In this thorough blog our co-operation partner Dr Frédérique Six (MBA, associate professor Public Governance at the Vrije Universiteit Amsterdam) writes about the persistent challenge of choosing governance mechanisms enabling interorganisational cooperation and benefitting service users. An important ingredient is working from the viewpoint of building trust.
The essence of the youth care governance challenge lies in dealing with the mutual interdependencies. We talk about mutual interdependency when you are dependent on another person, when that other person can contribute something that is important to you; and when that other person is also dependent on you. This can occur across organizations, when one organization has the professional expertise and capacity and the other organization the financial budget. Both are mutually interdependent on each other to achieve their goals of keeping children safe. Mutual interdependence also occurs within an organization between departments or teams.
Trust is relevant whenever you are dependent on someone else to do something that is important to you, but you cannot control what that other person will do or predict it with certainty. So there is uncertainty and vulnerability, if the other person does not do what you need, you may get hurt (financially, physically or otherwise). When your expectations of the other person’s behaviour are positive, you are willing to take the “leap of faith” and trust. You act as if that vulnerability and uncertainty do not exist. But you do not do that blindly; that would be naïve. You stay alert and regularly reflect on whether your trust is still justified.
In mutual interdependent situations trust is necessary, but just relying on trust is too simple and naïve. At the same time, only relying on formal rules would be naïve too, because that would only be an “illusion of control.” So how can we think about this governance challenge? Professor Rafael Wittek once used a useful illustration (Figure 1). On the left mutual interdependence and on the right cooperation. There are essentially two pathways to get from left to right.
Figure 1: From mutual interdependence to cooperation
The ex ante prevention pathway
When taking the upper pathway people do their utmost to create a system that can prevent problems from occurring in the first place (ex ante prevention). That implies that for each possible situation, rules are formulated to guide actions. This is the dominant approach in traditional bureaucracy and is still very much present in current public governance. Whenever something goes wrong, rules are formulated to prevent it from happening in future. It is based on a zero-risk tolerance mentality that does not accept any mistakes; and is driven by beliefs that perfection is attainable.
This pathway leads to an ever increasing number of rules and performance targets that suffocates those who need to comply. At the same time, it cannot guarantee that mistakes will never be made and that the cooperation will proceed smoothly. It merely creates an illusion of control but at a high cost. It not only creates an inefficient and significant administrative burden, but also demotivates the professionals who have to do the actual work of providing youth care to vulnerable children and their families. This pathway leads to a dynamic of distrust that is dominant in much of the public sector in many countries.
The ex post dealing with problems pathway
The other, bottom pathway accepts that it is inevitable that “problems” will occur, in the sense that unexpected things will happen. Society after all is radically uncertain and it is impossible to eradicate all risks with formal rules via the upper pathway. The emphasis in this lower pathway is on agreeing beforehand on the process for dealing with problems when they occur. Therefore, the agreements, controls if you wish, are more process controls. In this pathway the idea is that there is enough trust to have a constructive conversation about the “problem” that has occurred and to be able to agree on a common path forward. There is a common understanding that most problems will be “wicked”, i.e. not definitively solvable, but it is possible to agree on best ways forward.
Relationship between trust and control
The figure above is only an illustration to make a point: do you believe that it is possible to create 100% certainty by formulating rules that cover all possible eventualities? Or do you acknowledge and accept that there will always be residual uncertainty? Also, in the upper pathway is all rational, there is no room for emotions, And disregarding the emotions that are inherently part of youth care cannot work.
In both pathways there are residual risks that make you vulnerable to the behaviour of the other party. No governance mechanism or arrangement can provide 100% certainty. Therefore in both pathways trust is insufficient. Some form of control is also necessary.
That raises the question of the relationship between trust and control. Which combination will work in our particular context of mutual interdependence? Which type of controls? How do you build enough trust so that when the inevitable problems occur, you can constructively and productively talk about how to move forward and deal with the issues? The challenge is to create forms of control that support trust rather than signal distrust.
Three governance options in interorganizational cooperation
In public administration research three basic governance mechanisms are identified to control the behaviour of others and facilitate cooperation: hierarchy – based on authority -, market – based on price- and network – based on trust. Which mechanism is most appropriate will depend on the characteristics of the task and the task environment. At the same time we must realize that each of these mechanisms are “ideal types” which means that they are abstract concepts that will never occur in practice exactly as described. In practice we will always observe mixed arrangements.
Comparing the three “ideal ” governance options
In Figure 2 the three types are compared along several characteristics. Hierarchy is based on rules that are imposed and enforced hierarchically. This creates a vertical dependence: the subordinate, who has to comply with the rules, is dependent on the leader, who formulates the rules.
The market mechanism is based on contracts and conditions that both parties agree to conform with as they sign the contract. At the core of the market mechanism is the assumption that both parties are independent and have alternatives. The relationship is horizontal. This is an assumption that in the practice of public tasks is often not met, because in many situations the government is the main buyer and suppliers have few other options.
In the network mechanism all parties acknowledge their mutual interdependence and the intention is that via dialogue an agreement can be reached about how to cooperate. At the start this is usually the most difficult route. When this process is managed well, in the longer term it is the option for complex tasks – as youth care is -with the best responsiveness and lowest control costs.
Figure 2: Comparing the three ideal type governance mechanisms
Up front, hierarchy and market appear to provide most clarity and apparent certainty. But in hierarchy the illusion of control is lurking in the shadows and in market there is the unwanted effect of “you get what you pay for.” This leads to situations where the actual quality and effectiveness, and often the efficiency, turns out to be lower than predicted beforehand. One explanation for this effect is that in both these mechanisms the agreements on the ways of working together are not made by the frontline professionals but at the executive level.
From ideal type to practice
As I said above, in practice these ‘ideal’ types will not occur but variations of them will. In Figure 3 I highlight some common combinations. For example, within public commissioning relationships, that the theory says should be contract-based via the market mechanism, we often see that power and dependence play an important role and the assumed independence between parties does not exist. Many service providers are dependent on the public financier and the budgets that they have available. This makes the actual governance arrangement a mix between market and hierarchy.
Another example: because networks regularly end up in just being “talking clubs” that never get to agreeing on joint action, government uses its power to impose a process and/or actions on the network, or specify outcomes required. This is a mix of hierarchy and network.
Figure 3: Mixing the three ideal governance mechanisms
In the ‘ideal’ market relation the assumption is that both parties are independent and have low exit barriers: they have enough alternatives if the other party makes unacceptable demands. This is OK when buying and selling eggs or soap. But in many public tasks there is a desire and need for long-term relations, because in fact there is mutual interdependence. Youth care is a prime example where the continuity of care and other support is crucial for vulnerable children. For such cases the term relational contracting was introduced, where next to the “hard”, business aspects of contracting there is explicit attention to the “soft”, relational aspects of building and maintaining trust. In relational contracting parties pay more attention to the process of collaboration and conflict resolution; they do not try to write detailed contracts trying to prevent all possible, foreseeable risks.
In organizing complex social problems – as in youth care – the governance arrangements are probably a hybrid with characteristics of all three. The biggest challenge is: paying enough attention to the interpersonal relationships at all levels and building enough trust so that when the inevitable problem in the cooperation occurs, it can be dealt with constructively and effectively.
Dr Frédérique Six