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TRANSCRIPT
How did we get here?
Shared Service Centers in the Flemish Public Administration
Jan Boon
Koen Verhoest
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Paper presented at the ECPR General Conference
Panel: Shared Services in Government: Game-Changer or Gaming the System?
3-6 September 2014
Glasgow
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How did we get here?
Shared Service Centers in the Flemish Public Administration
1. Introduction
The relevance of Shared Service Centers (SSCs) has risen greatly over the past few years in
the public sector (Accenture, 2005; Ulbrich, 2010). Governments turn evermore to the idea of
consolidating overhead functions into Shared Service Centers (SSCs) (Bergeron, 2003).
Overhead refers to the whole of support functions within an organization – including financial
management and control, the management of personnel and the organization, ICT, facilities
management, internal communication and legal affairs (Boon & Verhoest, forthcoming; Van
Helden & Huijben, 2014). SSCs are said to bring the benefits of decentralization,
centralization and outsourcing while avoiding the drawbacks (Janssen & Joha, 2006). Indeed,
the growing popularity of SSCs might very well indicate that they are the latest public sector
panacea (Elston & MacCarthaigh, 2013).
Though academic attention far from equaled governmental attention, recent contributions
increasingly described the implementation of SSCs at local, regional and national levels in the
United Kingdom (Elston & MacCarthaigh, 2013; McIvor et al., 2011; NAO, 2012), Denmark
(Ejersbo & Ejersbo Iversen, 2011), Finland (OECD, 2010), Australia (AIM, 2012; Borman &
Janssen, 2013; Borman, 2010; Dollery et al., 2010), The Netherlands (Bekkers, 2007; Knol et
al., 2014; Strikwerda, 2007; Wagenaar, 2006), Ireland (Elston & MacCarthaigh, 2013; OECD,
2008), Sweden (Ulbrich, 2010), Germany (Becker et al., 2009; Niehaves & Krause, 2010),
Portugal (Domingues’ Cordeiro Gomes, 2011), and Canada (Grant & Ulbrich, 2010). These
contributions made clear that there is no unique perception of the term SSC (Schulz &
Brenner, 2010). Rather than a one-size-fits-all solution, the SSC idea forms a toolkit for
governments to implement in their own contexts. Schulz and Brenner (2010) formulated the
following characteristics of SSCs that are generally accepted: consolidated processes; support
services as core competency; oriented towards cost-reduction; focused on internal customers;
aligned with external competitors; separated organizational unit; operated like a business.
In 2002, the Flemish government introduced the SSC idea. Overhead functions were to be
organized according to SSC principles. Twelve years later, it became clear that pieces from
the SSC toolkit were selectively employed or left aside. Instead of a limited number of SSCs,
35 divisions still existed that organized overhead for one or more customer-entities. Budget
allocation to clients, separated organizational units, cost transparency, benchmarking and so
forth were practically non-existent. Scholarship so far has provided an elaborate overview of
the challenges practitioners face when implementing SSCs, and has fruitfully deduced key
success factors from positive examples (Ulbrich & Schulz, 2014). However, less is known
about the underlying processes that impede or hollow out key success factors (Wagenaar,
2006). The main research interest of this paper is to understand how and why the SSC idea
got translated in the Flemish administration. We contribute to the existent body of work by
taking a process- rather than a variable-oriented approach.
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2. Examining the Translation of the SSC idea
Previous accounts of the spread of management ideas have demonstrated how ‘fads and
fashions’ undergo processes of translation (Morris & Lancaster, 2006). Management ideas are
seldom emulated in their entirety. Rather, organizations fit ideas to their individual conditions.
As such, they become sedimented with the specific setting to which they are transferred. In
the process of adaptation, the idea must fight its way through a semi-permeable organizational
membrane (Doorewaard & Van Bijsterveld, 2001). Translation, then, is the process whereby a
general management idea is transferred and reinterpreted in a new setting (Czarniawska &
Sevón, 1996). Research has identified several success factors and challenges for practitioners
to keep in mind when implementing SSCs (Accenture, 2005; AIM, 2012; Becker et al., 2009;
Borman & Janssen, 2013; Borman, 2010; Burns & Yeaton, 2008; Dollery et al., 2010; Grant
& Ulbrich, 2010; Knol et al., 2014; Schulz & Brenner, 2010; Ulbrich, 2010; Wagenaar, 2006).
The role of agents as brokers or knowledge entrepreneurs in the diffusion of management
ideas is of paramount importance (Morris & Lancaster, 2006). In a public sector context, the
need for political and top-administrative ownership and adequate change and stakeholder
management is irrefutable. So, if “behavioral issues are at the heart of getting shared services
right” (AIM, 2012, p.3), then understanding if, how and why a particular management idea is
rendered appropriate by actors such that it can be translated into their work setting is crucial.
Actor-Centered Institutionalism (ACI) (Mayntz & Scharpf, 1995; Scharpf, 1997) offers a
framework that is highly appropriate for understanding actor behavior. It assumes that social
phenomena can be explained as outcomes of interactions among intentional individual or
composite actors. These interactions, however are structured, and the outcomes shaped, by the
characteristics of the institutional setting within which they occur. In short, it is actors that
make institutions, but to a certain extent also institutions that make actors (Scharpf, 1997: 42).
ACI is a useful approach “to explain past policy choices and to produce systematic knowledge
that may be useful for developing politically feasible policy recommendations” (Scharpf,
1997: 43). In the ACI-framework (see Figure 1), the proximate causes of policy choices are
actor-related. Actors are characterized by specific orientations and capabilities. First, actor
orientations refer to an actor’s policy position. They relate to the subjective perception of an
actor of reality. Actor preferences are shaped based on an actor’s interests, the normative
expectations that are attached to the role(s) an actor occupies, and the actor’s identity whereby
the actor emphasizes certain aspects of self-interest and normative purposes in its interactions
with other actors. Second, actor capabilities determine the likelihood of realizing the actor’s
policy position. Capabilities describe all action resources that allow an actor to influence an
outcome in certain respects and to a certain degree.
A valuable insight from ACI is that it is empirically meaningful to treat aggregates of
individuals as composite actors, who collectively form preferences and make strategic choices
to influence policy outcomes. As such, one can study the same policy event both from the
outside perspective to analyze the capabilities of organized groups or administrative bodies
during a policy process, or from an inside perspective to see how individual actors or
subgroups within a composite actor interact (Scharpf, 1997).
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However, individual and composite actors not only respond differently to external threats,
constraints, and opportunities because they differ in their orientations and capabilities. Their
perceptions and preferences are very much shaped by the specific institutional setting within
which they interact. Institutions a) form incentive structures that define the pay-offs
associated with certain strategies; b) structure which actors participate in the policy process;
and c) shape value orientations and actor preferences. As such, they influence the probability
of strategy adoption by self-interested actors (Scharpf, 1997: 39). Lastly, the wider policy
environment – other policies, social-economic developments, events, etc. – also affects the
orientations, capabilities, and strategies of actors.
To summarize, scholarship has not elaborated much on how the SSC idea gets translated, and
why some of its characteristics are consolidated while others are not (Morris & Lancaster,
2006; Ulbrich, 2010). This article analyzes the processes underlying the translation of the SSC
idea in the Flemish administration. We focus on how actors and institutions affected
subsequent occurrences in the translation process of the reform of Flemish overhead
functions, leading to a distinct end state (Hedstrom, 2005). We conceptualize the reform as a
process, and we apply a retrospective case study using the method of process-tracing
(Barzelay & Jacobsen, 2009). First, we provide a narrative account of the reform process with
specific attention for key events that occurred. Second, the commentary develops explanations
based on ACI. Data was collected through an extensive document analysis of publicly and
non-publicly available official government decisions, reports, notes, minutes, and
parliamentary actions covering the period from 1999 to mid-2014. We subjected more than
100 documents to qualitative content analysis in order to reconstruct the case. Furthermore,
we held in-depth elite interviews with 14 respondents. They were selected based on their
involvement in the reform process. All actors in key positions throughout the reform process –
members of cabinet, project champions, project managers – were interviewed. Also, we aimed
for a maximal diversity in the number of actor orientations: members of cabinet from different
Actor characteristics
Actor orientations Actor capabilities
Actor perceptions Actor preferences
Institutional characteristics
Policy environment
Policy
outcome
Figure 1: Theoretical model
Identity
Interests
Norms
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ministers (and political parties), top-level civil servants and mid-level civil servants, and civil
servants from horizontal and vertical ministries. The full list can be found in annex.
The research context is the Flemish administration. Flanders is a region in the Federal Belgian
state with its own parliament, government and public sector. Consecutive state reforms have
distributed competences among the Federal state and the regions (or communities). In 2002,
the Flemish government embarked upon an NPM-inspired reform (officially launched in
2006), known as ‘Beter Bestuurlijk Beleid’ (BBB), which resulted in a massive structural
reorganization of the Flemish agency landscape. We discern the following types of agency in
this article (Boon & Verhoest, forthcoming; Van Thiel, 2012):
- Departments or directories of the government;
- Public law agencies under full ministerial authority without legal independence;
- Public law agencies under full ministerial authority with legal independence;
- Public law agencies under restricted ministerial authority, governed by a board, with
legal independence
Legally independent agencies based on private law are not under study, since they were not
within the scope of the Flemish government’s decision to reform overhead functions.
3. Narrative
The narrative presents an event-based overview of the reform process. Afterwards, the
commentary will give a theoretical interpretation of how and why events occurred as they did,
with a specific focus on the interplay of actors and institutions. We first elaborate on the
broader BBB reform. Since reforming overhead functions was a package related to BBB, it is
important to contextualize its policy cycle.
3.1 Beter Bestuurlijk Beleid (BBB)
In 1988, Belgium experienced a big state reform. Some major competences such as education,
public works, mobility and economic policy were regionalized. This led to a boom in the
number of public law and hybrid agencies (Verhoest et al., 2012). To cope with this increase,
the Flemish administration was reorganized in a matrix organization structure in 1990. Five
vertical departments and their directorates were oriented towards citizens, and two horizontal
departments and their directorates towards internal service delivery and coordination.
Moreover, several public law and hybrid agencies were part of a highly diverse agency
landscape (Verhoest et al., 2012). The matrix structure was characterized by the multiple
reporting lines within entities. Also, it intended to provide a systematic means of coordination
and collaboration between and among ministries (departments and directorates) and agencies
(Pelgrims, 2008). In practice, however, the matrix structure was never unequivocally
accepted, mainly because the directorates and agencies denounced the hierarchical position of
the seven heads of department.
Dissatisfaction with the matrix structure caused concerns that placed the necessity of
subsequent administrative reforms on the agenda. In January 1996, a head of a horizontal
department advocated a radical separation between policy preparation in the core ministries,
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and policy execution in the executive agencies. From 1997 to 1999, the Flemish parliament
adopted four resolutions in which the fragmented agency landscape was questioned. In 1999,
when the new government took office, the administration again put the idea of increased
responsibility and result-orientation, and the separation between policy-formulating and
policy-executing agencies on the government agenda in their traditional contribution to the
government program. They were inspired by international experiences (mainly Sweden) and
NPM-doctrines (Verhoest et al., 2012). Although the political appetite for a reform was rather
low, the coalition government of the liberal party, the socialist party and the green party
placed reform ideas in the government agreement of 1999.
Both the government agreement and the contribution from the administration, however, had
no intention to implement a reform from the scale that BBB ended up to be (Pelgrims, 2008;
Ruyters et al., 2006). While all actors at the time, both political and administrative, saw
potential in the reform to meet their interests, a sense of reform fatigue was present after the
restructuring that had occurred following the state reform in 1988. A turning point came in the
beginning of 2000, when the Belgian Federal government announced a plan for a large scale
administrative reform called Copernicus. The Federal initiative inspired the Flemish Minister-
President (MP) and his cabinet1 to work on a similar plan. A couple of months later, on
February 19th
2000, the Flemish government decided on the guiding principles of a large
administrative reform called BBB, involving a separation between policy-formulating and
policy-executing agencies; a drastic reorganization of the agency landscape; the creation of
homogenous policy domains; and the abandonment of the matrix structure (Pelgrims, 2008).
Afterwards, a then leader of cabinet would refer to this decision as “a barely negotiated
scurry that installed principles that would dominate the debate afterward”’ (Mareels, 2006).
Shortly after, the government appointed two special commissaries (‘bijzondere
commissarissen’) to further develop the guiding principles that were politically agreed upon
into a framework. Both special commissaries originated from horizontal departments. The
public law agencies were hardly involved in the policy-formulation phase. After six months,
the special commissaries delivered an extensive report. A political coordination body called
the steering group (‘stuurgroep’) was established to coordinate the BBB reform, and to
prepare a political consensus on the propositions of the special commissaries. In 2002, after
two years of political and top-administrative negotiations, the government decided to lay the
initiative with the departments and agencies to implement the framework that was decided
upon. Each Minister appointed a transition manager with the task to execute the necessary
transitions in their policy domain. The transition managers could be agency heads, heads of
department, or heads of a division. They were given a free hand. Political and top-
administrative coordination was kept to a minimum.
The Flemish parliament adopted the BBB framework in July 2003. A christen-democratic
party member from the opposition referred to the decision as “a giant step into the unknown,
following a political decision that was taken ages ago” (Flemish Parliament, 2003). A year
later, the same christen-democratic party won the elections and led a government
1 In Flanders, each minister has a large political staff to micro-control his administration, which are called
cabinets (Verhoest et al., 2012).
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characterized by BBB skepticism. Nonetheless, the coalition partners agreed to start off the
implementation of a slightly adapted BBB framework, though not without discussion. Two
new bodies were installed to coordinate the implementation process of BBB. The Ministerial
Committee (‘Ministerieel Comité’) strongly resembled the steering group. The Assembly of
Official-Generals (‘College van Ambtenaren-Generaal’) took over the administrative
coordination from the special commissaries. However, while the players changed, the game
did not. The implementation of the government’s decision of 2004 remained in the hands of
the transition managers, still barely coordinated, in an atmosphere of ever-increasing reform
fatigue.
After nearly six years of negotiating and incremental decision-making, BBB was launched in
the beginning of 2006. While some of its innovations and structural changes meant
undisputed improvements, it left an agency landscape that was still highly fragmented, and an
administrative climate characterized by reform fatigue. However, several reform packages
still needed to be implemented, among which the overhead functions.
3.2 Reforming the Management Support Divisions
When the Flemish administration was a matrix organization, each department had its own
Management Support Division (MSD) that provided overhead support for its directorates2.
Some of the biggest directorates also had their own MSD, as did all public law agencies. They
were not functionally organized and provided several overhead services for their entity. MSDs
served as control instruments for the heads of department. They mainly verified whether
financial transactions and personnel affairs went according to the rules. Collaboration, or
process sharing, between MSDs was scarce. For some processes, such as the coordination of
the budget process, mutual reconciliation was self-evident. In general, however, collaboration
was deliberately kept to a minimum by the agency heads. They never accepted the idea that
another administrative actor or body interfered with their internal affairs.
When the Flemish government decided on the guiding principles of BBB in 2000, the MSDs
entered the scope of reforms. ‘BBB was a drastic and complete restructuring of our whole
administration. MSDs were an integral part of this, you could not ignore them’ (Respondent
A). So, when the special commissaries begun to design the architecture of BBB, the reform of
MSDs was part of their activities. Thematic working groups were composed of
representatives from horizontal and vertical ministries and agencies that each tackled a
specific overhead process. They had to come up with a list of criteria and functions that could
be organized at a government-wide level. This proved highly difficult. In the end, a
compromise was found that was principally adopted by the Flemish government in June 2001.
The horizontal ministries would centrally provide certain overhead services. However, the
agency heads received managerial freedom to decide whether not to use these services ‘within
the degrees of freedom imposed by the government’ (Flemish Government, 2001). How far
2 Before BBB, these divisions were called General Administrative Divisions, or in Dutch: Algemene
Administratieve Diensten. During BBB, they received a different label, Management Support Divisions, or in
Dutch: Management Ondersteunende Diensten. The reason for the name change was the intended increased
customer-focus of the MSDs. For reasons of simplicity, we will refer to both as MSDs in this article. Since these
divisions lack the essential characteristics of Shared Service Centers, we do not refer to these divisions as such.
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these degrees of freedom reached, and which services were to be centrally organized would be
decided later on. In the following months, negotiations in the steering group and its working
groups focused on crystalizing the government’s decisions into a framework for the
organization of overhead functions.
In February 2002, the Flemish government approved the framework for the organization of
overhead functions. For the first time, the term ‘Shared Service Center’ (SSC) was applied in
government notes: “The MSDs will function as SSCs […] Client-distributor relationships will
be formalized through Service Level Agreements (SLAs) […], a transparent accounting
system will allow for assigning costs to customers […], benchmarking will take place to
compare performance between MSDs […], the MSDs will function as separate entities”
(Flemish Government, 2002a). Ideally, SSCs combine the benefits of increasing efficiency
(cost-orientation) and quality of services (customer-orientation). In Flanders, the focus at the
time was on customer-orientation rather than cost-orientation. First, the degrees of freedom
that were mentioned in the government decision of 2001 turned out to be extended. Three
levels for the organization of overhead were distinguished (next to the option to outsource),
which were situated on a continuum from ‘full decentralization’ to ‘full centralization’. The
data between brackets is for 31/12/2013.
- MSDs at the level of the entities that sometimes offer overhead services to other
customer-entities (N = 19);
- MSDs at the level of the policy domains with (mostly) the entities in the policy
domain as customer-entities (N = 10);
- MSDs at a government-wide level with all entities as customer-entities (N = 6).
The default option was to organize overhead within the own entity: “the principle of
subsidiarity entails that overhead services that can be effectively organized at a lower level
should not be organized at a higher level” (Flemish Government, 2002a). The decision to
centralize overhead services could be based on a need for uniformity or when scale economies
were certain (through standardization, grouping of expertise, strengthened negotiating
position etc.). However, centralization was discouraged when specific knowledge was present
in an entity, or when transaction costs were high. Second, no lower limit of customers was set
for agency heads to organize a MSD within their entity. Third, MSDs were not functionally
organized. Six overhead domains were identified: financial management and control, the
management of personnel and the organization, ICT, facilities management, internal
communication and legal affairs. Managers could choose to organize all these domains within
their own entity, or to take some from other providers (both within and out of the Flemish
government) – depending on their perception of what would work best in their entity.
A couple of months after the approval of the framework, the government also approved a
transition scenario for the implementation of the framework. By January 1st 2005, the
framework had to be in operation. In each policy domain, the policy council (composed of all
the managers and the responsible minister of the policy domain) would decide on the
organization of overhead functions. Policy councils did not exist prior to BBB, and still had to
be implemented at the time. In anticipation of these councils, the transition managers, i.e. the
same that had to implement all reform packages linked to BBB, were tasked to start off the
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implementation of the framework in their policy domain. The transition scenario also
mentioned quantitative targets which for the first time indicated political motivations to
increase cost-efficiency: 14%-20% of full time employees should work in overhead functions
on average government-wide and 18% in each policy domain. These targets were based on a
first screening of MSDs by an external consultant.
In February 2003, the steering group gathered the transition managers from the horizontal
policy domains to discuss the extent of centralization of overhead services based on the
framework that was decided a year before. In May, a new working group was formed –
composed of representatives from horizontal and vertical ministries and agencies, and the two
special commissaries – to work out a detailed proposal. Meanwhile, the transition managers
further worked out the organization of non-centralized overhead services in their respective
policy domains. Early 2004, they presented the results of these efforts to the steering group.
No less than 39 MSDs were proposed. Virtually all agencies with legal personality would
organize their own MSD. Out of the 39 proposed MSDs, 12 had less than 250 customer-
employees, and 21 had less than 500 customer-employees. Two months before the end of its
term, the government decided that these propositions were not realistic in light of the
quantitative targets set in the transition scenario. A clustering towards 26 MSDs with a lower-
limit of 500 customer-employees was imposed (Flemish Government, 2004). In the following
five years, over the course of two governments, the reorganization of MSDs was left to the
newly formed policy domains and their departments and agencies.
In March 2009, the Flemish Audit Office issued a report on the reform of MSDs. Its
conclusions were disturbing. The implementation of the framework of 2002 had not been
executed which led to the existence of 33 MSDs instead of 26. Hardly any of these functioned
as a SSC. SLAs, customer-orientation, benchmarking, cost transparency, and process
standardization were practically non-existent. A lack of political and administrative
coordination, and contradictory political decisions were blamed. The report saw a great
potential for further efficiency gains in overhead processes. On July 15th
2009, the new
government presented its government agreement. The need for efficiency and collaboration
was omnipresent. More needed to be done with less. The high level of fragmentation and lack
of collaboration needed to be tackled, and synergies needed to be formed. For the first time in
five years, the reform of MSDs was on the government’s agenda.
The Assembly of Official-Generals was tasked to draft a multi-year plan for permanent
efficiency gains. The Assembly was an administrative coordinating body established during
BBB to bring together heads of department and agency to discuss and advise the government
on cross-cutting matters. It was composed of a representative from each policy domain – 13 in
total. The multi-year plan aimed to correct some of the flaws of BBB, which “emphasized
autonomy and responsiveness”, whereas “this plan emphasizes efficiency, effectiveness and
quality”. It further noted that “initiatives at the level of individual entities will not suffice”.
However, the plan was far from unambiguous: “[…] It is crucial to find the right balance
between accountability for the government as a whole on the one hand, and responsiveness
and autonomy on the other hand” (Assembly of Official-Generals, 2011). The plan
formulated four strategic objectives and 12 key projects. One of these projects concerned the
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MSDs with the aims to reduce the share of employees working in overhead functions to a
maximum of 10% government-wide by the end of 20143; to have all MSDs function as SSCs;
and to have customer-entities free to choose a supplier (internal or through outsourcing). A
project management structure was set up. A project champion and two project managers were
assigned to coordinate the project’s activities. They organized a working group with a
representative from each policy domain. The Assembly was responsible for the overall
governance of all the key projects linked to the multi-year plan. It organized special meetings
every six months during which the proceedings of all key projects were discussed. Periodical
reporting took place between representatives from the Assembly, the MP and the two vice-
MP’s on the progress of the key projects.
In 2011, the Public Governance Department hired an external consultant to study the
feasibility of sharing the HR management system ‘VLIMPERS’ and of a government-wide
social secretariat SSC. The report concluded that there was a clear and positive business case
for the organization of certain basic hard HR functions in a SSC which could, depending on
the choice of organizational model, lead to savings of 17%-36%. The report set a lower limit
of 2000 customer-employees for the SSC to obtain scale economies, though it mentioned that
the potential for efficiency savings further increased at the level of 2000-4000 and 4000-6000
customer-employees. Two months after the report, the Assembly released a ‘consensus note’.
A lot of effort went into nuancing the results of the consultant’s report. The note highlighted
segments out of the multi-year plan that stressed the “balance between collaboration and
operational autonomy as a prerequisite for the effective functioning of individual entities”,
and the “need for widespread support of reforms”. It mentioned “the diversity in processes
and the necessity of tailor-made solutions”. It proposed adaptations to the SSC concept, which
“has to offer a clear and substantial added value for the customer-entity that carries ultimate
responsibility”. Although the note did not reject the idea of a social secretariat SSC, such an
initiative had to grow bottom-up. First, mergers needed to occur among the existing MSDs,
after which the newly formed MSDs could choose to take up services from a SSC.
Furthermore, the note proposed a lower limit of 500 customer-employees to be able to
organize a MSD, which was the same as in 2004 when 14%-18% of employees working in
overhead functions was still the target. The note further mentioned the real risk of scale
diseconomies, or a decrease in efficiency in the case of too many customers. In contrast to the
consultant’s report, the importance of a gradual and realistic implementation plan was
highlighted. The consensus note was a clear compromise between different visions. In the
corridors, it was labeled the ‘compromise note’ (Respondents M; N). For the political level,
the note indicated the need to increase pressure.
On April 30th
2013, the cabinet of the Minister for the Civil Service principally agreed on a
conceptual note. The note argued that most action so far had been taken at the level of
individual entities, and it urged for more collaboration. It took a number of decisions that
clearly departed from previous notes: the lower limit for organizing a MSD was raised from
3 The audit report of 2009 involved a measurement of the share of employees working in overhead functions in
all entities. Based on these measurements, the Assembly decided that the original objective of 14%-20% was
rather unambitious.
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500 to 2000 customer-employees which would lead to a significant reduction in the number of
MSDs; it aimed for a maximal dissemination in the use of the HR support system
VLIMPERS; agencies that organized a social secretariat and prevention service were urged to
join a SSC that would be established; it decided upon the installation of an accounting SSC.
The Assembly was asked to formulate an advice, after which a new working group was set up
to propose a transition scenario for the mergers of MSDs. On July 5th
2013, their proceedings
led to a note from the Assembly to the government which among others proposed to abandon
the lower limit of 2000 and to continue on the path of gradual implementation which
according to the Assembly would result in 15 MSDs. The note also listed several risks linked
to the strongly top-down oriented way of working proposed in the conceptual note. The
subsequent response from the government, however, confirmed the ideas that were set in the
conceptual note (Flemish Government, 2013). In fact, in January 2014 after a second intense
round of working group meetings, the government approved a scenario that would result in 11
MSDs. The deadline for implementation was first set at May 2014 which soon proved
unrealistic, and was changed to the beginning of 2015.
4. Commentary
The narrative presented an overview of the reform process of the MSDs. The commentary
will analyze the processes underlying the events that were described in the narrative. We will
use a framework inspired by Actor-Centered Institutionalism (ACI) to explain the translation
of the SSC idea in the Flemish administration. While we structure explanations according to
the building stones of ACI –actor characteristics, institutional characteristics, policy
environment – it is important to note that in practice all events were caused by a coincidence
of several processes. Breaking up these processes purely serves analytical purposes.
4.1 Actor characteristics: orientations and capabilities
An important reason why the SSC-concept has not yet operated in the Flemish administration,
is that the concept in its pure form has few proponents. In its simplest representation, we can
distinguish between three groups with different actor orientations: the progressives, the
conservatives, and the pragmatists.
The progressives are mostly members of the Public Governance Department (‘Departement
Bestuurszaken’). They propose a big bang scenario and a coordinated centralization with
imposed take-up of standardizable processes by customer-entities. Their ultimate goal is to
have a limited number of SSCs, since (strongly) increasing the scale of overhead processes is
seen as the only way for these SSCs to professionalize. They question, however, the idea of
internal competition between MSDs or SSCs. The conservatives are situated at the other end
of the continuum. They are mainly public law agencies. They strongly oppose a coordinated
centralization of overhead processes with imposed take-up. If centralization were to occur,
they want managerial freedom to choose which MSD (or SSC) to buy services from in a
competitive climate, ideally with the option to fall back on their own MSD. The ultimate goal
is to maintain and control their own overhead. The pragmatists are more difficult to identify.
They have a willingness in common to move away from rigid visions on how overhead should
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be organized, and to find something that works in the context of the Flemish administration.
They typically recognize the possibility for significant efficiency gains through centralization,
as proclaimed by the progressives, but they oppose the idea of a coordinated centralization
with imposed take-up and limited attention towards individual customer needs, as proclaimed
by the conservatives.
Some of these viewpoints are quite stable and mask seemingly changing actor orientations.
For example, the idea to install a limited number of SSCs that work for all ministries and
public law agencies seemed to take off after the consultant’s report at the end of 2011. Even
the conservatives rallied behind the idea, although it contradicted their vision against
coordinated centralization. However, […] “In the end it was obvious that these large SSCs
could only operate if some overhead staff remained within the customer-entities to function as
liaisons. This offered them [the conservatives] the opportunity to maintain their royal
household under a mask of SSCs” (Respondent A).
How can we explain the divergent orientations between progressives and conservatives? First,
the progressives are by nature internally oriented. Ensuring that the administration as a whole
works efficiently and effectively is the core business of the Public Governance Department.
For them, overhead fragmentation and duplication forms a threat to an efficient and effective
administration: “People underestimate the importance of well-functioning and efficient MSDs.
The time and money that is won in making these processes more efficient directly benefits
citizens or companies that wait for their licenses” (Respondent F). Second, they are in the
difficult role to support both the cabinet of the Minister for the Civil Service that works
according to a political logic, and the Assembly that works according to an administrative
logic. For example, the big bang scenario the progressives proposed early 2013 fitted with a
political motive to progress before the end of the government’s term in July 2014. Third,
several respondents also mentioned self-interest to explain the position of the progressives on
some issues. Coordinated centralization with imposed take-up would give the progressives a
guaranteed customer-flow, since they are the most likely candidate for organizing most of the
SSCs. When the horizontal departments organized centralized MSDs under the matrix
structure, the quality of their services was questioned. The perception at the time was that the
MSDs of the agencies operated more efficiently and effectively. An article in the personnel
magazine in 2001 when the government had recently approved the framework for the
organization of overhead functions was titled ‘Horizontal patronization will disappear’
(Ministry of the Flemish Community, 2001), which illustrates the climate at the time.
Although the horizontal departments have evolved since, and are now pioneers in terms of
usage of SLAs, customer orientation, and digitalization, entering a competitive environment
might still come with great risks.
In contrast, the conservatives are primarily oriented towards their external target audiences.
They perceive centralization of overhead processes as a threat to the efficient and effective
functioning of their primary processes: “If you aim for maximal efficiency through
centralization, the only entity that will work more efficiently will be the centralized MSD.
However, the few efficiency gains there will be outweighed by the couple of hundred billion
that are lost in the core business processes that require specialized support” (Respondent H).
13
Remembering the days of the matrix structure, they strongly fear a situation where one or
more SSCs would fail to deliver and where the customer-entities would have no alternative.
Their fear is strengthened by the fact that positive examples of large scale government-wide
centralized MSDs have been highly scarce (Respondent G). Furthermore, conservatives
identify less with the idea of an effective and efficient Flemish administration as a whole.
They sometimes have a history that goes back to the 19th
century, which shaped their identity
long before the Flemish administration even existed.
Varying actor characteristics alone are insufficient to explain the incremental reform process.
The conservatives that have been dedicated to keep the level of change as low as possible
traditionally have more capabilities than the progressives. First, their external orientation and
tasks related to direct service delivery make them more important to their responsible
minister, since their activities directly translate into concrete policy outputs. Therefore, it is
hardly surprising that their concerns find more political support. Second, the sheer size of
public law agencies largely exceeds those of the departments which increases their saliency.
In 2013, the average department size was 275 FTE (N=13; MIN=105; MAX=837), the
average public law agency size was 930 FTE (N=22; MIN=18; MAX=7710). The two biggest
public law agencies were seven times as large than all three horizontal departments combined.
Third, agencies were far more united compared with the departments. The general willingness
not to involve public law agencies in the policy formulation phase ended up to be a great
underestimation of these agencies’ ability to influence the reform process informally. Through
their informal network called Management of Flemish Public Services (‘Management van de
Openbare Vlaamse Instellingen’), they were able to deploy a coordinated lobbying strategy
that targeted the different ministers directly (circumventing the special commissaries and the
steering group). Some adaptations to the original report of the special commissaries clearly
have the markings of public law agencies’ influence, such as the creation of the legal type of
internally autonomized public law agencies with a governing board. This type is unique to
the Flemish agency landscape (Verhoest et al., 2012).
4.2 Institutional characteristics
Actor orientations and capabilities are shaped by the institutional context in which actors
interact. Different process design features such as governance arrangements, guiding ideas
and structured events trigger different actor responses, because they offer different strategy
options. Likewise, rational and self-interested actors sometimes create and influence
institutions if they are in the capacity to do so. In short, actors make institutions, but to a
certain extent institutions also make actors.
When the government in 2002 decided to place the initiative to implement the framework for
the organization of overhead functions with the transition managers, a lack of coordination
was purposely built in. Dissatisfaction with the matrix structure, which was seen as an
oligarchic system in which the many were patronized by the few, was at the heart of this
mindset. “The matrix was a hierarchical structure led by seven heads of department.
Everyone underneath within the ministries had little input. BBB, however, compensated for
this by abandoning all forms of administrative and political leadership altogether”
14
(Respondent J). The transition managers reported directly to their responsible minister, not to
the special commissaries and the steering group. As a result, the steering group had no
consistent overview of which working groups were set up where, and of the progress within
these groups. The progress of the transition managers depended on their own preferences and
capacities, and of the other actors in their policy domain to go forward. “If strong entities
refused to go along with certain ideas, the transition managers basically could only take note
if this” (Respondent N).
By the time the Assembly took over the coordination of BBB reforms, it was clear that the
appointment of the special commissaries – both of whom originated from horizontal
departments and both of whom embodied the old matrix structure – had caused concerns.
From then on, a more balanced representation of the Assembly had to ensure more
widespread support. However, reaching a consensus on government-wide issues required
certain leadership and brokerage qualities. In the political selection of Assembly members,
these qualities were made secondary to other considerations. An even number of men and
women; departments and agencies; and political background4 was sought. The drawback of
this constellation was an inherent tendency for conflict. Not the least because the Assembly
members primarily saw their role as protectors of their policy domain’s interests: “The
Assembly needs to make decisions that harms none of the parties involved” (Respondent H).
This endeavor proved impossible concerning the MSDs, which was a very sensitive issue that
affected everyone in their operational autonomy. Furthermore, the Assembly had no mandate
to enforce decisions. The conservatives never wanted this. The agencies that were governed
by a board did not desire an administrative body with the ability to undermine their own
board’s decisions. Lastly, the Assembly always strived for a consensus in their interactions. In
practice, this often led to situations where any member could raise a veto when a proposition
endangered the interests of the policy domain. As an institution, the Assembly left ample
room for intentional actors to influence the reform process. One member referred to its
malfunctioning as the ‘bankruptcy of our leadership qualities’(Respondent E). On July 25th
2014, the government agreement of the new Flemish government announced to abolish the
Assembly.
The composition of the working group in 2011 is another illustration of strategic behavior. By
that time, it was already decided that the project champion that would chair the working group
would be the president of Management of Flemish Public Services, the interest group for
public law agencies which had by then opened up to all departments and agencies. He was
selected, basically because nobody else wanted to pull the project at the time, which had
gotten the reputation to be a minefield (Respondent C). Also, he fit the profile that was
searched for. To ensure widespread support, project champions were sought in all key projects
related to the multi-year plan that did not originate from a horizontal ministry. As a clear
conservative, it was generally perceived that he only took the position to ensure that his own
interest, maintaining the MSD of his own public law agency, was met. Also, the members of
4 The Flemish administration is highly politicized. Most of the heads of department and agency are linked to a
political party.
15
the working group were almost entirely heads of MSD, many of whom were not eager to
reduce or shut down their own division. In 2013, the project champion handed over his
position to the head of the Public Governance Department (i.e. progressive). During that time,
his department sent a note to the cabinet of the Minister for the Civil Service that set out their
vision. Inspired by the consultant’s report the year before, they envisaged a big bang scenario
towards a social secretariat SSC with 20000 customer-employees. This scale largely exceeded
anything that anyone had considered before. Not surprisingly, the working group failed to
come to a consensus and was soon abolished. Interestingly, these experiences contributed to a
different approach when a new working group was established a month later in response to
the conceptual note. The selection of heads of MSD as members was discouraged. The chair
of the group was an experienced member of staff from a vertical department, and had been
advisor to the cabinet of the Minister for the Civil Service back in 1999-2004. In contrast to
the former two chairs, the members perceived that he had no personal agenda except to find a
workable solution (i.e. pragmatist). The new chair played an important role in reaching the
conceptual note’s objectives against the set deadlines. “He had a different approach. He
understood the sensitivities that played and was a listener. In that sense, the working
atmosphere was less hostile than before” (Respondent A).
However, the main game-changer that limited the scope for strategic behavior was the strong
increase in political pressure. Since 2002, the reform process had been characterized by the
absence of political coordination, ownership and support. In 2001, the Minister for the Civil
Service who was a proponent of BBB had to resign after a scandal, and was succeeded by
someone with less enthusiasm for the project. Soon after, the leader of the MP’s cabinet who
was one of the architects of BBB left. With them, the government lost the little commitment
to BBB and its reform packages that it possessed. Also the Flemish Parliament had few
interest in the reforms. Civil servants felt that politicians were only interested in concrete
policy outputs, rather than the internal machinery of the administration. “Take a look at the
Flemish governments over the past 20 years. If you want to know who got the competences
over the civil service, look for the most junior minister of the smallest coalition party”
(Respondent J). When the christen-democrats won the elections in 2004, enthusiasm for the
BBB reform package further eroded to the point that it was almost shut down (Respondent C).
During that time, some political decisions were taken that would later affect the reform of
MSDs. For example, MSDs were denied a legal personality because of the political
atmosphere to scale down the proliferation of agencies with legal personality. In the years
before, multiple agencies were established in favor of a political appointment or a personal
agenda. In the end, far more agencies were created than initially envisaged – especially
agencies with legal personality. However, as a result of their legal classification, MSDs did
not install a board with representatives from all customer-entities. Rather, they were
organized within the different departments. Consequently, the agencies feared they would not
receive equal treatment compared with the departments, in which the MSDs were located. The
governance structure of most of these MSDs, which for a long time did not include customer
input, did not help in this respect.
16
In the end, however, an increase in political pressure provoked a breakthrough in the reform
process. To explain how this changing political mindset evolved, we need to turn to wider
policy developments.
4.3 Policy environment
Over the course of 14 years, the policy environment exerted great influence on the reform of
MSDs. Some features of the policy environment were stable throughout the reform process,
others dramatically changed.
A stable feature has been the lack of a collaborative culture in the Flemish administration. The
administration only existed briefly before BBB negotiations started. Many departments,
directorates and agencies that were transferred from the Federal level in 1988 had little history
in common. Furthermore, whereas the matrix structure tried to ensure coordination in an
increasingly diverse administrative landscape, in reality it created the perception that the
many were governed by the few. The public law agencies, which were estimated to employ
about two-thirds of all civil servants in the Flemish administration (Verhoest et al., 2012),
kept collaboration with the ministry at the required minimum (Respondent H). So, when the
architecture of BBB was negotiated, one of the objectives was to improve inter-organizational
collaboration, for instance by installing policy councils and management committees in each
policy domain that would bring together all heads of department and agency. However,
whether BBB improved collaboration is doubtful at best. The audit report mentioned that
“although a collaborative culture is essential, it seems that the fragmentation of the
administrative landscape has manifested itself in a culture that is all but collaborative”
(Flemish Audit Office, 2009). In 2013 and 2014, several strategic advisory boards made
similar remarks on the need to tear down the pillars to increase collaboration (CEEO, 2014;
SERV, 2014; VLABEST, 2013).
One of the main reasons why BBB did not increase collaboration is because its prime
objective was to increase managerial autonomy and responsiveness. Managers had to be free
to manage. Collaboration needed to be pragmatic, and had to arise bottom-up. The BBB
mindset clearly affected thinking about the reform of MSDs. Politicians were not inclined to
interfere after they had approved the framework for the organization of overhead functions in
2002 for two reasons. First, BBB intended a strict separation between decision-making in the
hands of politicians, and execution in the hands of the administration. Second, the right for
agency heads to organize their own MSD embodied the maximized operational autonomy as a
cornerstone of BBB. BBB not only affected the reform of MSDs because of the mindset it had
created. The reform packages linked to BBB that needed to be negotiated and implemented
were extensive. At the time, MSDs were not high on the reform agenda. Attention focused on
abolishing, merging and creating agencies, and on deciding the future agency heads (Flemish
Government, 2004; Flemish Audit Office, 2009).
Whereas the policy environment was not beneficial for a solution in the early years, this
gradually changed. Other policy developments and the precarious global economic situation
triggered the adoption of the reform of MSDs as one of the key projects in the multi-year
plan. First, the audit report a few months earlier had clearly shown a high potential for
17
efficiency gains in overhead processes. Interestingly, the initiative to audit had not originated
from one of the actors with an interest in a reform. The audit office wanted to increase its
effectiveness. Instead of auditing on specific processes that had little value outside of the
audited entity, government-wide issues that offered the possibility for structural changes were
sought. The MSDs came under attention when several process audits had pointed at problems
with the quality of overhead processes as an underlying cause for higher issues. Second, the
financial crisis necessitated austerities, which in Flanders mainly targeted the administration.
When the conceptual note on April 30th
2013 was issued, the working group chaired by the
new project champion had assembled only three weeks before. The minutes showed no sign
of an upcoming note. The note that appeared at the end of April was a so-called ‘non-paper’,
composed by the cabinet of the Minister for the Civil Service to increase top-down pressure.
By that time, the need for an efficient administration was high on the government’s agenda.
Savings on operating costs and salary costs had been incrementally imposed on the
administration (Molenveld et al., 2014). The conceptual note clearly focused on efficiency
gains (cost-orientation). Where the BBB mindset emphasized to ‘let managers manage’, the
conceptual note clearly emphasized to ‘make managers manage’. The beginning of the
conceptual note cited one of the former special commissaries who stated that “agencies tend
to want to control everything, while they should focus on their core business. Who cares who
cleans desks, pays wages or buys cars… As long as it happens efficiently and effectively”
(Flemish Government, 2013).
At the time of writing, the implementation progress is unclear. On the one hand, the increase
in political pressure and the need for further austerities seemed to have provoked a
willingness across progressives, conservatives and pragmatists to execute the government’s
decisions. On the other hand, several issues remain that need resolving. It is unclear how the
newly formed MSDs and the social secretariat and accounting SSC will relate to each other.
The core disputes, whether the focal point will be on the decentralized MSDs or the
centralized SSCs and whether the current government decision is an intermediate step or an
endpoint, have not yet been resolved.
5. Discussion and conclusion
In 2002, the Flemish government first introduced the SSC idea. However, despite several
government decisions and the long policy cycle of 14 years, the output of the reform process
in 2014 was scarce, both in terms of efficiency-savings and increased quality of overhead
processes. Rather, the SSC idea got translated in a peculiar way. This study argues this to be
an outcome of interactions among intentional actors, shaped by the institutional setting and
the wider policy environment. Various elements of the SSC toolkit were important to various
actors in various points of time, which created a distinct end state (Hedstrom, 2005). The SSC
idea is inherently ambiguous. It aims to bring together the benefits of centralization and
decentralization, which are often conflictual in nature (Janssen & Joha, 2006). Actors focus
on the benefits that they perceive to fit their interests, norms, and identities. For a long time,
the conservatives had both the capabilities and a favorable institutional setting that gave them
ample leeway to behave strategically. It seems the changing policy environment changed the
18
game somewhat, mainly concerning the orientations of political actors who have been more
prone to top-down interference in recent years.
This study raises some further questions. First, the issue of what a SSC defines has sparked
academic debate. We take the position that the SSC idea forms a toolkit with elements that
governments can employ or leave aside based on their specific contexts and motivations
(customer-orientation, cost-orientation, or both). However, if we allow practitioners to
translate ideas into their contexts, then how do we evaluate the output without universal
standards? In our view, the initial business case is crucial in this respect to formulate
measurable output objectives, which the ‘translated version of the SSC idea’ needs to meet.
The importance of a solid and realistic business case has been identified by previous
scholarship (AIM, 2012; Grant & Ulbrich, 2010; Knol et al., 2014). The Flemish case clearly
lacked such an instrument. The framework for the organization of overhead functions that was
adopted in 2002 allowed heads of agency and department to organize their MSDs how they
pleased. The leeway that was given to the administration to further delineate the framework
proved too large in an administrative setting characterized by reform fatigue and distrust. Too
much time (intentionally) went into discussing transition and operating costs and who would
bear these, indicators to measure performance, expected efficiency gains, and the impact of
other reform trajectories, all of whom could have been dealt with at the outset in a realistic
business case with clear outcome indicators, quality data, risk-management techniques
(OECD, 2010), thereby considering the complex environment with a large number of
stakeholders and a high degree of aversion to change (AIM, 2012). Second, how should
practitioners handle the governance of SSC implementations? Bekkers (2007) proposes to
distinguish between the development phase – characterized by process management with
horizontal coordination, creation of shared understanding and recognition of
interdependencies – and the implementation phase – characterized by increasing project
management, fixed deadlines and clear command lines. In the Flemish context the opposite
occurred with a highly centralized development phase with few stakeholder input, followed
by a highly decentralized implementation phase. At the very least, it seems that this
governance approach was highly flawed, and that it combined the worst of both worlds: lack
of trust and shared understanding among administrative actors versus a highly incremental
implementation process (Wagenaar, 2006).
This article contributes to the current body of work on SSCs by taking a process-centered
approach to explain the underlying mechanisms that impede or hollow out success factors in
the introduction of SSCs. We also contribute to the theoretical advancement of ACI by
elaborating on the social processes within composite actors: “Given their internal
heterogeneity, one central problem for ACI is to understand how composite actors formulate
their policy preferences” (Pancaldi, 2012: 17). Indeed, it seems that the disaggregation of
composite actors into its lower-level units during the analysis is a fruitful way to proceed. For
example, one can hardly understand the lack of decisiveness of the Assembly without
analyzing the divergent orientations and capabilities of its members, and how some were able
to exploit conflict to delay implementation. We believe that the conclusions that are drawn in
this study hold for specific administrative settings, characterized by fragmentation and a lack
19
of trust and collaboration between administrative actors. We urge future research on SSC
implementation to continue to take a context-sensitive approach. Since management fads such
as SSCs undergo processes of translation, we question whether it is fruitful to compare
strongly diverse administrative contexts, let alone the private sector (Kamal, 2012).
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7. Annex
Anonymous processing of interview data was guaranteed to the respondents. Most
respondents would only cooperate if full anonymity was assured. The list below, however,
gives some indication of the profile of the respondents.
1. Respondent A = Head of Management Support Division
2. Respondent B = Project manager MSD reform
3. Respondent C = Head of department, transition manager, member of cabinet (2004-2009)
4. Respondent D = Former Head of department and special commissary
5. Respondent E = Head of department, member of cabinet (1999-2002)
6. Respondent F = Head of Management Support Division
7. Respondent G = Head of department, project manager MSD reform
8. Respondent H = Head of agency, transition manager
9. Respondent I = Head of agency, project manager MSD reform
10. Respondent J = Member of cabinet (1999-2004)
11. Respondent K = Member of cabinet (2004-2014)
12. Respondent L = Member of cabinet (2009-2014)
13. Respondent M = Member of cabinet (2009-2014)
14. Respondent N = Member of cabinet (1999-2004), project manager MSD reform