How is public sector institutional reform different from organisational change? Public sector institutional reform attempts to change institutions and the way they function: the underlying incentives and norms that shape behaviour in organisations, rather than the formal organisational structures, rules and processes. The challenge for institutional reform in the past has been to identify institutions that are critical, and shape reforms to achieve underlying functional change (Pritchett & Weijer, 2010).
Source: Authors; adapted from DFID, 2003a, p. 12
The literature on organisational change is large, and draws on theories of public administration and organisations (Demers, 2007; March, 2013; Mahoney & Thelen, 2009). The evidence base on public sector institutional reform in developing countries is smaller and draws on experience of civil service reform, decentralisation, policy setting, policy formulation, and policy coordination, and institutional change in both formal and informal institutions. Public sector institutional reform aims to tackle underlying problems of motivation and behaviour by addressing formal and informal institutions. Because institutions are implemented, shaped and changed by people and organisations (DFID 2003a; Leftwich & Sen, 2010), institutional reform often involves organisational reform, and organisational reform can affect underlying incentives and norms.
Reforming public sector institutions requires looking at the structure of the state and its governance systems to identify where decisions are taken and how the various components connect. Three key perspectives to take into account are:
- Intra-state relations: How the core and sectors relate (Brinkerhoff & Goldsmith, 2004, p. 176; World Bank, 2012, p. 3). With about 80% of developing countries having undergone some form of decentralisation (Birner & von Braun, 2009), it is also important to consider how centralised and decentralised components of the public sector connect.
- State-society relations: Citizens engage in oversight relationships with policymakers and service providers, demanding goods and services (World Bank, 2004). Social norms that cut across state and society, such as norms on gender, ethnicity, and caste, shape discrimination, inequalities and access. Moreover state-society relations are a function of political settlements and elite pacts; the extent to which reforms threaten pacts can influence their success (Migdal, 2001).
- Private sector/enterprise relations: States have a reciprocal relationship with the private sector. States provide conditions for economic activity to flourish (rule of law, property rights, regulation, etc.) and the private sector, through economic growth and subsequent taxation, provides resources for states to operate (Evans, 1995).
- Birner, R. & von Braun, J. (2009). Decentralisation and public service provision – a framework for pro-poor institutional design. In E. Ahmad & G. Brosio (Eds.), Does Decentralisation Enhance Service Delivery and Poverty Reduction? Cheltenham: Edward Elgar Publishing Limited. More information
- Brinkerhoff, D. W. & Goldsmith, A. A. (2004). Good governance, clientelism and patrimonialism: New perspectives on old problems. International Public Management Journal, 7(2), 163-185. See document online
- Demers, C. (2007). Organizational change theories: A synthesis. London: Sage Publications. More information
- DFID. (2003a). Promoting institutional appraisal and development (Guidelines for DFID). London: Department for International Development. See document online
- Evans, P. (1995). Embedded autonomy. Princeton: Princeton University Press. More information
- Leftwich, A. & Sen, K. (2010). Beyond institutions: Institutions and organisations in the politics and economics of poverty reduction – a thematic synthesis of research evidence. DFID-funded Research Programme Consortium on Improving Institutions for Pro-Poor Growth (IPPG), September 2010. University of Manchester. See document online
- Mahoney, J., & Thelen, K. (2009). Explaining institutional change: Ambiguity, agency, and power. Cambridge: Cambridge University Press. See document online
- March, J. (2013). Handbook of organisations. London: Routledge. See document online
- Migdal, J. S. (2001). State in society: Studying how states and societies transform and constitute each other. New York: Cambridge University Press. See document online
- Pritchett, L., & Weijer, F. (2010). Fragile states: Stuck in a capability trap? (World Development Report 2011 Background Paper). Washington, DC: The World Bank. See document online
- World Bank. (2012). The World Bank’s approach to public sector management 2011-2020: ‘Better results from public sector institutions’. Public Sector & Governance Board, Poverty Reduction and Economic Management. See document online