Governing New

Governing in the new service environment: Between Hierarchies and Networks

Margaret F. Reid, Associate Professor University of Arkansas Department of Political Science Fayetteville, AR 72701 T: 479-575-5352

[email protected]

Session 8.5

1 Abstract The paper argues that the urban regime model can be salvaged as a useful approach to examining urban policy issues if it is seen within a multi-level and multi-sectoral governance context. The advantage of this expansion is three-fold: for one the model reflects contingencies that explain some of the differences within country and between country experiences; two, it expands the focus beyond its traditional interest in (economic) elite regime actors to the interactions of key policy-makers and the resulting choice sets that determine policy outcomes; finally it links to the developing literature of inter-organizational networks. In contemporary service environments governance arrangements are largely hybrids rather than pure forms-- hierarchies as well as networks—to relate broader policy level issues (urban regime) to provision of services (contracting regimes). It is not always clear however which services are provided and to whom; the nature of the urban regime may shed some light on these decisions.

2

Governing in the new Service Environment: Between Hierarchies and Networks Introduction The renewed interest in engaging nonprofits and other non-governmental actors in urban service delivery must be seen in its historical institutional context. Service delivery has occurred via a multitude of channels from the beginning of United States and many other countries before the creation of modern welfare states. Hall’s (1987) historical recounting of the role of nonprofits noted their almost immediate central role as service providers, long before they were enlisted by private philanthropies and later the public sector for their own respective purposes. In the second part of the 20th century, services have been delivered through a limited number of preferred mechanisms (Savas 2002): directly through public agencies and mediated through third party providers-- for-profit contractors or nonprofit organizations. The recent changes in service arrangements emphasizing devolution from the federal/national to state and/or local levels requires a renewed examination of these institutional arrangements (Alexander 1999) and their associated “contracting regimes” (Smith and Lipsky 1993). Policy shifts generically termed as “devolution” are driven by several ideological factors: that the public sector is “too big”, that non-governmental service providers or markets are more efficient or caring in what they do, and that services are best delivered closest to where they are needed (subsidiarity). Notably, both public and nonprofit organizations have been called upon to behave in a more businesslike manner which presumably means for them to be better stewards of their resources

3 and to show greater responsiveness to the clients they serve. 1 The question however remains if and how the underlying behaviors of dominant regime actors can be or are influenced by such changes (McAdam et al. 2001). In poor urban districts in Southern California researches Joassart-Marcelli and Wolch (2003: p.) found that while there are increasing numbers of nonprofits serving poor communities, the poorest are the least well supported: Nonprofits tend to gravitate to areas where they can mobilize resources, locations characterized by lower unemployment, a higher proportion of married families, and higher education. Although this is a rational behavior, this may have the indirect effect of physically separating antipoverty organizations from those most in need.

In the international context these issues have added relevance. As fledgling democracies are attempting to develop their social capital, encourage volunteering and other forms of civic participation across sectarian lines, the balkanization of special interests to the detriment of civic interaction is bound to be of concern. Backmann and Smith (2000) for example note that reliance on volunteers and close-knit social networks diminishes with the increased dependence on single donors or government contracts.

The rapid speed with which these new multi-actor and/or multi-purpose service arrangements are diffused throughout the world is even more astounding in light of the fact that “there is little evidence that governments or academics know much about how to govern or manage networks” effectively (Milward & Provan 2000: 260; Collinge &

1

Note the recent article by Durst and Newell (2001) on the differential effects of “reinvention” on nonprofits compared to their public counterparts.

4 Srbljanin 2002,2003).2 Moreover, many of these discussions have not been linked to earlier state-centered theorizing of the 1970s and thus lack a fundamental theoretical connections to earlier bodies of literature. Salamon’s “new governance” approach explicitly emphasizes the shift from “public agency and program to distinctive tools or instruments through which public purposes are pursued” (p. 9). Tool choices cannot be, however, as Peters outlines in the same volume, de-linked from institutional choices (p. 557). Only by dismantling or re-focusing institutional choice sets could certain approaches become the preferred policy and program tools for those who wield the power to select them. On normative grounds, some observers have begun to question the “marketization” of both public and nonprofit organizations with its attendant problems for the sustenance of democratic and civic values (e.g.,Denhardt & Denhardt 2002; Eikenberry & Kluver 2004). The boundaries between polis and market however are artificial ones and in constant flux. Thus prescribed policy tools can never be solely justified by their “efficacy”—whether associated with an outcome or a process. Such argument misses a more important issue: efficient/effective to do what and for whom? What is suggested here is that no one governance arrangement is inherently better or worse. Rather, governance involves a continuum of contingent choices that under the

2

Multi-purpose alliances are typical outcomes of policies that require direct collaboration and coordination of public agencies, of public agencies with private employers (e.g., workforce development) or nonprofits (e.g.,CDCs)

5 best of circumstances provide for input from many of the players. All produce temporary arrangements that are sufficient to resolve outstanding problems – until they are replaced by others as the needs or the power constellation shifts. In contemporary service environments governance arrangements are hybrids rather than pure forms: hierarchical for one purpose, to e.g., assure accountability, resembling networks for improved information and decisionmaking purposes (Oliver 1990). Such service arrangements are similar to border regions between countries: some for either historical, economic or political reasons produce hierarchical modes of interaction while others prefer more cooperative policy making modes (see e.g. Blatter 2000). In other words, the choice of instruments is influenced both by the preferences of network actors, but also constrained by political, cultural or institutional experiences that may limit available choice sets (see e.g. Breyer 1982; Majone 1976; 1989). In other words, we currently lack an effective way of explaining how service delivery choice sets are influenced by regime level choices and/or extant power relationships. Against this backdrop, urban regime scholarship remains somewhat arrested by the paucity of systematic comparative studies that can shed light on the intergovernmental and intersectoral relationships that form the institutional backdrop of local regimes (see e.g. Davies 2002). Empirically, arguments favoring the adoption of these evolving practices are often derived from a very limited number of cases or “success stories.” Moreover, many of these cases are not studied longitudinally or reflect specific institutional or historical preconditions that produced specific governance arrangements in the first place.

6 The purpose of this paper is three-fold: to start, I will briefly sketch why an expanded urban regime model is needed. Second, I will examine --using the fragmented urban social service environment as an example-- how institutional choices can increase urban service providers’ dependence on increasingly powerful external stakeholders that are bound to affect service choices and policy implementation structures. I will conclude with a sketch how such an extended, multi-level urban governance model might serve to enhance the explanatory power of the urban regime model. Specifically, the paper will propose a fusion of regime theories (policy level) with contracting regime theory (provider level) to reflect these more complex decisional environments.

Background: Urban governance in transition—the advent of multilevel service arrangements The last two decades have witnessed a tremendous restructuring of social service environments that leaves the traditional top-down authority structure as only one of many options for policy design and implementation (Agranoff and McGuire 2001). Increasingly, horizontal relationships complement or even replace centrally mandated policy or service relationships. In their stead a plethora of new coordinating devices have emerged (Mandell & Steelman 2003) that involve both market and non-market actors in sometimes fluid alliances with formalized, structured and informal relationships. What holds successful collaborations together is goal commitment, experience with working in non-hierarchical settings and the ability to marshal the resources needed to bring the task to fruition (see Stoker 1985; Stone 1993). For governmental actors the greatest challenges

7 associated with the presence of multiple principals (Bardach & Lesser 1996) arise from the diminished transparency and perceived lack of accountability to their citizens (Dicke & Ott 1999). Conceptualizing governance arrangements reflective of these complex policy and service environments and their likely impact on the extant and future role of urban governments is thus of great urgency. Systematic comparative studies as much as they exist are widely dispersed and often inaccessible to US and international service providers. International comparisons are often hampered by insufficient funding, political impediments and research design issues. Theorizing about these arrangements is in its infancy. While some of the network research has begun to incorporate these discussions (Mandell 2001; Forrest 2003; MacClean 2003; April 2003 and others in a special issue of the International Journal Public Administration), more widely used urban policy frameworks such as regime theory have been slow in incorporating the increasingly complex layering of these service networks (e.g. Clark 2001; Davies 2003). Emerging new approaches must focus on advancing designs that allow us to combine a complex system of intergovernmental (or federalist where appropriate), intersectoral and policy-sector spanning arrangements to evolve governance theories that can explain the existence of localistic regime characteristics and attendant service arrangements. This requires a level of theoretic sophistication that none of the extant regime or governance conceptualizations have as yet fully attempted. To be sure, traditional principal-agent or other related economic models are incapable of capturing these dynamics.

8 We might benefit from models advanced in the comparative politics literature or from the intergovernmental and attendant interorganizational (network) discussions to better understand political and economic resource dependencies and resulting collaborative choice sets. The objective of a theory of multi-level governance is to bridge the gap between all levels of authority (public and private) involved in a particular policy area and to identify avenues for effective policymaking under such conditions while understanding the limits of urban regime level theorizing (see Stone 2004, p. 6-7). Moreover, it would be of considerable value to link Benson’s earlier work to these discussions. Benson (1975) argued that for interorganizational networks to function properly, there must be agreement across four dimensions: ideological consensus, domain consensus (i.e. the role of each agent); support from those working within the networks; and sufficient coordination of work and organizational cultures.

Urban Regimes Revisited The previous discussion leaves little doubt that in contemporary societies coordination of purposes and work efforts across policy sectors, intergovernmental and interorganizational domains require a different response than calls for more commandand-control leadership, clearly identifiable realms of authority –all hallmarks of traditional hierarchies. The advent of the concept of urban regime was in many ways an acknowledgement of the complexities of governing diverse urban areas: the need to pool limited resources; the recognition of extant local power structures that shape policy agendas; the need for a stable coalitions of actors to provide for continuity of policy. formation and the inclusion of players from governmental and non-governmental arenas.

9 Urban regimes are the outcome of institutional, political and policy process choices. How to incorporate the many combinations of institutional/policy conditions with the various forms of collaborations and partnerships between urban actors remains an ongoing discussion. It is not clear at this point if the urban regime concept should be abandoned altogether for lack of comparative applicability, used more or less for the American setting, or if it can be expanded sufficiently to capture the varieties of regime characteristics beyond US settings without losing its explanatory usefulness (see e.g. Davies 2003). Certainly, regimes should not be confused with networks or partnerships. All share the need for collaboration, but conceptualized at different levels of analysis. Urban policy climates and political preferences shift over time with economic, demographic and other conditions that may not only induce a realignment of urban regimes but also the ideological foundations that supported the existence of particular local power structures (Stone, 1993; DiGaetano & Klemanski 1999). Moreover, the prevailing nature of intergovernmental relations creates opportunities and constraints beyond the urban context. Agranoff and McGuire capture these complexities when they characterize the contemporary intergovernmental environment in the US as follows: “The operational reality for many cities at the end of the twentieth century is a milieu of multiple incentives, organizations, actors, and agencies (Judd and Swanstrom 1997).” The substantial variety and variability that these conditions produce has not been sufficiently captured by the regime literature to even satisfactorily theorize about US conditions far less serve as a foundation for comparative analyses (see e.g. Davies 2002). It is unfortunate that the regime theory construct until recently has been largely limited to elite economic actor relationships even though Stone’s own writings seemed

10 to suggest a broader view of urban power relationships that extend beyond the economic bases of power (most recently, Stone 2004). In an era when policies and events outside the local environment influence power relationships as much as do those inside the community, such elaborations of the model could produce added explanatory power. Its lack of accounting for both formal and informal policy relationships has limited its usefulness for comparative work. In its focus on governing coalitions it also misses potential early indicators for regime change as new players, organizations or ideas enter the fray (Moore 1988). Here the interorganizational and network literature could be carefully grafted onto the regime concept to produce a multilevel governance theory that includes both elite and non-elite actors while alos acknowledging the influences of extralocal players such as the states in the US context or supra-national agencies and actors for the European context. This must be the subject of another project and cannot be tackled here. The focus for this paper will focused largely on the urban level. Examining relationships at the level of the elite policy actors, the neighborhood level and the degree of isolation of one from the other might (a) generate a more multidimensional picture of the political (in)stability of urban regimes over time, (b) identify reasons for the selection of preferred policy choices/responses to weather political or economic turmoil, and (c) explore its ability to transform itself when faced with such challenges.

2. Urban Regimes and Community Based Service Networks Collaboration among nonprofit, public, and private sector organizations is an increasingly prevalent practice within the urban service delivery field (Agranoff and

11 McGuire 2001;example for UK: Stephens and Fowler 2004). More significantly for our purposes are the institutional implications of what some have called “sector blurring” ( and others refer to as “tangled” relationships; see e.g., Saidel & Harlan 1998 ). Community based service delivery represents an interesting case for the evolution of urban governance because of its local and extra-local components. Central mandates (even when they are disguised in the US under the rhetorical mantle of devolution or states’ rights) exert a powerful pull on local regime actors and their ability to govern independently. When ideological forces at the central (or federal level) attempt to effect changes in local behaviors --as was the case with welfare reform in the US and elsewhere since the early 1990s --the policies produced locally may vary quite substantially . In order for the federal/national players to effect desired behavioral changes, conflict over ideological or policy goals must be minimized and discretion of local actors maximized without jeopardizing the desired policy directions (see e.g. for the UK health sector Kitchener & Gask 2003). In the UK where policy cooperation and coordination between central and local level actors has not been well developed, the policy shifts since 1997 have led to extensive discussions how such devolution can work in a policy setting that features comparatively large local authorities. The likely outcome is that the structure of (inter)-local policy networks are initially minimally disrupted, but the desired behavioral changes are also not guaranteed. Benson captured these dynamics when he wrote (1975: 237): “agencies can agree on matters of domain and ideology only to the extent that such agreement does not threaten their interests.” Within a provider network that may encompass many agencies, effectiveness is only assured when the member agencies are willing to surrender some of their individual autonomy to assure the independence of the

12 policy or provider network from unwanted intrusions that might cause disruptions to the proper functioning of the network (see e.g. Provan & Milward 1995). In other words, it is imperative that we conceptualize the links between policy level changes, provider networks and associated contracting regimes to understand reasons for changes within urban regimes. Contracting Regimes The increased reliance on non-state actors is not solely a function of diminished capacity of the public sector, the “hollow state” (Milward, Provan & Else 1993; Milward & Provan 2000). When the legitimacy of the central state as the primary source for setting public policy parameters is challenged or questioned, accountability migrates to the institution that can command the greatest authority or enlist the greater trust (Sabel 1993). For nonprofits this means that their prime standard of accountability becomes increasingly one dictated by those who they contract with. The dependence of many nonprofit organizations on external resources has been well documented. During the 1980s, when federal programs were cut by more than 20 percent, American nonprofits lost more than $30 billion in funding. Many organizations were forced to terminate programs and reduce staffs (Liebschutz,1992). North Carolina, e.g., lost more than $241 million in federal funds in the first year of the devolution to the states in 1981-82 (Coble 1999). Nonetheless, the relationship with government agencies continues unabated as nonprofits seek public funding at that same times that their private funding base continues to shrink. Nonprofits engaged in human services now receive approximately 30-40 percent of their resources from government contracts, some of them up to 60

13 percent or more. Likewise, the steady stream of volunteers that nonprofits were able to count on in earlier decades is diminishing as well. Some volunteers are displaced by government funding outright, others leave because they be “disillusioned with the changes in the organization” (Smith and Lipsky 1993: 114), while yet others may stay on and continue to fight for what they believe is the true mission of the organization. While the constitutionality of such service arrangements is an important consideration for some nonprofits, for the purpose of this discussion, the interests rests with the broader institutional consequences of a transfer of state functions to non-state actors -- a shadow state as Wolch (1990:41) called it: “Shadow state activities are not formally part of the state. They do not involve the same types of direct accountability and oversight procedures characteristic of the internal state apparatus. Instead, they are subject to state-imposed direct and indirect constraints on their autonomy.” The traditional urban regime discussions have reflected little on the political and economic power of the nonprofit sector to shape local policies but also the danger to be co-opted to lose their independent voices as a result of their increasing dependence on state contracts (Wolch 1990).

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Figure 1 Three Perspectives on Nonprofit – Government Relationships

Rationale for Involvement

Entrepreneurial Diversification

Revenue generation Actors in a Normative perspective of marketplace-competition NPs

Partnership/Alliance Historically strong ties with other organizations Interdependence for mutual benefits Political Economy

Public Service Mission driven Fits NP’s area of expertise or satisfies an unmet need Civic “incubator”

interdependence independence

Source: adapted from Seelfeldt et al. (2001, 5)

Public private service arrangements as well as their public nonprofit counterparts have found significant support from public managers and the general public alike. Those arguing in their favor cite several factors: that they are a cost-effective alternative of poorly managed public programs, that private providers have a strong incentive to produce results (their contract can be revoked), that private partners are less risk-averse, more flexible and innovative in their approaches to solving problems, and that private providers supply the jobs that the public agency could never secure for its clients (see e.g., Allen et al. 1989). These discussions leave much to be desired. Their focus on “tools” of governing rather than the governance arrangements themselves and reasons for their preference in one locale cannot be explained by such studies. Even fewer efforts have been undertaken to examine how contracting regimes between public agencies and private providers are in turn defined by urban regime characteristics, the institutional context, that prevails in the community examined (see

15 e.g. Austin & McCaffrey 2002). Depending on the contracting motivations and capacities of the partnering entities involved, these arrangements may be short term engagements or long-term “strategic partnering” (Austin and McCaffrey 2002: 41) designed to complement public and private interests, goals and resources over the longer term. The many case studies both from the United States and Europe seem to suggest however, that these partnerships are successful when they feature the right blend of public policy issues, leadership, a process for the partners to sort out their different perceptions of the issue to be resolved, and broad civic engagement. This would suggest that there are inherent structural conditions that shape the preferences for certain provider models. Social service-focused nonprofits most closely resemble traditional welfare programs such as health care, daycare, job-training, or nursing home care (Seefeldt et al. 2001). On the surface, they should represent the most straightforward case for successful partnerships as the parties: •

Share similar service philosophies

•

Have been accustomed of working with other public sector service providers in a particular community

•

Have predating service experience in multi-sectoral service arrangements

On the flipside, nonprofits with a history of heavy reliance on external funding or organizations that could be described as “low-autonomy” organizations, and “are more fragile by virtue of the hegemony the interorganizational environment is able to assert ” (Alexander 2000; O'Connell, 1996; Grønbjerg 1993). The survival of such organizations is closely tied to conformity with the demands of dominant actors contracting regime. In fact, nonprofits experience increased pressures to conform to prevailing business

16 practices as they are forced to compete with private actors in areas that once were the exclusive domain of nonprofits (see e.g. Rojas 2000, Ryan 1999, Rom 1999). For organizations with specific service missions or close ties to particular clientele this may be sufficient cause to reject any collaboration with other organizations that are likely to compromise their work or jeopardize their ability to provide programs and services to needed clients (Grønbjerg 1993). Graph 1 about here Examining the "contracting regime" (Smith and Lipsky 1993) is a useful way to capture manifestations of the institutional shift toward publicly funded but privately delivered human services. The work by Weick (1993), Di Maggio and Powell(1983) and Schlesinger (1998) is instructive in this context as well. They all have argued that external influences mediate behaviors of organizations or agencies, and by extension of provider networks. These influences include: the growth of large purchasers who can obtain services from organizations they prefer to interact with; the increased uncertainty or ambivalence about organizational goals due to a multitude of factors over which the single organization has limited control, and thirdly, the proliferation of widely accepted professional norms and management practices. The resulting isomorphism tends to make organizations look and act more alike over time. Differences may continue to occur when the external pressures, such as community or regulatory influences, are sufficiently complementary with the organization’s own normative commitments that it can continue with its own unique practices or service foci. Small nonprofits that have decided to isolate themselves to preserve their independence remain largely unviable in the future or find they are unable to compete for

17 resources with their networked counterparts. In fact, many grants now require collaboration among community organizations as a condition of receiving funding. Service complexity is one of the driving factors for many of these collaborative efforts. Service partnerships are viewed as an effective and cost-efficient way to address the needs of poor neighborhoods or to compensate for the loss of federal funding to provide integrated services to those communities (Chaskin & Brown 1996). Similar approaches are being considered for health care delivery. The main difference between the two policy domains is the policy dominance of private providers in one and the dominance of public and nonprofit providers in the other. Stability of neither of these provider networks and their attendant contracting regimes is not assured, however. Forrest suggests (2003, 594):

But even where policy networks become well-structured and politically entrenched, they may be hampered by the absence of a coordinating center, rendering it more difficult to sustain a commitment to a singular policy goal. This reflects the broader problematic that robust policy networks often evolve with a changing array of participants, agendas, and organizational mandates…. Networks that are under-resourced face additional dilemmas of holding the service alliances together over extended periods of time that it may take to address most social service problems. Economically powerful actors are notorious for the lack of commitment to long-term solutions to social problems. The diminishing commitment to or inability of the central state to resolve intractable policy problems such as poverty, urban plight or educational deficiencies can in part be explained by the place-specific manifestations of these issues. Adequate policy development require both a response at the macro-levels of policy decision making as well as an the intense involvement of local

18 policy actors who must fashion the structural and behavioral responses politically acceptable for their locales.

Graph 1

Institutional design: Authority in multiactor networks Fragmentation (internal or external) Contracting Regime Service arrangement predictability/stability

Accountability for resource uses

Shared Values

Sources: Milward&Provan (2000), Smith&Lipsky (1993), Smith&Sosin (2001), Weick (1990)

19 3. Urban Regimes and Multi-Level Governance The rapid institutionalization of the third sector – especially in the realm of urban service delivery requires a rethinking of urban regime models. No longer can these nonprofits be considered as a passing curiosity. The size of the sector, as well as their increasing contributions in transitioning societies, has not gone unnoticed among scholars. The field now has a half dozen or more reputable journals, universities have added research centers and courses to reflect their growing significance. The huge diversity of the sector makes generalizations about their contributions, their political weight, and their economic clout almost impossible. Load-shedding of both public and private sectors have contributed to the growth of the sector, but has also contributed to the sector blurring phenomenon that produces some of the analytical dilemmas briefly addressed in this paper. Yet despite their role as major service providers, the urban regime models have not reflected these increasingly complex partnerships, and networks of service providers. Economic explanations of why the sector exists as either some form of “institutional failure” ( market or government failure) ( see e.g. Weisbrod1988, 1997), or as “contract failure” (Hansmann 1987, 1996) have been generally rejected (e.g. Salamon 1996) while in some other fields nonprofits have not been classified as distinctive form other sorts of organizations. DiMaggio and Anheier, noted that “sociology . . . in contrast to economics, law and political science has not viewed nonprofit organizations as a useful, distinctive category of organizations” (138). It is not possible here to develop these arguments further. They suggest however two conclusions:

20 a. for regime theory to advance it must reflect on its embeddedness into specific macroinstitutional settings (e.g. the legal and as well as political economic roles of these organizations) b. regime theorists also must be more sensitive to policy contexts: some service sectors feature intense interactions of nonprofits with the market, in others with the public sector. The resulting differentials in norms as well as preferred structures that shape these interactions (e.g. the emphasis or preference of the corporate form may suggest the presence of organizational isomorphism) must be incorporated int these discussions c. regime theory may benefit from longitudinal analyses (such as Stone’s work on Atlana) that examine interorganizational collaborations and community systems, and changes in their various stakeholder that make up the contracting regimes described earlier. Graph 2 about here

21 Graph 2

Urban Regime Contracting Regime Provider Network Characteristics

Resource Dependence/ coupling

Mission & links to community

Service Capacities

Local Service Environments e.g., heterogeneity, poverty, degree of activism

Where does this leave urban regime theory? Stone suggested many years ago (1987:295) that instead “of fragmenting our attention by looking at discrete correlates of regime form, analysis might aim for a broad picture of how various elements of the community fit together in a porcess of change.” Urban regimes are not static entities but subject to structural and policy changes as well as difficult to detect links between national mandates/policy initiatives and local responses or lack thereof. In order for us to understand why some minority communities are thriving while others with similar conditions are not cannot be solely explained by national policies. A group of local activists may initiate discussions in their communities

22 about redirecting resources or increasing participation of long-neglected members of the community, while in another setting similar discussions may deteriorate to conflicts over turf, power and access to valued resources and thus fail to transform service delivery in the community. Hence, the nature of contracting regime is a visible reflection of the larger policy priories and purposes beyond specific service provider networks within a community or urban area. Changes in service network structure may signal that the regime structure and its supporting norms may be shifting. Because it is so difficult to analyze regimes per se, examining the prevailing contracting regimes may serve as a convenient substitute or at least as an entry point.

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