. • It is a tripartite organizations with representatives of the government, the employers and the workers. • It dominates 60% of the public and private mortgage market in Mexico. • It suffered from deep engrained corruption, financial mismanagement and lack of leadership for many years.

10. Infonavit’s case: background • After the more than 60 years of a single party dominance, in the years 2000 a president from the opposition came to power (Vicente Fox) • Fox was a business man with an “entrepreneurial” approach to government, that decided to propose to designate as general Director of Infonavit a former head of a private bank’s mortgages division (Víctor Borrás) • The new government’s target of financing and constructing 750,000 housing units per year relayed heavily on the Infonavit given its dominant position. • In 2001, the introduction of QM techniques begun, in the first instance as a way to standardize the internal processes of the Institute across the country, improve the pace of mortgage allocation and control costs.

11. Infonavit’s case: introducing QM • A two-fold strategy was adopted between 2001-2006: • Strengthening and standardizing costumer service at local offices with a “single window” model (CESI) • Intensive use of TICs to reduce costs, provide consistent information to users and reduce work loads at local offices • Streamlined call-center • Web page and SMS • E-kiosks • Quality understood as “compliance with requirements” and “waste reduction”.

12. Infonavit’s case: introducing QM • Results 2001-2006: • More efficient and predictable organizational performance • Increased capacity to process applications, with more client-oriented standards • Reaching a 500,000 mortgages a year target • However, not a consistent increase in costumers satisfaction, especially referring to the quality of the housing purchased with the Institute’s mortgages • A paradox appeared: as the capacity of the Institute increased and the access to its mortgages was made easier, that caused that the beneficiaries in many instances rushed to buy a house that may not be adequate to their needs…

13. Infonavit’scase: introducing QM • Increase supply of affordable housing, but: • Too crowded • Lacked common open spaces or parking • Far from urban centers and from work • Insufficient public infrastructure, services, and transport… • In some cases, the newly acquired units were left abandoned and the credits defaulted… • The increase in service quality was generating an inadequate housing supply and was not helping the beneficiaries to make the right investment decisions…

14. Infonavit’s case: from QM tometagovernance • In 2006 a new government ratified Borrás a General Director of Infonavit, and that allowed continuity in the reforms efforts. • A greater emphasis on the workers quality of life was adopted • Different means to evaluate the quality of the housing supply were developed… • Quality improvement not only understood as better to procedures and services …but also as replacing previous practices that resulted in the subordination of the worker’s needs to decisions made by other actors (the Institute, housing developers, and local governments, among others).

15. Infonavit’s case: from QM tometagovernance • The new approaches, however, required that the institute had to influence the behaviors of many actors, both public and private, whose combined performance was key to provide better housing: • Federal, state and local authorities • The Infonavit’s users • The developers or housing builders • The Infonavit had to engage in metagovernance activities, in order to achieve better collective results from the key actors of the Mexican housing sector.

16. Infonavit’s case: from QM tometagovernance • 3 examples of metagovernance strategies: • Reducing corruption and transparency: • Corruption was one of the main complaints by beneficiaries in the past • The introduction of standardized and computerized procedures to allocate mortgages reduced the spaces for unfair treatment, the need to pay braves or to hire informal intermediaries to access information, etc. • Transparency reduced also uncertainty to housing developers, as the amount of mortgages to be allocated in each region in the next five years was made public... This was an incentive to produce the right amount and type of housing units.

17. Infonavit’s case: from QM tometagovernance • Offering nudges (Thaler and Sunstein , 2009): • Delivering information about the quality of the housing developments online • Index of housing quality (Icavi): taking into consideration the preferences of the Institute’s beneficiearies, it assesses quality of houses available to be purchased with credits from Infonavit considering aspects such as: structural security, utilities, habitability (number and size of spaces), commercial value, quality of construction (http://201.134.132.148/ICV/Controller) • Housing Register (RUV), allowed the standardization of the information on the whole housing sector and the creation of a Geographic Information System (SIG), online and geo-referenced data base of the housing supply with satellite photos and information about location, proximity to facilities (access to roads, markets, churches, educational centers, shopping centers) among others. (http://sig.infonavit.org.mx/SIG/ )

18. Geographic Information System (SIG)

19. Infonavit’s case: from QM tometagovernance • Offering nudges: • Program on Municipal Competitiveness in Housing (PCMV): aimed at ensuring a more orderly process of urbanization in which houses are built in appropriate environments. • Local governments are assessed in relation to their capacity to perform regulatory activities regarding the development of housing projects. • It considers incentives to well-performing municipalities (local authorities receive the payment of the property tax through the payments workers submit to Infonavit) and provides supports for less capable ones.

20. Infonavit’s case: from QM tometagovernance • Articulating needs (McGregor Jr., 2000) : • New model of “social collecting”: the repayment of allocated loans is the most controversial aspect of the Infonavit operation. • The new “social collecting” model incorporates in the calculus of the mortgage payments an unemployment insurance and others means of supporting families, without recurring to foreclosures. • It grants greater flexibility in debt restructuring and gives preference to the recuperation of defaulted loans and preventive actions over judicial execution. • It even has developed a job-finder service to reduce the period that the beneficiaries of a mortgage remain unemployed.

21. Infonavit’s case: from QM tometagovernance • Articulating needs: • “Green mortgages”: consist in a bigger loan for properties that have energy saving devices that reduce utilities billings. • As a result, the disposable income of the household increases, making less probable that it will incur in default and allowing it to invest in the maintenance of the property that results in the preservation of its value. • Therefore, both, the beneficiary and the Institute gain.

22. Concluding remarks • The Infonavit case allows identifying this evolution of the idea of quality within an organization that was successful in achieving better performance. • The success, and not the failure, was the driver behind adopting increasingly wider understanding of quality: from efficiency, to costumer service and “meeting client’s needs and expectations”. • The success in improving the customer service revealed that the impact of the Institute upon the quality of life of its beneficiaries was questionable. A wider understanding of quality, as quality of life, was then adopted.

23. Concluding remarks • Infonavit is an example of how improving public services quality can also lead to better governance in policy areas by empowering the beneficiaries and sending the right signals to private actors. • The Institute was in a good position deal with the metagovernance of the housing sector, given its large share of the mortgage market in the country (coordination under the shadow of hierarchy). • However, it can also be argued that if the Institute had not invested a huge effort in strengthening its internal operational capacity and in increasing its social respectability and customer satisfaction, it may not had enough leverage to successfully change the behavior of its beneficiaries, other public authorities and private sector developers.

24. Thankyou! ernesto.velasco@civicus.com.mx