Implementing “new public management”

This article describes a reform to improve delivery of state-funded employment services in the province of Quebec. It is based on a six-year field study conducted during the reform process and presents the reform's objective, the way it was implemented, and some of the lessons learned during the reform process. This study focuses on three points: the key steps that led to the implementation of an output-based contracting system between the state and non-profit organizations; why the process of implementing private-sector practices was unexpectedly long and complex; and the side-effects associated with the reform. Sommaire: Cet article décrit en profondeur la réforme entreprise pour améliorer la prestation des services d'emploi financés par l'État dans la province de Québec. Il repose sur une étude sur le terrain menée pendant six ans au cours du processus de réforme; il présente l'objectif de la réforme, la manière dont elle a été mise en œuvre, et certaines des leçons qui en ont été tirées. Notre étude porte sur trois points : les principales étapes qui ont conduit à la mise en œuvre d'un système de contrat axé sur les résultats et passé entre l'État et les organismes sans but lucratif; la raison pour laquelle le processus de mise en œuvre des pratiques du secteur privé a étéétonnamment long et complexe; et certains effets secondaires associés à la réforme. Over the past two decades, “new public management” (NPM) has had a clear influence on governments around the world (Hood 1991; Pollitt 2002; Ridley 1996; Scott 2001). NPM reforms have taken place in many countries, including the U.K., New Zealand, the United States, Canada, Australia, Sweden, the Netherlands, Italy and Norway (Guthrie, Olson, and Humphrey 1999). The literature as to whether reforms have attained their objectives is rather scarce, and the existing empirical evidence yields mixed results (Bilodeau, Laurin, and Vining 2007; Boyne 2003). As a contribution to this literature, we summarize a reform process that took place at Emploi Québec (EQ) from June 2001 to October 2006. During this period, EQ undertook extensive negotiations with a large number of non-profit organization partners to reform the contracting system by which the agency transferred funds for the variety of employment services the organizations delivered. The goal of the negotiations was to establish acceptable prices for employment services based on an “output-based” system – rather than the previous “expense-based” system – of state–non-profit contracting. We describe the steps taken to reform a system whereby EQ compensated the non-profit organization for expenses incurred providing the service to a system that pays for each client who receives employment services. Our description identifies the main hurdles that disrupted the negotiation process and the key decisions that, in the end, paved the way for output-based contracting. Our analysis shows that, throughout the reforms, the committee to oversee the process placed a strong emphasis on using business practices in the procurement of employment services from non-profit organizations, the most obvious of which was the use of management accounting techniques and quantitative methods for determining the price paid by EQ for each client served. The committee used established management techniques to analyse the data in previous negotiated contracts and arrived at the conclusion that “output” should be the main factor used to determine the funds allocated for the employment services provided by its partners. The resulting output-based agreements between EQ and the non-profit organizations are closer to those found in the private-sector than were the expense-based agreements used prior to the reform. These reforms should help government meet its goals of controlling expenses more effectively. Since the reform introduced controls for the number of clients who benefit from employment services, non-profit organizations can be held more accountable for their results than before. Under the new regime, these organizations have an incentive to increase the number of clients they serve, which should also provide incentives to increase the quality of the services they provide. The article is organized as follows. The first section provides a brief contextual description of Quebec's employment service industry. The second section describes the early stages of the reform process, while the third section describes in greater depth the implementation process. The fourth section discusses the results and is followed by a brief conclusion. At the beginning of the 1990s, the Quebec government introduced results-based management (RBM), a managerial approach typically associated with NPM. This managerial approach is aimed at improving the efficiency of the government and is based on four principles: 1) delegating responsibilities to make chief executives more directly responsible for resource allocation within their departments; 2) determining objectives; 3) measuring results using both qualitative and quantitative means; and 4) regularly communicating these results to the public in order to increase accountability (Quebec, Office of the Auditor General 1999). Rather than being strictly concerned with rules and procedures, RBM focuses on clients, results and measurable outcomes. By encouraging decentralization, RBM introduces flexibility in public-sector management, which thereby creates opportunities for initiative and other means of improving the government's ability to achieve results. Under the terms of RBM, the government also improves transparency by publishing the objectives and results obtained by its many departments (Côté 2006). In Quebec, the Department of Income Security is responsible for offering employment services such as job-search help, development of an employability profile, training, apprenticeship and professional qualification, self-employment and the reclassification of collectively licensed workers. Employment services are managed by the specialized agency, Emploi Québec (EQ). Created in April 1998, the agency defines its mission around the concepts of developing and sustaining the employment services offered to the population of Quebec. As is the case with many other agencies, EQ is managed in the spirit of RBM. In order to fulfil its mission, EQ relies on partnerships with a large network of non-profit organizations that offer a wide variety of employment services to their local community.1 Because they are well connected to the needs of the local population and the requirements of the business community, these private partners can provide employment services that are tailored to their region. In exchange for these services, EQ provides its partners with most of the necessary funding. The strategic alliance between the Quebec government and non-profit organizations dates back to the mid-1970s, that is, before the creation of EQ in 1998. Up to 2001, the government was subsidizing non-profit organizations in exchange for their services. After the adoption of the Public Administration Act (Loi de l'administration publique) (R.S.Q. c. A-6.01), which formalized the application of RBM to decentralized agencies, EQ intended to move away from the subsidy approach associated with traditional government arrangements and develop a more commercial relationship in which the agency would buy services from non-profit organizations. The process of allocating funds for employment services has a number of steps. At each level of provincial public administration, politicians and civil servants make decisions about perceived needs and available resources. Prior to the reform, funds were allocated based on the non-profit organization's expenses rather than on the number of clients served. At the beginning of the fiscal year, regional units of EQ would meet with representatives of the organizations operating in their region to negotiate contracts. Each non-profit organization presented its prediction about the number of clients expected and the anticipated expenses for delivering the services. Following a brief negotiation, EQ and the organization would sign a final agreement specifying the number of clients that the organization agreed to serve and the funds that EQ would transfer for the upcoming year. During the year, funds were allocated based on the actual expenses incurred irrespective of the number of clients served.2 In 2001, Quebec's Treasury Council raised many important questions regarding this funding process. Members of the council failed to understand the criteria used by EQ to allocate the resources to non-profit organizations, and EQ was unable to provide satisfactory answers. The council decided that under this arrangement, EQ was not holding non-profit organizations accountable with respect to their output. Although the number of client numbers was loosely estimated during the negotiation period, the non-profit organization's funding did not strictly depend on this estimate. For the council, this transfer of resources to non-profit organizations was more consistent with that of a subsidy rather than one inspired by a “commercial” relationship. The council identified other weaknesses in the funding process. For instance, EQ was not comparing the amounts it allocated to different non-profit organizations. As a result, the funding under the subsidy approach was inequitable across non-profit organizations, intra- as well as inter-regionally. Also, varying negotiating skills among managers of non-profit organizations and the civil servants increased inequalities in funding among non-profit organizations. Table and the process of the with that by the reform – to the funding relationship between EQ and the non-profit organizations from one a a commercial In a commercial EQ would to buy a of service based on the estimated number of clients rather than of the non-profit organization's expenses to the of services. this commercial EQ would to establish a that also took of to the non-profit organization a of the associated with the delivery of employment services. The section the process that led to the of the but of a We were to the reform process by EQ from the and the at the of the data used in this study can be back to In June 2001, EQ the process of a price for the employment services offered by the large number of their non-profit organization partners. determine this EQ a committee to analyse the of the non-profit organizations. The committee was of civil servants the non-profit organizations, and one of the of this The non-profit organizations to four of The first of 1) is of about that provide a in which are to during a of to The second of 2) non-profit organizations mission is to professional employment services to the in their job-search The third 3) non-profit organizations that a job-search approach six steps they to in the The fourth and final of 4) more than job-search that offer a based on a The of the on EQ as their funding Table the amounts to each of the the In has its amounts increase more than the number of clients during the under the funding while had the in in the number of clients but managed to increase the funding by its We held to with of three to four representatives from each with and in June 2001, and with the and in June The were held a of from the The as The first of the services offered by the of each The second of at in the the main for across non-profit organizations. The third of that be used to determine the price of the services. These were followed by a to the results of approach to determine the price of each The services offered by the non-profit organizations under three The first the services that are a of Members of are specialized in services, while the of and not offer such services. Because EQ funds using a de de la main the used to the of is from the used to the of the other The second services for the à this services such as services, and other service associated with a client of this service would first for at a government's regional employment servants would the of the be of a more which case specialized services that an analysis of the be a needs are the civil typically the client to the non-profit organization that the services. the wide variety of services in committee that it would be to these services. from one to in order of service were The third of services more to the de à these services are a of more at the of which the should be for During field these services were from The second of was aimed at why across non-profit organizations. In order to the for we funding agreements the between EQ and non-profit organizations. We representatives to the main that in their across different on these we established a of – the number and the of clients, the of the service including the the of the whether the service is offered in and the non-profit organization's and – that The that some of these are was not by the For service of and of the are that the non-profit organizations are to be in region and are also to be These were taken in the The committee two to determine the price of employment services. The first approach of the of non-profit organizations to determine a for each of their The price be at an that the non-profit organizations for their The second approach used quantitative methods to determine the price as in past agreements with the non-profit organizations. the of services based on past agreements would provide a of the EQ had agreed to in the the for this price be had and The first approach and was by the the other it the to negotiations that would not be to both Because it is based on the main of the second approach was that it from the past to be the For representatives from the non-profit organizations the case that their were under the and the of using the past amounts as an of Emploi Québec that the amounts allocated to non-profit organizations had increased the previous funding had at that the non-profit organizations to offer quality services the In the end, it was that past would be – that is, in of one of the the of services based on past agreements would provide a of the EQ had agreed to in the the for this price be In the end, the second approach and were used to determine the price based on This approach that the of the of the and delivery to the of is in the services was to this was The in the of the non-profit organization while the the associated with each service The results from that is by the for each service After a first of EQ the by the committee to improve the Although provided EQ was not to the and the committee was to develop a more that is, one that provides an closer to a the the committee had to be about the number of taken the had to be as as across the non-profit organizations. The the and and in In order to to the partners on a the not a In data to the which the for each service The whether is to different prices for different to more flexibility the that had an output-based funding approach the of the non-profit and it was decided that the amounts by EQ a would to for the in that are in Table Because it was the most and EQ decided to use data to determine the The process of the price for the services followed three steps. the analysis in was for each This was necessary to the of the approach to the different the was on a in which the non-profit organizations were irrespective of their At this a number of partners offering job-search services were in the The third of using the price of each service from the to the of funding that each would from EQ the reform had in in After the final was on a of negotiated contracts from analysis was to the of the services offered by partners under The with a first of the agreed to a price of The of the for each of the service in the first of Table At this the with the did not most of the representatives the reform from a subsidy of funding to one using an output-based government representatives it clear throughout the that the was not an to their the government the representatives during a held in the of During this it was that the other to output-based contracting would be a process, to which non-profit organizations would be to for contracts offered by This was a it obvious that, as as it contracting on would be more to the non-profit organizations than a process. In exchange for to the negotiation process, the government the non-profit organizations that it would the output-based approach in such a way as to The using the price of the first of Table that the price to the funding would in for the other the of partners would their funding by than a number of partners would of more than of their This was for partners of which would from the most many partners would also a in their and both EQ and the representatives agreed that some flexibility had to be introduced in order to for the implementation of the new At this the non-profit organizations were with the results. to more flexibility the that had an output-based funding more flexibility the funding process, the committee to around the prices the the use of of a price for a each non-profit organization a price that between an and The around each price were that, for of the non-profit organizations, the actual by the non-profit organizations in to an would be within the of it would under the output-based For the of non-profit organizations, they would have to their funding needs in order to have within the to the services that they The and for each service in and of Table The of had on the reform process. it did not the to it these to for a implementation of the new approach during the fiscal The of around the price raised the as to each non-profit organization would be in the In order to the and the negotiation process with the non-profit organizations, criteria to determine the price for each service offered by the non-profit organizations were as 1) the number of during which the is in a relationship with the non-profit 2) whether the non-profit organization 3) the of prior to the non-profit organization's of service 4) the of offered the non-profit organization's of service the service of service and the non-profit organization's of services. Since a organization a variety of services, this also as a for The funding process that a non-profit organization can that the services it among one of these the non-profit organization would be to a price closer to the and The first that can be from the Emploi Québec is that NPM reforms can be are to a long and on the of those responsible for their implementation The of had on the reform process. it did not the to it these to for a implementation of the new approach during the fiscal year. the other the of such an approach was that, by the amounts in were between the and for of the non-profit organizations, it was that the to in would be to the amounts in this was to be the the process would have to as the for the funding needs of most of the partners and to from that using an output-based approach for the one that the amounts in were on as a was to to this new each was the to the data used by EQ before the price were During that process, some were to the including some non-profit organizations with respect to the of service they the had on the results. Table the results for the both before and the field to results from which can be they provide evidence about is within the organizations. number of lessons can be from field and these lessons are to from an expense-based to an output-based approach was and it a of among managers of non-profit organizations The first that can be from the Emploi Québec is that NPM reforms can be are to a long and on the of those responsible for their This with most of the literature on which to the of to a from controlling expenses to controlling In the in this the were by the that a non-profit was not by the but an by being in the reform process. This had a on the reform process it took three for the non-profit organizations to on to the reform. have the of the with this and EQ is its first of the reform. It a of to the reform's it is that a of more than be for implementation This has a reform can more than it is that the process have to at one process and a in civil servants responsible for a reform's implementation would have to a of and the reform is to such a which have In the of the implementation of the reform was by a in government in but the at that to that the in government would be In the quality of this was by the flexibility of EQ throughout the process. As EQ was to to the non-profit organizations while holding on to its main objective, which was to the relationship with the non-profit organizations offering employment services. its ability to which also from EQ would not have to this reform. the reform process, to was a from an expense-based to an output-based approach was and it a of among managers of non-profit organizations. The process of the from a to an of prices was a of this The non-profit organization's funding based on rather than on also raised many questions that were before. The non-profit accounting for instance, by the reform. the government's funding was these organizations were well by accounting In the the non-profit organizations are paid a a system that the adoption of the organizations have a rather of the of each client in order to their at the of the year. number of organizations are to their accounting to this of have in for accounting and a of Emploi Québec has agreed to for the development of accounting and new important raised by the representatives was to the funding of their were the partners were concerned about to funding a non-profit organization to meet its number of that some of the clients be to non-profit organizations by they were also concerned about under EQ would a number of EQ by that in order to the on the non-profit organizations to it would the agreed at the beginning of the year, irrespective of the actual number of clients by the non-profit organization during the year. As a to this EQ agreed to a of the in each non-profit organization during the and the agreement based on in the representatives also about the funding of and EQ has decided not to the of in the price but rather to analyse the to the non-profit This is for each non-profit organization as of the negotiation process. are necessary to the agreed employment services, EQ provides the funding As for EQ has agreed to analyse each The agency whether not to for based on the of each many representatives have the implementation of the output-based approach using that some non-profit organizations more than for services, the that the reform was to In EQ has decided to the criteria used for non-profit organizations within each the price on criteria is to provide a as to why some non-profit organizations more than while offering services. This field study describes the of employment services in the province of Quebec has that can be learned from the reform process as well as the of the reform on the are also important is that it is aimed at a process, a reform can be The that a large number of partners is by the reform the government's more reforms are in a of the – in this the non-profit organization partners that state-funded employment services – are to the reform process This study also traditional used in public can be to Although the in the province of Quebec be to other the and flexibility that were to the reform in Quebec is to be a of many other public reforms, both and This study also shows that implementation can be long and but can empirical aimed at the of reforms inspired by NPM be the more important that are of The reform in this study a number of questions for aimed at the of the and incurred by the by the reform is the of reform on the quality of the services offered by the non-profit organizations one the emphasis that the reform on non-profit organizations to increase their in order to increase their funding but this be at the of service the other the for new clients an incentive to increase service the of clients they serve improve the quality of service offered by non-profit organization partners. in and in the quality and of employment services would be of the reform's

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